Question: Ms. Gomez earned a $91,250 salary,

> Mrs. Cox, a head of household, earned a $313,000 salary and recognized a $29,300 net long-term capital gain this year. Compute the income tax on the gain if: a. None of the gain is collectibles gain or un recaptured Section 1250 gain. b. $10,000 is colle

> Mr. Fox, a single taxpayer, recognized a $64,000 long-term capital gain, a $14,300 short-term capital gain, and a $12,900 long-term capital loss. Compute Mr. Fox’s income tax and Medicare contribution tax if his taxable income before consideration of his

> Refer to the preceding problem. Determine which of the four cases results in a capital loss carry forward for Mr. and Mrs. Revel. What is the amount and character of each carry forward? Data from Problem 24: Mr. and Mrs. Revel had $206,200 AGI before c

> Mr. and Mrs. Revel had $206,200 AGI before considering capital gains and losses. For each of the following cases, compute their AGI: a. On May 8, they recognized a $8,900 short-term capital gain. On June 25, they recognized a $15,000 long-term capital lo

> This year, Linda Moore earned a $112,000 salary and $2,200 interest income from a jumbo certificate of deposit. She recognized a $15,300 capital loss on the sale of undeveloped land. Compute Linda’s AGI and any capital loss carry forward into future year

> Mr. Alm earned a $61,850 salary and recognized a $5,600 capital loss on the sale of corporate stock this year. Compute Mr. Alm’s AGI and any capital loss carry forward into future years in each of the following cases: a. Mr. Alm had no other capital tran

> Refer to the preceding problem. For each case, determine CVF’s tax basis in the security received in the exchange. Data from Problem 19: CVF owned 2,000 shares of Jarvis nonvoting common stock with a $225,000 basis. In each of the following cases, dete

> Mr. Lay, who has a 37 percent marginal tax rate on ordinary income, earned a $22,030 dividend on his investment in Rexford Mutual Fund. Compute the income tax and the Medicare contribution tax on this dividend if his Form 1099 reported that: a. The entir

> CVF owned 2,000 shares of Jarvis nonvoting common stock with a $225,000 basis. In each of the following cases, determine CVF’s recognized gain or loss on the disposition of this stock: a. CVF exchanged it for 1,300 shares of Jarvis voting common stock wo

> Vern plans to invest $100,000 in a growth stock, in year 0. The stock is not expected to pay dividends. However, Vern predicts that it will be worth $135,000 when he sells it in year 3. The $35,000 increase in value will be taxable at the preferential ca

> In 2016, Mr. Dale paid $47,600 for 3,400 shares of GKL Mutual Fund and elected to reinvest his year-end dividends in additional shares. In 2016 and 2017, he received Form 1099s reporting the following. a. If Mr. Dale sells his 4,052 shares for $18 per

> Refer to the facts in the preceding problem. Assume that on January 1, 2025, Mr. Fairhold’s unrecovered investment in the annuity is $1,875. a. How much of his total 2025 annuity payments ($15,600) are taxable? b. Assume that he dies in February after re

> Fifteen years ago, Mr. Fairhold paid $50,000 for a single-premium annuity contract. This year, he began receiving a $1,300 monthly payment that will continue for his life. On the basis of his age, he can expect to receive $312,000. How much of each month

> In 2016, Mrs. Ulm paid $80,000 for a corporate bond with a $100,000 stated redemption value. Based on the bond’s yield to maturity, amortization of the $20,000 discount was $1,512 in 2016, $1,480 in 2017, and $295 in 2018. Mrs. Ulm sold the bond for $84,

> Mr. Nixon and Mr. Ryan are employed by HD Inc., which provides its employees with free parking. If the parking were not available, Mr. Nixon would pay $35 a month to a city garage. Mr. Ryan uses public transportation to commute. HD offers a complete fami

> Mrs. Eller’s corporate employer has a cafeteria plan under which its employees can receive a $3,000 year-end Christmas bonus or enroll in a qualified medical reimbursement plan that pays up to $3,000 of annual medical bills. Mrs. Eller is in a 24 percent

> Mr. Kim is a U.S. citizen who has been stationed at his employer’s Tokyo office for the last six years. a. Compute Mr. Kim’s AGI if his only income for the year was his $65,000 salary. b. Compute Mr. Kim’s AGI if his only income for the year was his $169

> Mr. and Mrs. Soon are the sole shareholders of SW Inc. For the last three years, SW has employed their son as a sales representative and paid him a $30,000 annual salary. During a recent IRS audit, the revenue agent discovered that the son has never made

> Ms. Sturm owns a tax-deferred retirement account with a $200,000 current balance. She intends to roll over this balance into a new Roth IRA before the end of the year. Ms. Sturm’s current marginal tax rate is 35 percent. Compute Ms. Sturm’s tax cost of c

> Mrs. Lohan, age 64, plans to retire this December. She estimates that the balance in her IRA will be $86,500, which she plans to withdraw to finance the purchase of a condominium. Assuming that her marginal tax rate is 24 percent, compute her after-tax c

> Moto Inc. pays state income tax at a 6 percent rate and federal income tax at a 21 percent rate. Moto recently engaged in a transaction in Country N, which levied a $97,300 tax on the transaction. This year, Moto generated $2.738 million net income befor

> Mr. and Mrs. Brock own a bakery. Their marginal tax rate on the bakery’s income is 32 percent. The Brocks’ 18-year-old daughter Megan works part-time in the bakery. This year, Megan earned $15,284 of wages, which was her only income. a. Compute Megan’s i

> Mrs. Kwan withdrew the entire $8,000 balance from her Roth IRA this year. Her total contributions to the account were $6,070, and her marginal tax rate is 12 percent. Determine the tax cost of the withdrawal if: a. Mrs. Kwan is age 63 and opened the Roth

> Mr. Ballard retired in 2018 at age 69 and made his first withdrawal of $35,000 from his traditional IRA. At year-end, the IRA balance was $441,000. In 2019, he withdrew $60,000 from the IRA. At year-end, the account balance was $407,000. Determine how mu

> Mrs. Shin retired in 2017 at age 63 and made her first withdrawal of $20,000 from her traditional IRA. At year-end, the IRA balance was $89,200. In 2018, she withdrew $22,000 from the IRA. At year-end, the account balance was $71,100. Determine how much

> Mr. Gilbert is self-employed and makes annual contributions to a Keogh plan. Mrs. Gilbert’s employer doesn’t offer any type of qualified retirement plan. Each spouse contributes $3,000 to a traditional IRA. In each of the following cases, compute the AGI

> Mr. and Mrs. Marlo file a joint tax return. Each spouse contributed $5,000 to a traditional IRA. In each of the following cases, compute the deduction for these contributions. The AGI in each case is before any deduction. a. Mr. Marlo is an active partic

> Mr. and Mrs. Davos file a joint tax return. Each spouse contributed $3,800 to a traditional IRA. In each of the following cases, compute the deduction for these contributions. The AGI in each case is before any deduction. a. Neither spouse is an active p

> What is the maximum IRA contribution that Mr. Janson can make under each of the following assumptions? a. He is age 20 and single. His only income item is $13,200 interest from a trust fund. b. He is age 40 and single. His only income item is a $31,900 s

> Mr. and Mrs. Weiss had the following income items. Mr. Weiss’s salary …………………………………………………$105,000 Mrs. Weiss’s earnings from self-employment ……………50,000 The income tax deduction for Mrs. Weiss’s SE tax was $3,532. Mr. Weiss contributed the maximum to h

> Marlo, a publicly held corporation with a 21 percent tax rate, has agreed to pay an annual salary of $1.3 million to its employee, Mrs. Ryman. In each of the following cases, compute Marlo’s after-tax cost of the salary. In making your calculation, ignor

> Company EJ plans to build a new plant to manufacture bicycles. EJ sells its bicycles in the world market for $400 per bike. It could locate the plant in Province P, which levies a 20 percent tax on business income. On the basis of the cost of materials a

> Refer to the facts in the preceding problem. Assume Mrs. Bard retires in 2023 and receives her first $20,000 payment from Lyton Industries. a. How much compensation income does Mrs. Bard recognize in 2023? b. What is Lyton Industries 2023 tax deduction f

> This year, Mrs. Bard, who is head of Lyton Industries’s accounting and tax department, received a compensation package of $360,000. The package consisted of a $300,000 current salary and $60,000 deferred compensation. Lyton will pay the deferred compensa

> Refer to the facts in the preceding problem. Petro Inc. pays $125,000 deferred compensation to Mr. Gilly in 2025, the year of his retirement. a. How much compensation income does Mr. Gilly recognize in 2025? b. What is Petro’s 2025 tax deduction for the

> Mr. Gilly is the PFO of Petro Inc. This year, his compensation package was $625,000. Petro paid him a $500,000 salary during the year and accrued an unfunded liability to pay him the $125,000 balance in the year he retires at age 60. a. How much compensa

> Mrs. Kirk withdrew $30,000 from a retirement account and used the money to furnish her new home. Her marginal tax rate is 24 percent. Compute the tax cost of the withdrawal in each of the following cases: a. Mrs. Kirk is 56 years old. She withdrew the mo

> Mr. Toomey (a 45-year-old single taxpayer) exercised an ISO and purchased $380,000 worth of his employer’s stock for only $113,000. His only other income was his $158,500 salary, and he doesn’t itemize deductions. Compute Mr. Toomey’s income tax includin

> Trent Inc. needs an additional worker on a multiyear project. It could hire an employee for a $65,000 annual salary. Alternatively, it could engage an independent contractor for a $72,000 annual fee. If Trent’s income tax rate is 21 percent, which option

> In 2011 (year 0), Mrs. Linsey exercised a stock option by paying $100 per share for 225 shares of ABC stock. The market price at date of exercise was $312 per share. In 2018, she sold the 225 shares for $480 per share. Assuming that Mrs. Linsey is in the

> In 2013, BT granted a nonqualified stock option to Ms. Pearl to buy 500 shares of BT stock at $20 per share for five years. At date of grant, BT stock was trading on Nasdaq for $18.62 per share. In 2018, Ms. Pearl exercised the option when BT’s stock was

> Refer to the facts in the preceding problem. Five years after Gogo granted the option to Mrs. Mill, she exercised it on a day when Gogo stock was selling for $10.31 per share. a. How much income must Mrs. Mill recognize in the year of exercise? b. What i

> Lardo Inc. plans to build a new manufacturing plant in either Country X or Country Y. It projects gross revenue in either location of $4 million per year. Operating expenses would be $1.5 million in Country X and $1.8 million in Country Y. Country X levi

> In each of the following cases, determine if the United States has jurisdiction to tax Mr. KT. a. Mr. KT is a U.S. citizen but has been a permanent resident of Belgium since 1993. b. Mr. KT is a citizen and resident of Canada. He owns an apartment buildi

> On September 30, 2014, Stalling Inc. issued 2,000 shares of its publicly traded stock as compensation to its employee, Mr. Harry. On the date of issuance, the stock’s fair market value was $40,000. Under the terms of his 2014 compensation contract, Mr. H

> Peet Company provides free on-site day care for its employees with preschool children. Determine the pretax value of the care for each of the following employees: a. Mrs. Udolf, who has a 32 percent marginal tax rate and who would pay $10,675 annually fo

> Greg Company agreed to pay Ms. Bilko $45,000 compensation for services performed for the company. a. Compare the income tax consequences to Greg and Ms. Bilko if she is an employee or if she is an independent contractor. b. Compare the payroll tax conseq

> Mr. and Mrs. Daku had the following income items. Mr. Daku’s salary ……………………………………..$52,500 Mrs. Daku’s Schedule C net profit ………………..41,800 Interest income …………………………………………….1,300 Mrs. Daku’s self-employment tax was $5,906. Mrs. Daku’s Schedule C net

> Mr. Olaf earned an $89,000 salary, and Mrs. Olaf earned a $40,330 salary. The couple had no other income and can’t itemize deductions. a. Compute their combined tax if they choose to file separate returns. b. Compute their tax if they file a joint return

> Mr. and Mrs. Ohlson file a joint income tax return. Determine if each of the following unmarried individuals is either a qualifying child or a qualifying relative. a. Son Jack, age 20, lives in his parents’ home and works full-time as an auto mechanic. J

> Ms. West is an unmarried individual. Determine if each of the following unmarried individuals is either a qualifying child or a qualifying relative. a. Daughter Dee, age 20, is a student at State University but lists Ms. West’s home as her permanent resi

> Ms. Noteboom, a single taxpayer, projects that she will incur about $13,500 of expenses qualifying as itemized deductions in both 2018 and 2019. Assuming that her standard deduction is $12,000 in both years, compute the effect on taxable income for each

> Mr. and Mrs. Brown report taxable income of $130,000 in 2018. In addition, they report the following. Excess Social Security Withholding Credit ………………$ 2,200 Estimate tax payments 4,000 Withholding ……………….14,200 Compute the amount due or refund claimed

> Firm W, which has a 32 percent marginal tax rate, plans to operate a new business that should generate $40,000 annual cash flow/ordinary income for three years (years 0, 1, and 2). Alternatively, Firm W could form a new taxable entity (Entity N) to opera

> In January, Ms. NW projects that her employer will withhold $25,000 from her 2019 salary. However, she has income from several other sources and must make quarterly estimated tax payments. Compute the quarterly payments that result in a 2019 safe-harbor

> Jaclyn Biggs, who files as a head of household, never paid AMT before 2018. In 2018, her regular tax liability was $102,220 which included 39,900 capital gain taxed at 20 percent, and her AMTI in excess of her exemption amount was $422,500. Compute Jacly

> In each of the following cases, compute AMT (if any). For all cases, assume that taxable income does not include any dividend income or capital gain. a. Mr. and Mrs. Baker’s taxable income on their joint return was $200,000, and their AMTI before exempti

> Mr. and Mrs. Kigali’s AGI (earned income) was $14,610. Their federal income tax withholding was $850. They had no itemized deductions and two dependent children, ages 18 and 19. If Mr. and Mrs. Kigali are entitled to a $4,716 earned income credit, comput

> Mr. and Mrs. Lovejoy are married with no dependent children. Mr. Lovejoy worked for Smart Tech Corporation January through March and for Computer Associates the remainder of the year. Mrs. Lovejoy finished her degree in November and immediately began as

> Mr. and Mrs. Keppner file a joint income tax return. Compute their standard deduction assuming that: a. Mr. Keppner is age 68, and Mrs. Keppner is age 60. b. Mr. Keppner is age 70, and Mrs. Keppner is age 68. c. Mr. Keppner is age 70, and Mrs. Keppner is

> On March 31, Mr. Reinhardt quit his job with MT Inc. and began a new job with PK Company. His salary from MT was $82,600, and his salary from PK was $93,000. Compute his excess Social Security tax withholding credit.

> Mr. and Mrs. Coulter have four dependent children, ages 1, 4, 7, and 11. Mr. Coulter’s salary was $21,400, Mrs. Coulter’s wages totaled $16,200, and the couple had no other income or above-the-line deductions this year. The Coulters paid $3,600 for dayca

> Mr. and Mrs. Alexander have two dependent children. They paid $7,200 wages to a housekeeper to care for the children and $549 employer payroll tax on her wages. Mr. and Mrs. Alexander file a joint return. In each of the following cases, compute their dep

> Mr. and Mrs. Chaulk have three dependent children, ages 3, 6, and 9. Compute their child credit if AGI on their joint return is: a. $88,300. b. $462,700 c. $200,000 and assume that they have one non-child dependent who meets the requirements for the chil

> Corporation R signed a contract to undertake a transaction that will generate $360,000 total cash to the corporation. The cash will represent income in the year received and will be taxed at 21 percent. Corporation R will receive $200,000 in year 0 and $

> Ms. Gleason, an unmarried taxpayer, had the following income items. Salary …………………………………………….$40,000 Net income from a rental house …………..3,200 Ms. Gleason has a four-year-old son who attends a daycare center while she is at work. Ms. Gleason paid $4,3

> Callie is the 11-year-old daughter and dependent of Mr. and Mrs. Santo. This year, Callie filed a Form 1040 on which the only item of gross income was $10,557 interest from an investment bond portfolio that Callie inherited from a great aunt. Compute Cal

> Mrs. Atkinson is an unmarried taxpayer with one dependent child living in her home. Her AGI is $40,000, and she does not itemize deductions. The 18-year-old child earned $12,480 from a part-time job and incurred no deductible expenses. a. Compute Mrs. At

> Mr. Mason’s salary was $397,000, and Mrs. Mason’s salary was $344,000. They had no other income items, no above-the-line or itemized deductions, and no dependents. a. Compute their tax on a joint return. b. Compute their combined tax if they file separat

> Mr. and Mrs. Palio celebrated the birth of their third child on November 18. Compute the effect of this event on their tax liability, assuming that: a. Their AGI was $99,000, and their taxable income before considering the new dependent was $84,200. b. T

> Danny Liu is 20 years old and is considered a dependent of his parents for tax purposes. Compute Danny’s taxable income in each of the following cases. a. Danny’s only income item was $2,712 interest earned on a certificate of deposit. b. Danny had two i

> Mr. Garrett, a single taxpayer, has $15,700 AGI. Compute his taxable income in each of the following cases. a. Mr. Garrett’s AGI consists entirely of interest income. He is 19 years old and is considered a dependent of his parents for tax purposes. b. Mr

> Mr. Rogers, an unmarried individual, had the following income items. Salary ……………………………………………….$512,100 Interest income ……………………………………19,700 Dividend eligible for 20% rate ……………….31,000 Mr. Rogers had $34,000 itemized deductions and four dependent chil

> Mr. and Mrs. Ludwig had the following income items. Dividend eligible for 0% preferential rate ………………….$ 3,400 Capital gain eligible for 0% preferential rate …………………2,900 Mrs. Ludwig’s salary. …………………………………………………24,325 Mr. L is age 66, and Mrs. L is ag

> Mr. Coleman, an unmarried individual, had the following income items. Interest income …………………………………………………$14,200 Ordinary loss from an S corporation ……………………..(8,400) Ordinary income from a partnership …………………….159,000 He had $27,300 itemized deduction

> French Corporation wishes to hire Leslie as a consultant to design a comprehensive staff training program. The project is expected to take one year, and the parties have agreed to a tentative price of $60,000. French Corporation has proposed payment of o

> Mr. Perry is an unmarried individual with no dependent children. He reports the following information. Wages ……………………………………………………………………….$65,000 Schedule C net profit ……………………………………………………..11,650 Interest from savings account ……………………………………………500 Self-e

> Ms. Timmons, an unmarried individual, has the following income items. Schedule C net profit …………………………………..$31,900 NOL carry forward deduction ………………….…….(9,190) Interest income ……………………………………..…………..725 Ms. Timmons’s self-employment tax was $4,507. Sh

> Mr. and Mrs. Simpson have the following income items. Mr. Simpson’s Schedule C net profit ………………………..$91,320 Mrs. Simpson’s Schedule C net loss ………………………….(7,480) Mrs. Simpson’s taxable pension ………………………………….12,300 Mr. Simpson’s self-employment tax was

> Turbo is a U.S. corporation. This year, it earned $5 million before-tax income and paid $175,000 income tax to jurisdictions other than the United States. Compute Turbo’s U.S. federal income tax assuming that: a. The other jurisdictions were Ireland and

> Lido Inc. does business in two states, X and Y. State X uses an equal weighted three-factor apportionment formula and has a 4 percent state tax rate. State Y bases its apportionment only on the sales factor and has a 5 percent state tax rate. Lidoâ

> Cromwell Corporation does business in two states, A and B. State A uses an equal-weighted three-factor apportionment formula and has a 5 percent state tax rate. State B uses an apportionment formula that double-weights the sales factor and has a 6 percen

> Refer to the facts in problem 4. Compute the state income tax savings if Oldham could relocate its personnel so that payroll expense in State M increased to $1,900 (thousand) and payroll expense in State N decreased to $100 (thousand). Data from Problem

> Refer to the facts in the preceding problem. Compute Oldham’s State M and State N tax if State N uses an apportionment formula in which the sales factor is double-weighted. Data from Problem 4: Oldham Inc. conducts business in State M

> Oldham Inc. conducts business in State M and State N, which both use the UDITPA three-factor formula to apportion income. State M’s corporate tax rate is 4.5 percent, and State N’s corporate tax rate is 7 percent. This

> Refer to the facts in the preceding problem. Assume that the tax rate in Country X is 15 percent and Cotton Comfort’s U.S. marginal tax rate is 21 percent. The corporation and its subsidiary have agreed to a transfer price for the cloth of $30 per shirt.

> What is the effect on the NPV of the restructured transaction in the preceding problem if Firm H’s marginal tax rate in year 2 increases to 30 percent?

> Please Cotton Comfort Corporation is a U.S. shirt manufacturer with a foreign subsidiary in Country X. Cloth to make shirts is woven in the United States, at a cost of $14 per shirt and shipped to Country X where it is cut and sewn at a cost of $15 per s

> Alamo, a Texas corporation, manufactures plastic components that it sells to Vegas, a Mexican corporation, for assembly into a variety of finished goods. Alamo owns 60 percent of Vegas’s stock. Alamo’s cost per component is $85, its selling price per com

> Norton Inc. is a domestic corporation with several foreign subsidiaries. This year, Norton has $940 million domestic gross receipts and $800 million of allowable deductions. It made deductible related party payments to its foreign affiliates of $520 mill

> Leming, Inc. is a CFC with total foreign earnings of $90 million, of which $27 million is considered subpart F income. Leming owns tangible business property with an adjusted tax basis of $70 million. Hare Corporation, a U.S. corporation, owns 30 percent

> Fairview, Inc. is a CFC with total foreign earnings of $30 million, of which $8 million is considered subpart F income. Fairview owns tangible business property with an adjusted tax basis of $40 million. Collins Corporation, a U.S. corporation, owns 100

> Grandmere, a calendar year domestic corporation, owns 50 percent of Petit, Inc., a calendar year controlled foreign corporation. At the end of 2017, Petit has accumulated $26 million of undistributed income and has $4.2 million of cash. a. Compute Grandm

> Yasmin Corporation, a calendar year domestic corporation, owns 100 percent of Luna Inc., a calendar year controlled foreign corporation. Luna has never paid a dividend and at the end of 2017 has accumulated $18 million undistributed income (none of which

> Jumper Inc., which has a 21 percent tax rate, owns 40 percent of the stock of a CFC. At the beginning of 2018, Jumper’s basis in its stock was $660,000. The CFC’s 2018 income was $1 million, $800,000 of which was subpart F income. The CFC paid no foreign

> Dixie Inc., a Tennessee corporation, conducts business in South America through two foreign corporations, Dix-Col Inc. and Dix-Per Inc. Dixie formed Dix-Col six years ago and owns 100 percent of its stock. Dix-Per was formed six months ago and Dixie owns

> Omaha Inc. owns 100 percent of the stock in Franco, a foreign corporation. All Franco’s income is foreign source, and its foreign income tax rate is 20 percent. During its fiscal year ended June 30, 2017, Franco distributed a $50,000 dividend to Omaha. a

> Firm H has the opportunity to engage in a transaction that will generate $100,000 cash flow (and taxable income) in year 0. How does the NPV of the transaction change if the firm could restructure the transaction in a way that doesn’t change before-tax c

> This year, Tuna, Inc., a domestic corporation, earned $3 million from sales of goods to unrelated foreign customers. If Tuna has $12 million of depreciable assets, calculate its foreign-derived intangible income.

> Cheeta Corporation earned $5 million this year from both domestic and international operations. Assume $2.2 million of this income qualifies as foreign-derived intangible income (FDII). If Cheeta paid no foreign income tax, calculate its U.S. income tax