On his 2017 Federal income tax return, Walter deducted state income taxes of $8,000 for amount withheld and estimated tax payments made in 2017 When he filed his 2017 state income tax return in April 2018, he discovered that he had overpaid his state income taxes by $1,500. Rather than having the $1,500 refunded to him, he treated it as a 2018 estimated tax payment. Walter was not in AMT in 2017. In preparing his 2018 Federal income tax return, Walter is confused about how he should treat the $1,500. He knows that under the tax benefit rule, he should include the $1,500 in gross income in calculating his regular taxable income. However, because he will be subject to the AMT, he is uncertain as to how he should treat the $1,500 in calculating AMT. He thinks that the amount could be treated as a negative adjustment in converting taxable income to AMTI if 2017 had been an AMT year for him. Because it was not, Walter is unsure of the treatment. Advise Walter on the appropriate treatment of the $1,500 in calculating his 2018 Federal income tax liability
> Jadeveon a self-employed attorney, has a profit plan with a contribution rate of 15% of compensation. Jadeveon's earned income after the deduction of one-half of self-employment tax but before the Keogh contribution, is $304,750. What is the limit of Jad
> Zack, a sole proprietor, has earned income of $85,000 in 2018 (after the deduction for one-half of self-employment tax). What is the maximum contribution Zack may make to a defined contribution Keogh plan?
> Joanne, age 44, defers $23,000 in a qualified solo 401(k) plan in 2018. a. What amount must be returned to Joanna and by what date? b. In what year will the amount be taxed? c. What percent of the tax will be imposed on Joanna if excess contributions are
> During 2018, Learphart Corporation contributes $35,000 to its qualified pension plan. Normal cost for this year is $15,000, and the amount necessary to pay retirement benefits on behalf of employee services before 2018 is $110,000 (past service costs). a
> Sergio has participated for eight years in a defined benefit plan and has nine years of service with his employer. His average compensation for the three highest years is $160,000. What is Sergio's dollar limit on annual benefits?
> Shondee Corporation uses the lower of cost or market and FIFO inventory methods. At the end of 2017, the FIFO cost of the ending inventory was $181,000, and the market value of the inventory was $160,000. The corporation switched to LIFO in 2018. As a re
> The taxpayer's ending inventory is valued as follows: Under the lower of cost or market method, what is the value of the taxpayer's inventory? Item Cost Market Rakes $8,100 $7,900 Shovels $3,800 $4,300 Нoes $6,000 $6,250
> Shumpert, Inc., entered into a contract that was to take two years to comp1ete, with an estimated cost of $900,000. The contract price was $1,300,000. Costs of the contract for 2017, the first year, totaled $675,000. a. What was the gross profit reported
> Which of the following is not a deduction for AGI? a. Alimony paid b. Business rent on a self-employed business c. Property taxes paid on your primary residence d. One half of self-employment tax
> Jabeli Corporation, a calendar year taxpayer utilizing the complete contract method of accounting, constructed a building for Samson, Inc., under a 10ngterm contract. The gross contract price was $2,300,000. Jebali finished construction in 2018 at a cost
> In 2018, Skylar sold an apartment building for $20,000 cash and a $300,000 note due in two years. Skylar's cost of the property was $250,000, and he had deducted depreciation of $150,000, $60,000 of which was in excess of what the straight -line amount w
> On December 30, 2018, Whitney sold a piece of property for $85,000. Her basis in the property was $40,000, and she incurred $1,200 in selling expenses. The buyer paid $5,000 down with the balance payable in $10,000 installments over the next eight years.
> For 2018, Essence Company, a calendar year taxpayer, will change from using the cash method for tax purposes to the accrual method. At the end of 2017, Essence had the following items: What is the 481(a) adjustment for this change in accounting method?
> In 2018, Chaya Corporation, an accrua1 basis, ca1endar year taxpayer, provided services to clients and earned $25,000. The clients signed notes receivab1e to Chaya that have a fair market va1ue of $22,000 at year-end. In addition, Chaya sold a 36-month s
> In 2018, Aurora received a $25,000 bonus computed as percentage of profits. In 2019, Aurora's employer determined that the 2018 profits had been incorrectly computed, and Aurora had to refund the $8,000 in 2019. Assume that Aurora was in the 35% tax brac
> Gaffey Corporation is a wholesale distributor of auto parts and uses the cash method of accounting. The company's sales have been about $20,000,000 per year for the last few years. However, Gaffey has the opportunity to acquire an unincorporated competit
> Find a Federal or state proposal for a soda tax or sweetened beverage tax. Provide the bill number and a brief explanation. Also apply the AICPA's principles of good tax policy to support your recommendation for or against the bill.
> Delaine is a 90% shareholder in a personal service corporation (PSC). The corporation paid Delaine a sa1ary of $265,000 during its fiscal year ending September 30, 2018. a. Assume that the corporation cannot satisfy the business purpose test for a fiscal
> John and Janet Baker are husband and wife and maintain a household in which the following persons live: Calvin and Florence Carter and Darin, Andrea, and Morgan Baker. • Calvin and Florence are Janet's parents, who are retired. During the year, they rec
> Can a Tax Court Small Case Decision be treated as a precedent for other cases? Explain.
> 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 efforts to prev
> To report its transactions for the year, a partnership must file a Form 1065 with the IRS a. When is this return due? b. As is the case with individuals and corporations, can a partnership obtain an automatic extension for filing the Form 1065? c. Does a
> Scott and Brooke are the sole shareholders of Tanager Company, a calendar year Subchapter S corporation. After several loss years, in December 2018, Tanager is forced to borrow $300,000 for working capital purposes. Robin State Bank makes the loan to Tan
> During 2018, Jayden Steele received a distribution of $24,000 on stock he owns in Razorbill Corporation. He had planned to report this amount as dividend income until he talked to his father-in-law, Jim. According to Jim, who had examined Razorbill's fin
> Tyler and Travis Best are brothers and are equal shareholders in Maize Corporation, a calendar year C corporation. In 2018, they incurred travel and transportation expenses on behalf of Maize Corporation. Because Maize was in a precarious financial condi
> Using newspapers, magazine articles, and other resources, prepare a report on stock appreciation rights to present to your class.
> Jacob Patterson is limited from making a fully deductible $5,500 IRA contribution because of his income limitation. Instead, he makes a $3,500 nondeductible IRA contribution to his traditional IRA. Find out how Jacob reports this on his return, and compl
> Some corporations offer their employees restricted stock, whereas other corporations offer restricted stock units. Search the internet to find the differences between these two types of restricted stock offerings.
> An individual taxpayer has $25,000 § 1231 gain from the disposition nonresidentia1 real estate. Straight-line depreciation of $43,000 was deducted on the real estate. The taxpayer also has a § 1231 loss of $56,000 from the sale of equipment. How much of
> In July 2016, the IRS issued regulations on longevity annuities that can help people prolong their retirement savings, easing their concern of outliving their savings. Conduct research on this topic, including a review of information provided by the IRS
> Before Lemon Corporation was taken private in a transaction engineered by its largest stockholder, some of Lemon's employees had unexercised options to purchase stock of Lemon. Under an employee agreement, Lemon canceled the unexercised stock options by
> Jim Raby transfers one-half of his compensatory stock options (ISOs and nonqualified stock options) to his ex-wife as part of a divorce settlement. Discuss the tax aspects of this transfer
> John Curran and his wife own a construction company, and they want to set up two new corporations that will be owned by their Roth IRAs. The two Roth-owned corporations will then enter into contract to provide services to their construction company. They
> More than one president and others have called for repeal of the LIFO method for tax purposes. Conduct an internet search to find arguments for and against this proposal. Prepare a summary of these arguments.
> In 2018, your client, Clear Corporation, changed from the cash to the accrual method of accounting for its radio station. The company had a positive 481 adjustment of $2.4 million as a result of the change and began amortizing the adjustment in 2018. In
> You recently obtained a new client that operates a chain of convenience stores that sell food and vehicle fuel. You notice that the company has a customer card program whereby customer purchases of fuel are entered on the card. For each gallon purchased,
> Your supervisor at your CPA firm has questioned whether the depreciation taken on a building under 168(k) is subject to 1250 depreciation recapture. Find a discussion in the Form 4797 instructions confirming that this depreciation is subject to 1250 reca
> Walter is both a real estate developer and the owner and manager of residentia1 rental real estate. Walter is retiring and is going to sell both the land he is ho1ding for future development and the renta1 properties he owns Straight-line depreciation wa
> Using the IRS Tax Statistics that can be found at www.irs.govjstatistics, based on adjusted gross income for the most recent year available, determine the amount of net long-term capital gain taxpayers reported Use the search function to look for a tab1e
> Several years ago Nicolas, a timber dealer purchased a tract of land with a substantial stand of trees on it. The land cost $8,000, and the timber cost $250,000. On the first day of 2018, the timber was appraised at $325,000. In August 2018, Nicolas cut
> Elizabeth received the following sources of income in the current year: What amount must Elizabeth include in gross income on her Federa1 income tax return? a. $650 b. $1,150 c. $1,350 d. $1,700 U.S. Treasury bond certificates interest Interest on
> In general, the 45-day identification period and the 180-day exchange period for like-kind exchanges cannot be extended. Does this rule change if the like-kind property or the taxpayer involved in the exchange is located in a Presidentially declared disa
> Taylor owns a 150-unit motel that was constructed in the late 1960s. It is located on 10 acres on the main highway leading into the city. Taylor renovated the motel three years ago. Taylor's motel is condemned by the city, which is going to use 2 of the
> Charlene and Alton Dutro had lived in their home for two and one-half years when they decided to enlarge and remodel the house. However, their architect advised them that more stringent building and permit restrictions had been imposed since the house wa
> The specific identification method is important when one invests in mutual funds. When taxpayers sell part of their holdings, the basis of the surrendered shares can be difficult to compute. Go to the site of an investment adviser or a mutual fund to fin
> Many see the "step-up in basis at death" rule of 1014 as an expensive tax loophole enjoyed by the wealthy. Find the latest estimates of the revenue loss to the Treasury that is attributable to this rule. a. How does Canada's tax law determine the basis o
> What are the most significant credits claimed by individual taxpayers? How do the credits claimed differ by income class? To answer these questions, go to the IRS Tax Statistics page (www.irs.govjstatistics) and download the Microsoft Excel spreadsheet t
> The IRS provides a web-based tool to help taxpayers determine whether they are eligible for the earned income tax credit. Locate this tool at the IRS website. Then apply the facts related to a hypothetical taxpayer, and determine whether the earned incom
> Find an article or a website that discusses why some policy makers wanted to repeal both the corporate and individual AMT provisions from the Internal Revenue Code. Discuss the justification for elimination as well as any concerns policymakers had about
> Jiang receives tax-exempt interest of $33,000 on private activity bonds. She properly excludes the $33,000 from her gross income for regular income tax purposes [under ~ 103(a) and (b)(l)]. Jiang asks your advice on the treatment of the interest for AMT
> Shen purchased corporate stock for $20,000 on April 10, 2016. On July 14, 2018, when the stock was worth $12,000, Shen died and his son, Mijo, inherited the stock. Mijo sold the stock for $14,200 on November 12, 2018. What is the amount and character of
> Carol is a successful physician who owns 100% of her incorporated medical practice. She and her spouse, Dick, are considering the purchase of a commercial office building located near the local community hospital. If they purchase the building, Carol wil
> Marcia, a shareholder in a corporation with stores in five states, donated stock with a basis of $10,000 to a qualified charitable organization in 2017 Although the stock of the corporation was not traded on a public stock exchange, many shares had been
> Download IRS Form 8919 (Uncollected Social Security and Medicare Tax on Wages) from the IRS website. According to the instructions, who should file this form?
> Analyze S. 1549 (115th 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 July 13, 2017, at: www.thune.senate.gov/public/index.cfm/ 2017 /
> Download IRS Form 1099- K and its instructions from the IRS website. What is the purpose of the form, and when is it used? Go to the Square, Inc. website (www.squareup.com) and search for information about this form. Summarize what you discover in an e-m
> Prepare a blog post for the "Online Tutor Match Company" to explain to its freelancers the tax implications of their work. Topics should include (1) what records to keep (both for income and expenses), (2) unique situations facing freelancers (e.g., home
> Your client, a large construction firm organized as a C corporation, allows certain employees (including the president of the corporation) to use in company-owned airplane for nonbusiness flights. The employees include the value of the flights in their i
> Locate a financial calculator program that assesses the wisdom of buying versus leasing a new car. Install the program on your computer, and become familiar with it. Use the program to work through Problem 50 in this chapter Data from Problem 50: Denni
> Your client, Dave's Sport Shop, sells sports equipment and clothing in three retail outlets in New York City. During 2018, the CFO decided that keeping track of inventory using a combination of QuickBooks and spreadsheet was not an efficient way to manag
> The $1 million maximum compensation deduction does not seem to have deterred large corporations from remunerating their executives at very high levels. What techniques are being used to work around the millionaires' provision? Are executives taking pay c
> On August 31, 2017, Harvey and Margaret who file a joint return and live in Charleston, South Carolina, sell their personal residence, which they have owned and lived in for 10 years. The realized gain of $292,000 was excluded under 121. They purchased a
> Sarah was contemplating making a contribution to her traditional IRA in 2017. She determined that she would contribute $5,000 in December 2017, but forgot about making the contribution until she was preparing her 2017 tax return in February 2018. Use the
> Mona viewed herself as a creative individual who had chosen to go to law school for economic reasons. Mona's undergraduate majors were creative writing and American Indian studies. Mona was very successful as an attorney and eventually was admitted to pa
> Rex and Agnes Harrell purchased a beach house at Duck, North Carolina, in early 2018. Although they intended to use the beach house occasionally for recreational purposes, to help pay the mortgage payment, property taxes, and maintenance costs, they also
> Employers often use the internet as a means of attracting applications from potential employees. Locate an internet site offering employment opportunities, ideally one provided by a well-known corporation. How does the employer promote its fringe benefit
> Your client works for a defense contractor and was assigned to work on a military base in Australia. As a condition of his employment, he was required to live in housing that was provided to military personnel. The housing provided was a condominium loca
> Your client, John Butler, is an avid Houston Astros fan. Last March at the Astros' home opener, as a result of a random drawing of those in attendance at the game, John won 300 Shipley Do-Nut coupons. Each coupon entitled him to a cup of coffee and a fre
> The employees of the city of Greenville must make mandatory contributions to the city's postretirement health benefit plan. The employees' contributions are placed in a trust and are used exclusively for the employees' benefits. The employees believe tha
> Go to the web page of a consulting firm that offers counseling services to individuals as they negotiate the terms of a divorce. What specific tax related services do these firms offer? Suggest a new tax-related service the consulting firm could offer.
> Lottery winnings are taxable for Federal income tax purposes What many lottery hopefuls forget to factor into their tax considerations are that lottery winnings are also taxable in many states. Search the internet to see whether you can determine whether
> Your client is a new retailer who often issues store gift (debit) cards to customers in lieu of a cash refund. You recall that the IRS issued a Revenue Procedure that provided that the prepaid income rules in Revenue Procedure 2004- 34 could be applied t
> Arnold, who is sing1e, sold his principa1 residence on April 10, 2018, and excluded the realized gain under 121 (exclusion on the sale of a principal residence). On April 12, 2018, he purchased another principal residence, which he sells on January 12, 2
> On July 1, 2014, Rex purchases a new automobile for $40,000. He uses the car 80% for business and drives the car as follows: 8,000 miles in 2014, 19,000 miles in 2015, 20,000 miles in 2016, and 15,000 miles in 2017. Determine Rex's basis in the business
> Determine the gross income of the beneficiaries in the following cases: a. Justin's employer was downsizing and offered employees an amount equal to one year's salary if the employee would voluntarily retire. b. Trina contracted a disease and was unable
> Ed, an employee of the Natural Color Company, suffered from a rare disease that was very expensive to treat. The local media ran several stories about Ed's problems, and the family created a website that generated more than $10,000 in gifts from individu
> Jackson uses his automobile 90% for business and during 2018 drove a total of 14,000 business miles. Information regarding his car expenses is listed below What is Jackson's deduction in 2018 for the use of his car if he uses: a. The actual cost method
> For calendar year 2018, Jean was a self-employed consultant with no employees. She had $80,000 of net profit from consulting and paid $7,000 in medical insurance premiums on her policy covering 2018. How much of these premiums may Jean deduct as a deduct
> Pebble Securities is a corporation that buys and sells financial assets. It purchases notes receivable from manufacturers that need cash immediately and cannot wait to collect the notes. Pebble pays about 88% of the face value of the receivables and then
> Del Mar Corporation (EIN 33-1234567) was formed and began operations on January 1, 2018. The corporate address is 463 E. Pershing Blvd. Cheyenne, WY 82001. Del Mar uses the accrual basis of accounting. The corporation's trial balance is presented below:
> As of January 1, 2017, Norman has a basis of $85,000 in his 30% capital interest in the Plata Partnership. He and the partnership use the calendar year for tax purposes. The partnership incurs an operating loss of $440,000 for 2017 and a profit of $285,0
> Aiden has a 35% capital interest in the Oro Partnership and is entitled to a yearly guaranteed payment of $40，0∞00. As of January 1, 2018, Aiden's basis in the partnership interest is $87,000. During tax year 2018, Or
> The Pheasant Partnership had the following transactions in the current year: a. What is Pheasant's ordinary income (or loss)? b. What are Pheasant's separately stated items? Operating income Cost of goods sold Capital gains- Long-term Short-term $7
> Gary, who is sing1e, sells his principal residence (owned and occupied by him for seven years) in November 2018 for a realized gain of $148,000. He had purchased a more expensive new residence eight months prior to the sale. He anticipates that he will o
> Guy, Alma, and Kara form the Ivory Partnership. In exchange for a 30% capital interest, Guy transfers property (basis of $200,000; fair market value of $400,000) subject to a liability of $100,000. The liability is assumed by the partnership. Alma transf
> Ida owns 30% of the stock in Mockingbird, a ca1endar year S corporation. Her basis in the stock as of January 1, 2018, is $130,000. Mockingbird has an operating loss of $500,000 in 2018 and an operating profit of $600,000 in 2019. Ida withdraws $70,000 i
> Jim Olsen owns all of the stock in Drake, a ca1endar year S corporation. For ca1endar year 2018, Drake anticipates an operating loss of $160,000 and cou1d, if deemed worthwhile, sell a stock investment that wou1d generate a $10,000 long-term capital loss
> Assume the same facts as in Problem 56. Kirby Turner is a 20% shareholder in Thrasher Corporation. She is aware of the tax consequences of the various items listed on the Schedule K- 1 (Form 1120S) she received but does not understand their effect on bas
> During the current year, Thrasher (a calendar year, accrual basis S corporation) has the following transactions: a. Determine Thrasher Corporation's separately stated items for the current year. b. Determine Thrasher's ordinary business income for the
> The stock of Emerald Corporation is held equally by Barney and Faye The shareholders would like to receive, as a dividend, value of $800,000 each. The corporation has the following asset that it can spare: Both assets are held as investments. Emerald C
> Harold, Marcia, and Richard are equal shareholders in Pelican Corporation, a calendar year C corporation. During the current year, Pelican makes a $150,000 distribution to its three shareho1ders. Of the $50,000 that each shareholder receives, the tax res
> Lily is sole shareholder of Crimson Corporation (a C corporation). At a time when Crimson has a deficit in accumulated E & P of $90,000 and current E & P of $65,000, it distributes a cash dividend of $85,000. If Lily's basis in her stock is $15,000, what
> Elton, Neil, Courtney, and Zelma from Ecro Corporation with the following investments: In addition to its stock, Ecru distributes cash as follows: $10,000 to Neil, $20,000 to Courtney, and $100,000 to Zelma. Assume that each share of Ecru stock is wort
> Doris, Walt, and Pat form Swan Corporation with the following investments: In addition to the 500 shares of stock, Pat receives $100,000 in cash from Swan Corporation. Assume that each share of Swan stock is worth $1,000 a. How much loss does Wa1t real
> On February 24, 2018, Allison’s building, with an adjusted basis of $1.3 million (and used in her trade or business), is destroyed by fire. On March 31, 2018, she receives an insurance reimbursement of $1.65 million for the loss. Allison invests $1.55 mi
> Puce, a calendar year C corporation, had the following Schedule M-1 transactions on its Form 1120 for the current year: What is Puce Corporation's net income per books for the current year? Taxable income $100,000 Federal income tax 21,000 Excess c
> In each of the following independent situations determine the C corporation’s Federal income tax liability for calendar year 2018. Corporation Taxable Income $ 45,000* 68,000** Sparrow Warbler Scaup 80,000
> Puffin Corporation was formed on July 1 of the current tax year and incurred qualifying organizational expenditures. It uses a calendar year and wants to accelerate any deductions that are available. Based on this assumption, what is Puffin Corporation's
> Determine the dividends received deduction for each of the following independent situations. Assume that the percentage of stock owned in the corporation paying the dividend is 30% for Green Corporation and less than 20% for Red Corporation and Blue Corp
> Auburn Company manufactures and sells furnishing for hospitals (e.g., special needs bathroom fixtures). In the current year, it donates some of its inventory to a newly constructed hospice. The hospice is adjacent to a cancer treatment center and is inte
