Lara uses the standard mileage method for determining auto expenses. During 2021, she used her car as follows: 9,000 miles for business, 2,000 miles for personal use, 2,500 miles for a move to a new job, 1,000 miles for charitable purposes, and 500 miles for medical visits. Presuming that all the mileage expenses are allowable (i.e., not subject to percentage limitations), what is Lara’s deduction for: a. Business? b. Charitable? c. Medical?
> John and Mary Jane Diaz are married, filing jointly. Their address is 204 Shoe Lane, Blacksburg, VA 24061. John is age 35, and Mary Jane is age 30. They are expecting their first child in early 2022. John’s salary in 2021 was $125,000, from which $22,800
> Roberta Santos, age 41, is single and lives at 120 Sanborne Avenue, Springfield, IL 62701. Her Social Security number is 123-45-6780. Roberta has been divorced from her former husband, Wayne, for three years. She has a son, Jason, who is 17, and a daught
> Alfred E. Old and Beulah A. Crane, each age 42, married on September 7, 2018. Alfred and Beulah will file a joint return for 2020. Alfred’s Social Security number is 111-11- 1109. Beulah’s Social Security number is 123-45-6780, and she has chosen to use
> Martin S. Albert (Social Security number 111-11-1111) is 39 years old and is married to Michele R. Albert (Social Security number 123-45-6789). The Alberts live at 512 Ferry Road, Newport News, VA 23601. They file a joint return and have two dependent ch
> Cecil C. Seymour is a 64-year-old widower. He had income for 2021 as follows: Pension from former employer …………………………………………………………………………..$39,850 Interest income from Alto National Bank……………………………………………………………….. 5,500 Interest income on City of Alto bonds
> Daniel B. Butler and his spouse Freida C. Butler file a joint return. The Butlers live at 625 Oak Street in Corbin, KY 40701. Dan’s Social Security number is 111-11-1112, and Freida’s is 123-45-6780. Dan was born on Ja
> John Rivera, age 31, is single and has no dependents. At the beginning of 2021, John started his own excavation business and named it Earth Movers. John lives at 1045 Center Street, Lindon, UT, and his business is located at 381 State Street, Lindon, UT.
> Meghan, a calendar year taxpayer, is the owner of a sole proprietorship that uses the cash method. On February 1, 2021, she leases an office building to use in her business for $120,000 for an 18-month period. To obtain this favorable lease rate, she pay
> Janice Morgan, age 24, is single and has no dependents. She is a freelance writer. In January 2020, Janice opened her own office located at 2751 Waldham Road, Pleasant Hill, NM 88135. She called her business Writers Anonymous. Janice is a cash basis taxp
> Logan B. Taylor is a widower whose wife, Sara, died on June 6, 2018. He lives at 4680 Dogwood Lane, Springfield, MO 65801. He is employed as a paralegal by a local law firm. During 2020, he had the following receipts: Logan inherited securities worth $60
> Lance H. and Wanda B. Dean are married and live at 431 Yucca Drive, Santa Fe, NM 87501. Lance works for the convention bureau of the local Chamber of Commerce, and Wanda is employed part-time as a paralegal for a law firm. During 2020, the Deans had the
> David R. and Ella M. Cole (ages 39 and 38, respectively) are husband and wife who live at 1820 Elk Avenue, Denver, CO 80202. David is a self-employed consultant specializing in retail management, and Ella is a dental hygienist for a chain of dental clini
> Research the following questions regarding virtual currency, and write your answers in the form of a set of “frequently asked questions” (FAQs) suitable for the website of your CPA firm. As part of your research, consider the IRS’s FAQs on virtual curren
> On December 29, 2021, an employee received a $5,000 check from her employer’s client. The check was payable to the employer. The employee did not remit the funds to the employer until December 30, 2021. The employer deposited the check on December 31, 20
> Jamie has an undergraduate degree in finance and has an established financial planning practice (a single member LLC). To expand her knowledge base and serve her clients better, she decides to pursue a master’s degree in quantitative finance at a local u
> Isabelle was contemplating making a contribution to her traditional IRA in 2020. She determined that she would contribute $6,000 in December 2020, but forgot about making the contribution until she was preparing her 2020 tax return in February 2021. Use
> Classify each of the following expenditures paid in 2021 as a deduction for AGI, a deduction from AGI, or not deductible: a. Roberto gives cash to his father as a birthday gift. b. Sandra gives cash to her church. c. Albert pays Dr. Dafashy for medical s
> Oleander Corporation, a calendar year entity, begins business on March 1, 2021. The corporation incurs startup expenditures of $64,000. If Oleander elects § 195 treatment, determine the total amount of startup expenditures that it may deduct for 2021.
> Shanna, a calendar year and cash basis taxpayer, rents property to be used in her business from Janice. As part of the rental agreement, Shanna pays $8,400 rent on April 1, 2021, for the 12 months ending March 31, 2022. a. How much is Shanna’s deduction
> Using the legend provided, classify each of the following statements: a. Sue writes a $707 check for a charitable contribution on December 26, 2021, but does not mail the check to the charitable organization until January 10, 2022. She takes a deduction
> In 2021, Muhammad purchased a new computer for $16,000. The computer is used 100% for business. Muhammad did not make a § 179 election with respect to the computer. He does not claim any available additional first-year depreciation. If Muhammad uses the
> On June 5, 2020, Leo purchased and placed in service a new car that cost $75,000. The business use percentage for the car is always 100%. Leo does not claim any available additional first-year depreciation. Compute Leo’s cost recovery deductions for 2020
> Naya purchased a new computer (5-year property) on June 1, 2021, for $4,000. Naya could use the computer 100% of the time in her business, or she could allow her family to use the computer as well. Naya estimates that if her family uses the computer, the
> Stella Watters is a CPA who operates her own accounting firm (Watters CPA LLC). As a single-member LLC, Stella reports her accounting firm operations as a sole proprietor. Stella has QBI from her accounting firm of $540,000, she reports W–2 wages of $156
> For tax year 2019, the IRS assesses a deficiency against David for $500,000. Disregarding the interest component, what is David’s penalty if the deficiency is attributable to: a. Negligence? b. Fraud?
> Rita files her income tax return 35 days after the due date of the return without obtaining an extension from the IRS. Along with the return, she remits a check for $40,000, which is the balance of the tax she owes. Disregarding the interest element, wha
> Using the legend provided, classify each of the following tax sources: a. Sixteenth Amendment to the U.S. Constitution. b. Tax treaty between the United States and India. c. Revenue Procedure. d. An IRS publication. e. U.S. District Court decision. f. Y
> Brianna, a calendar year taxpayer, files her income tax return for 2020 on February 3, 2021. Although she makes repeated inquiries, she does not receive her refund from the IRS until May 28, 2021. Is Brianna entitled to interest on the refund? Explain
> During 2021, Stork Associates paid $60,000 for a 20-seat skybox at Veterans Stadium for eight professional football games. Regular seats to these games range from $80 to $250 each. At one game, an employee of Stork entertained 18 clients. Stork furnished
> Mio was transferred from New York to Germany. He lived and worked in Germany for 340 days in 2021. Mio’s salary for 2021 is $190,000. In your computation, round any division to four decimal places before converting to a percentage. For example, 0.473938
> Janice acquired an apartment building on June 4, 2021, for $1,600,000. The value of the land is $300,000. Janice sold the apartment building on November 29, 2027. a. Determine Janice’s cost recovery deduction for 2021. b. Determine Janice’s cost recovery
> Rex, age 55, is an officer of Blue Company, which provides him with the following nondiscriminatory fringe benefits in 2021: • Hospitalization insurance premiums for Rex and his dependents. The cost of the coverage for Rex is $2,900 per year, and the add
> On May 5, 2021, Christy purchased and placed in service a hotel. The hotel cost $10,800,000, and the land cost $1,200,000 ($12,000,000 in total). Calculate Christy’s cost recovery deductions for 2021 and for 2031.
> On April 3, 2021, Terry purchased and placed in service a building that cost $2,000,000. An appraisal determined that 25% of the total cost was attributed to the value of the land. The bottom floor of the building is leased to a retail business for $32,0
> On August 2, 2021, Wendy purchased a new office building for $3,800,000. On October 1, 2021, she began to rent out office space in the building. On July 15, 2025, Wendy sold the office building. a. Determine Wendy’s cost recovery deduction for 2021. b. D
> Juan acquires a new 5-year class asset on March 14, 2021, for $200,000. This is the only asset Juan acquired during the year. He does not elect immediate expensing under § 179. He does not claim any available additional first-year depreciation. On July 1
> Selma operates a contractor’s supply store. She maintains her books using the cash method. At the end of 2021, her accountant computes her accrual basis income that is used on her tax return. For 2021, Selma had cash receipts of $1,400,000, which include
> Orange Corporation acquired new office furniture on August 15, 2021, for $130,000. Orange does not elect immediate expensing under § 179. Orange claims any available additional first-year depreciation. a. Determine Orange’s cost recovery for 2021. b. How
> In 2018, José purchased a house for $325,000 ($300,000 relates to the house; $25,000 relates to the land). He used the house as his personal residence. In March 2021, when the fair market value of the house was $400,000, he converted the house to rental
> In 2021, Ava, an employee, has AGI of $58,000 and the following itemized deductions: Home office expenses …………………………………………………………….$1,200 Union dues and work uniforms ……………………………………………………350 Unreimbursed employee expenses ………………………………………………..415 Gambling
> Valentino is a patient in a nursing home for 45 days of 2021. While in the nursing home, he incurs total costs of $13,500. Medicare pays $8,000 of the costs. Valentino receives $15,000 from his long-term care insurance policy, which pays while he is in t
> In May 2021, Hernando, a resident of California, has his 2019 Federal income tax return audited by the IRS. An assessment of additional tax is made because he inadvertently omitted some rental income. In October 2021, California audits his state return f
> In 2021, Meghann, a single taxpayer, has QBI of $110,000 and modified taxable income of $78,000 (this is also her taxable income before the QBI deduction). Given this information, what is Meghann’s QBI deduction?
> Jayda maintains an office in her home that comprises 8% (200 square feet) of total floor space. Gross income for her business is $42,000, and her residence expenses are as follows: Real property taxes …………………………………………………………….$2,400 Interest on mortgage …
> Charlie purchased an apartment building on November 16, year 1, for $1,000,000. Determine the cost recovery for year 20. a. $36,360 b. $32,100 c. $45,500 d. $331,850
> In 2021, Robert takes four key clients and their spouses out to dinner at a local restaurant. Business discussions occurred over dinner. Expenses were $700 (drinks and dinner) and $140 (tips to servers). If Robert is self-employed, how much can he deduct
> Many states have their income tax calculations “piggyback” the Federal income tax calculation. In other words, these states’ income tax calculations incorporate many of the Federal calculations and deductions to make both compliance and verification of t
> Carlos is retired and receives Social Security benefits. During the year, Carlos appeared on a television game show and won $5,000. By how much will the prize increase his gross income?
> A qualified expense is not deductible unless there is appropriate substantiation to document it. Find two websites and/or articles that provide (1) guidance on the types of substantiation required for business expenses and (2) suggestions for taxpayers o
> Use information about individual income tax returns available at the IRS Tax Stats website (irs.gov/statistics/soi-tax-stats-individual-income-tax-returns) to find data on the number of individuals who report tax-exempt interest income on their tax retur
> Apply the tax benefit rule to determine the amount of the state income tax refund included in gross income in 2021. a. Myrna and Geoffrey filed a joint tax return in 2020. Their AGI was $85,000, and itemized deductions were $25,500, which included $7,000
> A taxpayer is considering two alternative investments. A Series EE U.S. government savings bond accrues 3.5% interest each year. The bond matures in three years, at which time the principal and interest will be paid. Alternatively, a bank will pay the ta
> Find a newspaper article that discusses tax planning for casualty losses when a Federal disaster area designation is made. Does the article convey the pertinent tax rules correctly? Then list all of the locations identified by the President as Federal di
> Kelly decided to invest in Lime, Inc. common stock after reviewing Lime’s public disclosures, including recent financial statements and a number of press releases issued by Lime. On August 7, 2019, Kelly purchased 60,000 shares of Lime for $210,000. In M
> There are significant tax planning opportunities related to fixed asset acquisition (and depreciation). Search out how large public accounting firms are assisting clients in this area. Summarize your findings in an e-mail to your instructor
> Mark and Lisa were divorced in 2020. In 2021, Mark has custody of their children, but Lisa provides nearly all of their support. Who is entitled to claim the children as dependents?
> Locate a financial calculator app or program that assesses the wisdom of buying versus leasing a new car. Use it to work through Problem 46 in this chapter.
> Caden and Lily are divorced on March 3, 2020. For financial reasons, however, Lily continues to live in Caden’s apartment and receives her support from him. Caden does not claim Lily as a dependent on his 2020 Federal income tax return but does so on his
> How many U.S. individuals claim a deduction for casualties? Does it vary by size of income (AGI)? How do casualty loss deductions compare to the amounts of other itemized deductions claimed by taxpayers? Go to the IRS tax statistics website (irs.gov/stat
> Which of the following is not a deduction for AGI? a. Alimony paid for a divorce finalized in 2018. b. Business rent on a self-employed business. c. Property taxes paid on your primary residence. d. One half of self-employment tax.
> Jeffrey Dean, a Master’s Degree candidate at North State Central University, was awarded a $15,000 scholarship from North State Central in the current year. During the current year, he paid the following expenses: Tuition……………………….. $12,000 Books……………………
> Which of the following is a deduction for AGI? a. Charitable contributions of property. b. Alimony paid pursuant to a 2015 divorce agreement. c. State income taxes. d. Mortgage interest paid on your primary residence.
> Bigham Corporation, an accrual basis calendar year taxpayer, sells its services under 12- and 24 month contracts. The corporation provides services to each customer every month. On July 1, 2021, Bigham sold the following customer contracts: Length of Con
> Calculate the taxpayer’s 2021 qualified business income deduction for a qualified trade or business: Filing status: ……………………………………………………………..Single Taxable income: ……………………………………………………$180,000 Net capital gains: …………………………………………………………… $0 Qualified busin
> Calculate the taxpayer’s 2021 qualified business income deduction for a qualified trade or business: Filing status: …………………………………………….Single Taxable income: ………………………………….$100,000 Net capital gains: ………………………………………….$0 Qualified business income (QBI): ……
> Which of the following is the overall limitation to the qualified business income (QBI) deduction? a. Lesser of 50% of combined QBI or 20% of the taxpayer’s taxable income in excess of net capital gain b. Lesser of combined QBI or 20% of the taxpayer’s t
> What is the basic deduction calculation for the qualified business income deduction? a. 30% 3 Qualified business income (QBI) b. 20% 3 W–2 wages c. 20% 3 Qualified business income (QBI) d. 30% 3 W–2 wages
> Which of the following is considered a specified service trade or business (SSTB) for purposes of the qualified business income deduction? a. Accounting firm b. Manufacturing company c. Engineering firm d. Architectural services
> Where is the deduction for qualified business income (QBI) applied in the individual tax formula? a. As an adjustment to arrive at adjusted gross income b. As an itemized deduction c. As an alternative to the standard deduction d. As a deduction from adj
> Bob and Nancy are married and file a joint return in 2020. They are both under age 50 and employed, with wages of $50,000 each. Their total AGI is $112,000. Neither of them is an active participant in a qualified plan. What is the maximum traditional IRA
> Data, Inc., purchased and placed in service $5,000 of office furniture on August 24, year 3. This is the only asset purchase during the year. Code § 179 expensing and bonus depreciation were not elected. Using the excerpt of the MACRS half-ye
> Mark and Lucy owned two stocks, Tinker Inc., and Chance Inc., that became worthless during year 8. The adjusted basis in Tinker was $80,000. Tinker was incorporated in year 2, and Mark and Lucy purchased their stock in year 4. Their adjusted basis in Cha
> Mark and Lucy owned two stocks, Tinker Inc., and Chance Inc., that became worthless during year 8. The adjusted basis in Tinker was $300,000. Tinker was incorporated in year 2, and Mark and Lucy purchased their stock in year 4. Their adjusted basis in Ch
> In 2021, Jack, age 12, has interest income of $4,900 on funds he inherited from his aunt and no earned income. He has no investment expenses. Christian and Danielle (his parents) have taxable income of $82,250 and file a joint return. Assume that no pare
> The Groves own a beach house as a second home. This year, the Groves used the beach house personally for 4 months. For 14 days during the summer, the Groves rented out their beach house for $5,000 total to friends. Which statement is true regarding the t
> The Griffins own a mountain cabin that is used for both personal and rental purposes. In the current year, the Griffins rented the cabin out for 150 days and used it personally for 50 days. Assume that the Griffins itemize their deductions. Which of the
> Bob is a farmer and is required to use the accrual method. At the beginning of the year, Bob has inventory, including livestock held for resale, amounting to $10,000. During the year, Bob purchased livestock totaling $3,000. Bob’s ending inventory was $4
> Which of the following is taxable as gross income? a. Child support received based on a divorce agreement executed in 2015. b. Alimony received based on a divorce agreement executed in 2015. c. Child support received based on a divorce agreement executed
> The Tiller family has an adjusted gross income of $200,000 in 2020. The Tillers have two children, ages 12 and 13, who qualify as dependents. All of the Tillers’ income is from wages. What is the Tillers’ child tax cre
> In 2020, Madison and Nick Koz have two children, ages 8 and 10. Both children meet the definition of qualifying child. The Koz family has adjusted gross income of $300,000. What is the amount of the child tax credit on the couple’s income tax return? a.
> Jonathan Jones is a 19-year-old full-time college student at the local community college. He lives in an apartment near campus during the school year and returns home for the summer break and holidays. Jonathan earned $5,000 this year working at the camp
> Heather is single and has one son, Rhett, who is 19 years old. Rhett lived at home for four months of the current tax year before moving away to take a full-time job in another city. Heather provided more than half of Rhett’s support for the taxable year
> Susie, John, Luke, and Will provide support for their 80-year-old mother, Joyce. Joyce lives by herself in an apartment in Miami, Florida. Joyce earned $5,000 this year working at her church. Joyce provides 5% of her own support. Susie provides 30% of Jo
> Bill and Anne Chambers are married and file a joint return. They have no children. Their college friend Ryan lived with them for the entire current tax year. Ryan is 40 years old and earned $2,000 at a part-time job and received $25,000 in municipal bond
> Compute the 2021 tax liability and the marginal and average tax rates for the following taxpayers (use the 2021 Tax Rate Schedules in Appendix A for this purpose): a. Chandler, who files as a single taxpayer, has taxable income of $94,800. b. Lazare, who
> Katherine and Bill Grant have two children. Kelly is 22 years old and is a full-time student. She lives on campus at an out-of-state university but will return home for the summer. Kelly earns $5,000 a year working part-time. Her parents provide her with
> Jeff and Rhonda are married and have two children, Max and Jen. Max is 20, attends college in the Los Angeles area full-time, and works as a stunt double for a television show while he is in school. Max earns $15,000 per year as a stunt double and lives
> Visit the websites of a few public accounting firms to learn how they are using data analytics and visualization in the tax function. In an e-mail to your instructor, explain what you found, provide the source(s) you used, and explain how you think the d
> How do U.S. individuals generate their income? Does it vary by size of income (AGI)? Go to the IRS tax statistics website (irs.gov/statistics), and download a recent tax year’s information on “sources of income.” Compare the following types of income by
> Your client Murray reported to the Environmental Protection Agency that his employer was illegally dumping chemicals into a river. His charges were true, and Murray’s employer was fined. In retaliation, Murray’s employer fired him and made deliberate eff
> Kathy and Brett Ouray married in 2003. They began to experience marital difficulties in 2017 and, in the current year, although they are not legally separated, consider themselves completely estranged. They have contemplated getting a divorce. However, b
> Analyze S. 700 (116th Congress) introduced by Senator John Thune to provide a new approach to provide freelance (“gig”) workers independent contractor status. Also see his press release of March 7, 2019, at thune.senate.gov/public/index.cfm/2019/3/thune-
> Do depreciation deductions vary by entity type or by industry? Go to the IRS Tax Statistics page (irs.gov/statistics), and review the spreadsheets containing data for corporations, partnerships, and nonfarm proprietorships by sector or industry. You can
> Juan owns a business that acquires exotic automobiles that are high-tech, state-of-the-art vehicles with unique design features or equipment. The exotic automobiles are not licensed or set up to be used on the road. Rather, the cars are used exclusively
> In 2017, Jed James began planting a vineyard. The costs of the land preparation, labor, rootstock, and planting were capitalized. The land preparation costs do not include any nondepreciable land costs. In 2021, when the plants became viable, Jed placed
> Paul and Sonja, who are married, had itemized deductions of $13,200 and $400, respectively, during 2021. Paul suggests that they file separately—he will itemize his deductions from AGI, and she will claim the standard deduction. a. Evaluate Paul’s sugges
> Your client, Dave’s Sport Shop, sells sports equipment and clothing in three retail outlets in New York City. During 2021, the CFO decided that keeping track of inventory using a combination of QuickBooks and spreadsheets was not an efficient way to mana
> Esther owns a large home on the Southeast Coast. Her home is surrounded by large, mature oak trees that significantly increase the value of her home. In September 2021, a hurricane damaged many of the trees surrounding her home; her region was declared a
> During 2021, your client, Kendra Adams, was the chief executive officer and a shareholder of Maze, Inc. She owned 60% of the outstanding stock of Maze. In 2018, Kendra and Maze, as co-borrowers, obtained a $100,000 loan from United National Bank. This lo
> Rex and Agnes Harrell purchased a beach house at Duck, North Carolina, in early 2021. Although they intended to use the beach house occasionally for recreational purposes, to help pay the mortgage payments, property taxes, and maintenance costs, they als
