Question: Kevin and Jill are married and file

> Kuerten Manufacturers sue the Rafter Corporation for patent infringement. The court upholds Kuerten’s claim and requires Rafter to pay Kuerten $2,000,000 in damages. However, the court does not allow Kuerten to recover its $100,000 in legal expenses fr

> Tonya purchased land for investment purposes in 2014 for $21,000. In 2017, she sells the land for $36,000. The terms of the sale require the purchaser to pay Tonya $12,000 per year for three years with interest of 6% on the unpaid balance. Tonya also

> Eric is a self-employed financial consultant. During the current year, Eric's net self-employment income is $160,000. What is Eric's self-employment tax?

> The Kimpton Corporation pays the following taxes during 2017: Federal taxes withheld from employees……………………………….$26,000 State taxes withheld from employees …………………………………………9,000 Social Security withheld from employees………………………………… 4,850 Kimpton's share

> Martin receives the following tax bills, related to a rental dwelling, from the county treasurer. Special assessment for installing sidewalks and streets……………………… 12,000 Real property tax on dwelling for the 1/1/17 -- 12/31/17

> State whether the following taxes are allowed as a current deduction for taxes paid by a business: a. Sales tax on the purchase of a desk b. State and local income, real estate, and personal property taxes c. Federal income, estate, and gift taxes d. An

> For each of the following situations, state whether the expense related to the transaction can be deducted as an insurance expense: a. Baker Company pays the insurance premium to provide each of its employees with a $50,000 whole life insurance policy.

> KOM pays the following insurance premiums during 2017: Auto accident and liability insurance: Paid 1/1/17 Coverage period 1/1/17 - 12/31/17…………………..$3,500 Fire, storm, and other casualty insurance: Paid 4/1/17 Coverage pe

> The Rollins Group produces training corporate training videos. It operates as a sole proprietorship and is 100% owned by Scott Rollins. For 2017, Rollins has gross receipts from qualified production activities of $1,500,000. The cost of goods sold rel

> The Cavanaugh Corporation owns the licensing rights to the Mississippi Marauders hockey apparel. For 2017, Cavanaugh has gross receipts from qualified production activities of $6,000,000. The cost of goods sold related to these receipts is $2,000,000,

> In addition to being an employee of Rock Hard Roofing Material, Lou owns 10% of the company's common stock. Rock Hard falls on hard times in 2016. To forestall bankruptcy, Rock Hard's employees and shareholders loan the company $1,000,000. Lou's share

> The following information is from the financial records of the Adham Corporation at the end of the year: Accounts receivable…………………………..$ 450,000 Allowance for bad debts account………….(34,000) Net accounts receivable…………………..$ 416,000 The allowance for b

> RealTime Rentals leases space on its Internet server. Its standard one-year lease agreement requires new customers to pay the first and last months' rent upon signing the lease and a $500 deposit that is returned after the customer has been with RealTim

> During the year, Grace Inc. has total sales of $800,000. Based on total sales, the corporation estimates that its bad debts for the year are 2% of sales. As a result, the corporation deducts $16,000 in bad debts for financial accounting purposes. At t

> Gosney Corporation has 2 employees. During the current year, Clinton earns $80,000 and Trahn earns $150,000. How much Social Security tax does Gosney have to pay on the salaries earned by Clinton and Trahn?

> Howard loaned $8,000 to Bud two years ago. The terms of the loan call for Bud to pay annual interest at 8%, with the principal amount due in three years. Until this year, Bud had been making the required interest payments. When Howard didn't receive t

> Chet is an officer of the Branson Corporation a publicly traded corporation. His salary for the year is $1,320,000, which is the sixth-highest salary at Branson. What amount can the corporation deduct as salary expense? How would your answer change if

> Cory is the fourth-highest-paid officer of the Mast Corporation, a publicly traded corporation. The company pays Cory a salary of $1,100,000. What amount can it deduct as salary expense? Would your answer change if Mast is a closely held corporation a

> Paula is single and works as a high school science teacher. Each summer, she travels to a national conference on high school science curriculum. She also spends one week during the summer traveling to areas in the United States to further her science k

> For each of the following situations determine whether the expenses are deductible as an education expense. a. Dorothy owns a real estate business. She is enrolled in a one-year weekend MBA program that meets in a city three-hours away. She takes a tra

> Jan owns the Mews Bar and Grill. Every year at Christmas, he has a party for his 20 employees and their families. This year’s party cost $1,600. At the party, Jan presented each employee with a $50 gift certificate redeemable for merchandise at a loca

> Floyd owns an antique shop. During the year, he and his wife, Amanda, who works as a real estate broker, attend a 3-day antique show in Boston. The expenses related to the antique show are as follows: Train per person……………………………………………$ 110 Hotel daily

> Marisa is an obstetrician. Every February, she attends a 3-day conference on financial planning with Ester, her college roommate. Ester is Marisa’s accountant and is a certified financial planner. This year, the seminar was in San Di

> Meek, Inc., remodeled its offices this year. Renee, the executive vice president, bought the desk, couch, and lamp set that had been in her office for $200. Identify the tax issue(s) posed by the facts presented. Determine the possible tax consequences

> Olga has to travel to Philadelphia for 2 days on business. She enjoys history and is planning to visit the Liberty Bell and other historic sights in the city. If time permits, she would like to make a side-trip to nearby Gettysburg. A friend of Olga's

> Chai is self-employed and travels to New Orleans for a business conference. The following facts are related to the trip: Round trip airfare………………………………………………..$375 Hotel daily rate for single……………………………………….120 Conference registration fee……………………………………1

> Return to the facts of problem 48. Assume that each month, Joe Bob has $2,800 in federal income tax and $900 of state income tax withheld from his salary. What is Joe Bob's take-home pay in pay in a. March? b. November?

> Juanita travels to San Francisco for 7 days. The following facts are related to the trip: Round trip airfare…………………………………………………..$ 475 Hotel daily rate for single or double occupancy……………175 Meals -- $40 per day ………………………………………………….40 Incidentals -- $2

> Prudy is a recent college graduate who has taken a position with a real estate brokerage firm. Initially, Prudy will be selling both residential and commercial property. She is thinking about buying a new car at a cost of $14,500. However, the salesper

> Mario owns his own business and drives his car 15,000 miles a year for business and 7,500 miles a year for commuting and personal use. He wants to claim the largest tax deduction possible for business use of his car. His total auto expenses for 2017 ar

> Cassandra owns her own business and drives her van 15,000 miles a year for business and 5,000 miles a year for commuting and personal use. She purchases a new van in 2017 and wants to claim the largest tax deduction possible for business use. Cassandra

> Julianita is a sales representative for a food distributor and spends only 1 day of the week in the office. Her office is 12 miles from home. She also has a part-time job as a bartender. Typically, she works 2 nights during the week and 1 night on the

> Pablo is a computer sales representative and spends only 4 days a month in the office. His office is 18 miles from home. Pablo spends 3 nights a month traveling to his out-of-town clients. a. What portion of Pablo's travel is considered business? b. Du

> For each of the following situations, explain whether a deduction should be allowed for entertainment expenses: a. Gayle, a dentist, invites 50 of her best patients to her daughter's wedding reception. The cost of the reception related to the presence of

> Gilbert got married this year. Because he couldn't afford a wedding reception, his employer gave him the $5,000 he needed to pay for it. Identify the tax issue(s) posed by the facts presented. Determine the possible tax consequences of each issue that

> For each of the following situations, explain whether a deduction should be allowed for entertainment expenses: a. Neil owns a real estate agency and has an annual Christmas party at his house. The party is only for employees of his firm and costs $2,60

> Marcel is the former chief executive officer and chairman of the board of Donovan Technology. He is a member of the board of directors and has the title of chairman emeritus. Marcel and his wife enjoy having parties and entertaining clients of Donovan.

> Karl is the vice president of finance for Wyatt Industries. Last month, he took a client to an afternoon baseball game. The box-seat tickets cost $30 each. Because the client had a plane flight after the game, Karl was unable to take her to dinner. Duri

> Marla had $2,100 in state income taxes withheld from her 2017 salary. When she files her 2017 state income tax return, her actual state tax liability is $2,300.

> A.J. is the vice president for Keane Products, a marketing consulting firm. On a business trip to New York City, he meets with three executives from Keane’s top account. After the meeting, A.J. takes them to dinner and then to the theater. The theater

> During the current year, the Coetzer Corporation hires Marcelo, and agrees to reimburse him for all his moving costs. Marcelo submits the following expenses to Coetzer for reimbursement: Transportation of household goods………………………$2,700 Airfare ……………………

> Myron graduates from college this year and lands a job with the Collingwood Corporation in Dallas. After accepting the job, he flies to Dallas to find an apartment. Myron uses $2,000 his grandmother gave him as a graduation gift to pay a moving company

> Simon graduated from Lessard University last year. He financed his education by working part-time and borrowing $16,000. During the current year, he pays $1,400 of interest on his student loan. a. What amount can Simon deduct as student loan interest i

> Martha graduated from Tassle Tech and immediately started working as an accountant for Creedon Industries. To finance her college education, she borrowed $23,000 from a local bank pays $1,800 of interest expense during the year. Her adjusted gross inco

> Lleyton is single and has adjusted gross income for 2017 of $58,000. He works as a marketing manager for a national clothing store. During the year he enrolls in two business courses at Heath University. Even though the courses improve his job skills,

> How does gross income differ from income?

> Yung is the sole owner of Southern Hills Insurance Agency. His primary business is the sale of fire and casualty policies. He has recently expanded his business by selling life insurance policies. Under his agreement with Heart Life Insurance Company,

> Gary and Patricia are divorced and have three children, ages 9, 6, and 2. Patricia has custody of the children and is entitled to the dependency exemption for each child. Their adjusted gross incomes are $48,000 and $61,000 respectively. During the cu

> Alex and Carmin are married and have two children, ages 6 and 3. Their adjusted gross income for the year is $123,000. a. What is maximum amount they can contribute to each child’s Coverdell Education Savings Account for the year? b. If their adjust

> Chanda is 36, single, and an active participant in a qualified employee pension plan. Determine the maximum Roth IRA contribution that she can make in each of the following cases: a. Her adjusted gross income for the year is $66,000. b. Her adjusted gro

> While reading a State College alumni newsletter, Linh is surprised to learn that interest paid on student loans is deductible. Linh graduated from college 2 years ago and paid $1,200 in interest during the current year on loans that he took out to pay h

> Kathy, who is single and 25, inherited $7,000 from her grandmother. A coworker has suggested that Kathy open an Individual Retirement Account with the $7,000. Her friend says that an IRA is a great way to save because you don't have to pay tax on the i

> Lois and Kam are married and file a joint return. Lois earns $64,500 and Kam earns $40,000. Their adjusted gross income is $112,000. Determine the maximum IRA contribution and deduction in each of the following cases: a. Neither Lois nor Kam is covered

> Carlos and Angela are married, file a joint return, and both are 42 years old. During the current year, Carlos’s salary is $70,000. Neither Carlos nor Angela is covered by an employer-sponsored pension plan. Determine the maximum IRA contribution and

> Thomas is single and a self-employed architect. During 2017, Thomas’s income from his business is $144,000. He also pays $2,200 for a medical insurance policy. a. How should the medical insurance policy payment be reflected on his 2017 tax return? b. W

> Evelyn is single and a self-employed engineer. During 2017, Evelyn's income from her engineering business is $55,000. Evelyn pays $3,100 for her medical insurance policy. a. How should the medical insurance policy payment be reflected on Evelyn's 2017

> Norman and Vanessa are married and have 2 dependent children. This is a summary of their 2016 tax return: Adjusted gross income…………………………………………………$103,800 Deductions from adjusted gross income: Standard deduction……………………………………

> The Ballaraat Corporation is cutting costs. The vice president of finance has asked the tax department to justify the company's continued use of an accountable employee expense reimbursement plan. You are the manager of the tax department. Prepare a le

> Alvin is an employee of York Company. During the year, he incurs the following employment-related expenses: Travel…………………………………………….$ 4,000 Meal………………………………………………. 2,400 Lodging……………………………………………2,500 Entertainment ……………………………………1,100 a. How should Alv

> Mona works for Leonardo Corporation as a sales representative. Leonardo gives her a travel allowance of $350 per month. During the current year, she spends the following amounts on valid travel expenses: Transportation……………………………..$ 2,700 Meals…………………

> Diane and Peter were divorced in 2017. The divorce agreement states that Peter is to have custody of their son, Stewart, and that Peter will be entitled to the dependency exemption. In addition, Diane is required to pay Peter $12,000 per year until Stew

> Vince is the third highest paid executive for Sensor Corporation, a publicly traded-corporation. His salary is $1,250,000. Identify the tax issue(s) posed by the facts presented. Determine the possible tax consequences of each issue you identify.

> Audrey opened Hardy Consulting Services during the current year. She has one employee, Deng, who is paid a salary of $30,000. Audrey is confused about the amount of federal unemployment tax she is required to pay on Deng's salary. The state unemployme

> Jennifer is self-employed. At Christmas, she gives the elevator operator in the building where her office is located a pair of gloves. She makes similar gifts to the two parking lot attendants who park her car. Identify the tax issue(s) posed by the fa

> Salvador is an insurance representative for the Hendricken Insurance Company. Recently, he heard that the controller of his largest account, Gore Plastics, was asking other insurance representatives to submit quotes on the cost of providing workers’ com

> Marjorie is an accountant and Alana is an attorney. They have been business acquaintances for about 10 years. They meet every Friday at 6 P.M. at a local tavern to socialize. As always happens with attorneys and accountants, they discuss what is happe

> Stephanie Zane is the sole proprietor of Shear Madness, a hair salon. Her revenue comes from two sources, haircuts and the sale of hair products. Stephanie has three employees whose compensation consists of a weekly salary and a 40% commission on the

> Simon and Sherry divorce during the current year. As part of their property settlement, Simon gives Sherry 25% of the stock in his 100%-owned corporation, Hobday, Inc. The stock has a fair market value of $80,000. Rather than pay Sherry any alimony, S

> Evander, an officer in the Marine Corps, was appointed commanding officer of the Marine training base in Beaufort, S.C. As is customary in connection with changes in command, he hosts a party at his home for officers and guests the night before he assum

> Pierre is a certified high school teacher in Kansas. During the year, his wife’s company transfers her to New Jersey. In applying for a job in New Jersey, Pierre is informed that he will be granted only a 6-month provisional teaching certificate unless

> The Internet is a useful resource for gathering tax information. An important aspect of taxes discussed in this chapter is how deductible IRA’s and Roth IRA’s can be used to save for retirement. One site that provides a comparison of these two retireme

> The use of a “flat tax” to replace the current income tax system has received a considerable amount of interest in recent years. Various flat-tax proposals have been made, but the gist of a flat tax is the use of a single tax rate with very few deductio

> Sam, the owner of The Perfect Cut, a wholesale meat distributor, unexpectedly dies during the current year. In an effort to provide equally for his two children, Sam’s will provides that the entire business less 40% of its accounts receivables be left t

> Scott is single and wants to maximize his retirement income. He contributes the maximum allowable to his company's qualified pension plan. His adjusted gross income for the year is $73,000. Identify the tax issue(s) posed by the facts presented. Deter

> Many legislative, administrative, and judicial resources are available on the Internet. These can be located using a search engine or a tax directory site on the Internet. This assignment is designed to acquaint you with some of the tax directory sites

> As stated in the text, the federal income tax is the largest revenue-producing tax in use in the United States. Why do you think the income tax produces more revenue than any other tax?

> The town of Dinsmore passed a bill requiring that all homes be connected to the town sewer system. Baskin Ridge is the only section of town that does not have town sewers. Dinsmore will finance the project by assessing each homeowner in Baskin Ridge $1

> The Copeland Corporation acquires a machine for $5,000 and pays $250 in state sales tax. The machine has a tax life of 7 years. Identify the tax issue(s) posed by the facts presented. Determine the possible tax consequences of each issue you identify.

> The Gallery is an indoor recreational facility. It employs 95 minimum wage employees and 7 management-level persons. During the past month, all employees of the facility participated in a promotion to enhance sales by distributing discount coupons to p

> Susan loaned $2,000 to her minister a year ago. The loan is not evidenced by a note and does not bear interest. The minister has moved out of town without paying her back. She doesn't want to embarrass him by asking him to repay the loan. Identify t

> Jake loaned his cousin, Arnold, $10,000 in March 2015 to open a cybercafe in Santa Barbara. Arnold signed a loan agreement to pay Jake 7% interest annually, with the principal due in 2018. Jake received his 2015 interest payment but did not receive any

> Carla has a B.S. degree in history and is employed as an administrative assistant for a public accounting firm. After work, she attends Wittman College where she is enrolled in an accounting course. Her goal is to take the necessary courses to sit for

> Based on the information provided in the text, calculate Rufus and Rhonda's taxable income and their tax liability. Assume that they are cash basis taxpayers and want to be as aggressive as possible in taking their allowable deductions. In addition, yo

> Tom is a CPA for a large regional firm. In preparing the tax return for Espresso Industries, he notices that the firm has an unusually high amount of travel, meal, and entertainment expenses. Therefore, he decides to examine the supporting documentation

> What requirements must be met to deduct life insurance premiums paid on an employee's policy?

> Explain the criteria used to determine whether an educational expense is deductible or nondeductible and how education expenses are deducted on a taxpayer's return.

> Under what circumstances are business gifts deductible?

> The purpose of this assignment is to introduce you to the tax information provided by the Internal Revenue Service on its World Wide Web site (http://www.irs.gov/). Go to this site and look at the various types of information provided and write a short

> What records are necessary to properly document travel, entertainment, and gift expenses?

> How is the gross income from a rental property or a royalty property determined?

> What problems does the taxpayer who uses an automobile for both business and personal purposes encounter? What option(s) does the taxpayer have regarding the automobile expense deduction?

> How does an entertainment expense directly related to business differ from an entertainment expense associated with business?

> What requirements must be met for meal and entertainment expenses to be deductible?

> Most expenditures that have a business purpose and meet the ordinary, necessary, and reasonable requirements are deductible. However, specific rules must be adhered to in determining the deductibility of many expenses that meet this test. Why are these

> Explain the general requirements that must be met to obtain a deduction for moving expenses and the type of moving expenses that are deductible.

> Is the interest on education loans always deductible? Explain

> Who is eligible to make and receive contributions to a Coverdell Education Savings Account?

> How does the tax treatment of a conventional IRA differ from a Roth IRA?

> Are all taxpayers allowed a deduction for contributions to a conventional individual retirement account? Explain.

> Joey and Camilla are married and have three children, ages 8, 16, and 18. They own a commercial cleaning business that is organized as a sole proprietorship and makes $170,000 annually. They have $30,000 of other taxable income (net of allowable deduct