Question: On January 1, year 5, Olinto Corp.,

> On June 5, 2017, Leo purchased and placed in service a new car that cost $20,000. The business use percentage for the car is always 100%.. Leo claims any available additional first-year depreciation. Compute Leo's cost recovery deduction for 2017 and 201

> On October 15, 2018, Jon purchased and placed in service a used car. The purchase price was $25,000. This was the only business use asset Jon acquired in 2018. He used the car 80% of the time for business and 200A. for personal use. Jon used the regular

> Jabari Johnson is considering acquiring an automobile at the beginning of 2019 that he will use 100% of the time as a taxi. The purchase price of the automobile is $35,000. Johnson has heard of cost recovery limits on automobiles and wants to know die ma

> Jamie purchased $100,000 of new office f1.1miture for her business in June of the current year. Jamie understands that if she elects to use ADS to compute her regular income tax, there will be no difference between the cost recovery for computing the reg

> In January 2018, Pelican, Inc., established an allowance for uncollectible accounts (bad debt reserve) of $70,000 on its books and increased the allowance by S 120,000 during the year. As a result of a client's bankruptcy, Pelican, Inc., decreased the al

> On June 5, 2017,Javier Sanchez purchased and placed in service a 7-year class asset costing $560,000 for use in his landscaping business, which he operates as a single member LLC (Sanchez Landscaping LLC). During 2017, his business generated a net income

> During 2018, John was the chief executive officer and a shareholder of Maze, Inc. He owned 60% of the outstanding stock of Maze. In 2015, John and Maze, as co-borrowers, obtained a $100,000 loan from United National Bank. This loan was secured by John's

> Dove Corporation, a calendar year C corporation, had the following information for 2018: Based on the above information, use Schedule M-2 of Form 1120 (see Example 50 in the text) to determine Dove's unappropriated retained earnings balance as of Decem

> A business building owned by an individual taxpayer on which straight- Digging Deeper line depreciation of $13,000 was taken is sold on the installment basis for S 100,000 with $20,000 down and four yearly installments of $20,000 plus interest. The adjus

> The following information for 2018 relates to Sparrow Corporation, a calendar year, accrual method taxpayer. Based on the above information, use Schedule M- 1 of Form 1120, which is available on the IRS website, to determine Sparrow's taxable income fo

> Hector and Walt are purchasing the Copper Partnership from Jan and Gail for $700,000; Hector and Walt will be equal partners. During the negotiations, Jan and Gail succeeded in having the transaction structured as the purchase of the partnership rather t

> Repeat the computations of Problem 36, but now assume that State B uses a double-weighted sales factor in its apportionment formula. Data from Problem 36: PinkCo, Inc., operates in two states, both of which equally weight the three apportionment factor

> Renee and Sanjeev Patel, who are n1arried, reported taxable income of $1,008,000 for 2018. They incurred positive AMT adjustments of $75,000 and tax preference iten1s of $67,500. The couple itemizes their deductions. a. Compute the Patels' AMT! for 2018

> Pat is 40, is single, and has no dependents. She received a salary of $390,000 in 2018. She earned interest income of $11,000, dividend income of $15,000, gambling winnings of $14,000, and interest income from private activity bonds (issued in 2015) of $

> Jane and Robert Brown are married and have eight children, all of whom are eligible to be claimed as the couple's dependents. Robert earns $196,000 working as a senior n1anager in a public accounting firm, and Jane earns $78,000 as a second-grade teacher

> Tan1my and Willy own 40%. of the stock of Roadn1nner, an S corporation. The other 60"A. is owned by 99 other shareholders, all of whom are single and unrelated. Tamn1y and Willy have agreed to a divorce and are in the process of negotiating a property se

> Included in Alice's regular taxable income and in her AMT base is a $300,000 capital gain on the sale of stock she owned for three years. Alice is in the 20% tax bracket for net capital gains for regular incon1e tax purposes. a. What rate should Alice us

> Esther owns a large home on the East Coast. Her home is surrounded by large, mature oak trees that significantly increase the value of her home. In August 2017, a hurricane damaged many of the trees surrounding her home; her region was declared a Federal

> Chuck is single, has no dependents, and does not itemize deductions. In 2018, he reports taxable income of $320,000. His tax preferences total $51,000. What is Chuck's AMTI for 2018?

> Gabriel, age 40, and Emma, age 33. are married with two dependents. They recorded AG! of $250,000 in 2018 that included net investment income of $3,000 and gambling winnings of $2,500. The couple incurred the following expenses during the year (all of wh

> Ann and Bill were on the list of a local adoption agency for several years, seeking to adopt a child. Finally, in 2017, good news comes their way, and an adoption seems imminent. They paid qualified adoption expenses of $5,000 in 2017 and $11,000 in 2018

> Rover Corporation would like to transfer excess cash to its sole shareholder, Aleshia, who is also an employee. Aleshia is in the 24% tax bracket, and Rover is in the 21 % bracket. Because Aleshia's contribution to Rover's profit is substantial, Rover be

> Turtle, a C corporation, reports taxable income of $200,000 before paying salaries to the two equal shareholder-employees, Britney and Alan. Turtle follows a policy of distributing all after-tax earnings to the shareholders. a. Determine the tax conseque

> Sammy and Monica, both age 67, incur and pay n1edical expenses in excess of insurance reimbursements during the year as follows. Sammy and Monica's 2018 AG! is $130,000. They file a joint return. Chuck and Carter are Sammy and Monica's dependents. a.

> Flicker, a single men1ber LLC, acquired a passive activity this year. Gross income from operations of the activity was S 160,000. Operating expenses, not including depreciation, were $122,000. Regular income tax depreciation of $49,750 was computed under

> Lilia is going to be subject to the AMT in 2018. She owns an investment building and is considering disposing of it and investing in other realty. Based on an appraisal of the building's value, the realized gain would be $85,000. Two individuals have ind

> Jo and Velma are equal owners of JV Company. Jo invests $500,000 cash in the venture. Velma contributes land and a building (basis to her of $125,000, fair market value of $500,000). TI1e entity then borrows $250,000 cash using recourse financing and $10

> Allie, who was an accounting major in college, is the owner of a medium-size constn1ction limited liability company. She prepares the company's Schedule C each year. Due to reporting a home construction contract using the completed contract method, the c

> 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, nor are they set up to be used on the road. Rather, the cars are used e

> David is the sole proprietor of a real estate construction business. He uses the completed contract method on a particular contract that requires 16 months to complete. The contract is for $500,000, with estimated costs of $300,000. At the end of 2017, $

> Find a Federal or state proposal for a soda tax or sweetened beverage tax. Apply the AICPA's Principles of Good Tax Policy to support your recommendation for or against the bill.

> Taxpayers who purchase health insurance coverage through the Health Insurance Marketplace may be eligible for the premium tax credit under § 36B. Use the IRS's website (www.irs.gov) to read about this provision and determine which taxpayers are eligible

> Sarah was contemplating making a contribution to her traditional IRA in 2017. She determined 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 webs

> In March 2018, Helen Carlon acquired used equipment for her business at a cost of $300,000. The equipment is five-year property for regular tax depreciation purposes. a. If Helen depreciates the equipn1ent using the method that will produce the greatest

> Jacob Patterson cannot make a fully deductible $5,500 IRA contribution because his AGI exceeds the phase out range. Instead, he makes a $3,500 nondeductible IRA contribution to his traditional IRA. Determine how Jacob reports this on his tax return, and

> Teal Company, a single member LLC, owns two warehouses that were placed in service before 1987. This year, accelerated depreciation on Warehouse A is $36,000 (straight-line depreciation would have been $30,000). On Warehouse B, accelerated depreciation w

> Crane is a partner in the Cardinal Partnership. A dispute arose with the partnership regarding Crane's share of current earnings. The partnership contends that the amount is $75,000, while Crane believes his share is $100,000. Crane ceased being a partne

> The Turnaround LLC was formed several years ago. It incurred losses for several years, reducing many of its members' bases in their interests to zero. However, the business recently obtained some new and promising contracts, and there is an expectation o

> Duffy Associates is a partnership engaged in real estate developn1ent. Olinto, a civil engineer, billed Duffy $40,000 in the current year for consulting services rendered. In full settlen1ent of this invoice, Olinto accepted a $15,000 cash payment plus t

> Nick, Chris, Stacey, and Mike are each 25% partners in Liberty Partnership, a general partnership. During the current year, the partnership had revenues of $300,000 and non separately allocated business expenses of $100,000, including a guaranteed paymen

> Gray is a 50% partner in Fabco Partnership. Gray's tax basis in Fabco on January 1, year 4, was $5,000. Fabco made no distributions to the partners during year 4 and recorded the following. What is Gray's tax basis in Fabco on December 31, year 4? a. $

> Jake pays the following amounts to his former spouse during the current year: What amount can Jake deduct as alimony for the current year? Assume the divorce occurred before 2019. a. $0 b. $12,000 c. $22,000 d. $137,000 Regular alimony payments Chi

> Bill and Jane Jones were divorced on January 1, 2018. They have no children. In accordance with the divorce decree, Bill transferred the title of their house over to Jane. The home had a fair market value of $250,000 and was subject to a $100,000 mortgag

> Which of the following staten1ents is true regarding the taxation of Social Security benefits? a. 85% is the maximum amount of taxable Social Security benefits. b. 500/o is the maximum amount of taxable Social Security benefits. c. If a taxpayer's only s

> Swift Corporation agreed to redeem some of the shares of two of its shareholders. It distributed land (basis $55,000 and fair n1arket value $120,000) to Sam in exchange for part of his stock. Sam's basis in the redeemed stock was $25,000. Swift also dist

> Jane is the sole shareholder of Buttons, Inc. Buttons has accumulated earnings and profits (E & P) of $65,000 at the beginning of the current year. The current E & P is $35,000. Buttons pays out a property distribution to Jane during the current year wit

> Jane is the sole shareholder of Buttons, Inc. Buttons has a deficit of $60,000 in accumulated earnings and profits (E & P) at the beginning of the current year. Current E & P is $35,000. If Buttons pays out a cash distribution to Jane during the current

> Ridge Corp., a calendar year C corporation, made a non liquidating cash distribution to its shareholders of $1,000,000 with respect to its stock. At that time, Ridge's current and accumulated earnings and profits totaled S750,000 and its total paid-in ca

> Fox Corp. owned 2,000 shares of Duffy Corp. stock that it bought in year 0 for $9 per share. In year 8, when the fair market value of the Duffy stock was $20 per share, Fox distributed this stock to a non corporate shareholder. Fox's recognized gain on t

> Hirsch, Incorporated, is a calendar year corporation that has had revenues of less than $500,000 since inception. In 2017, Hirsch had a net operating loss that \Vas able to be used in full via a carryback to 2016. For 2018, Hirsch expects to have taxable

> In the current year, Acorn, Inc., had the following items of income and expense: The dividends were received from a corporation of which Acorn owns 30%. In Acorn's current-year corporate income tax return, what amount should be reported as income befor

> Ron, David, and Mary formed Widget, Inc. Ron and David each received 40% of the stock, and Mary received the remaining 2001o. Ron contributed land with an FMV of $70,000 and an adjusted basis of $20,000. The corporation also assumed a $30,000 liability o

> Gearry and Olinto organized The Worthington Corp., which issued voting common stock with a fair market value of $240,000. They each transferred property in exchange for stock as follows: The building \Vas subject to a $20,000 mortgage that was assun1ed

> Gearry and Olinto organized The Worthington Corp., which issued voting common stock with a fair market value of $240,000. They each transferred property in exchange for stock as follows: The building was subject to a $20,000 mortgage that was assumed b

> Use the following data to calculate Chiara's AMT base in 2018. Chiara will itemize deductions and will file as a single taxpayer. Taxable income $248,000 Positive AMT adjustments 73,000 Negative AMT adjustments Preferences 25,000 30,000

> Jim spent four years earning his undergraduate degree at a local university. He began his first year of Jaw school in January of the current year. Assuming he is under the phase out limitation, what education tax credit is Jim eligible for in the current

> Which of the following credits is considered "refundable"? a. Child and dependent care credit b. Retirement plan contribution credit c. Child tax credit d. Credit for elderly

> In the current year, Wells paid the following expenses: In the current year, Wells recovered $1,500 of the $2,000 that she paid for physical therapy through insurance reimbursement from a group medical policy paid for by her employer. Disregarding the

> Ryan Ross (111-11-1112), Oscar Omega (222-22-2222), Clark Carey (333-33-3333). and Kim Kardigan (444 44 4444) are equal active members in ROCK the Ages 11.C. ROCK serves as agent and manager for prominent musicians in the Los Angeles area. 1he LLC's Fede

> On November 1, 2008, Janet Morton and Kim Wong formed Pet Kingdom, Inc., to sell pets and pet supplies. Pertinent information regarding Pet Kingdom i5 summarized as follows. • Pet Kingdom's business address is 1010 Northwest Parkway, Da

> Paul and Donna Decker are married taxpayers, ages 44 and 42, respectively, who file a joint return for 2018. The Deckers live at 1121 College Avenue, Carmel, IN 46032. Paul is an assistant manager at Carmel Motor Inn, and Donna is a teacher at Carmel Ele

> John Parsons (123-45-6781) and George Smith (123-45-6782) are 70%, and 30%, owners, respectively, of Premium, Inc. (11-1111111), a candy company located at 1005 16th Street, Cut and Shoot, TX 77303. Premium's S election was made on January 15, 2010, its

> Bob and Nancy are married and file a joint return. They are both under age 50 and employed, with wages of $50,000 each. Their total AGI is $110,000. Neither of them is an active participant in a qualified plan. What is the maximun1 traditional IRA deduct

> Linda is an employee of JRH Corporation. Which of the following is included in Linda's gross income? a. Premiums paid by JRH Corporation for a group term life insurance policy for $50,000 of coverage for Linda. b. $l ,000 of tuition paid by JRH Corporat

> Kim was seriously injured at her job. As a result of her injury, she received the following payments. • $5,000 reimbursement from employer-provided health insurance for medical expenses paid by Kim. The premiums this year paid by Kim's employer totaled $

> For many years, Sophie has owned and operated several apartn1ent buildings. In 2012, upon the advice of her attorney, Sophie transferred the apartment buildings to a newly created corporation. Her main reason for incorporating the business was to achieve

> Stephen is a graduate student at West University. He works part time at the campus coffee shop earning $5,000 this year. Stephen also receives a $25,000 scholarship that pays for his tuition, fees, and books. What amount does Stephen include in his gross

> Section 1250 recapture applies to which of the following? a. Section 1231 real property sold at a gain with accumulated depreciation in excess of straight line. b. Section 1231 personal property sold at a gain with accumulated depreciation. c. Section 12

> Section 1245 recapture applies to which of the following? a. Section 1231 real property sold at a gain with accumulated depreciation in excess of straight line. b. Section 1231 personal property sold at a gain with accumulated depreciation. c. Section 12

> Net Section 1231 losses are: a. Deducted as a capital loss against other capital gains and nothing against ordinary income. b. Deducted as a capital loss against other capital gains and up to $3,000 against ordinary income. c. Not allowed as a deduction

> Wally, Inc., sold the following three personal property asset5 in year 6: What is Wally's net Section 1231 gain or loss in year 6? a. $500 loss b. $300 gain c. $800 gain d. $1,600 gain Asset Purchase Date Cost Accumulated Depreciation Selling Price

> A piece of depreciable machinery is sold. It has been held for three years and qualifies as Section 1231 property. The selling price is greater than the adjusted basis but less than the original purchase price. Which statement below is correct? a. All o

> In the current tax year, Blake Smith provided more than half of the support for his cousin, niece, and a close family friend. Blake lives alone and sends a monthly support check to each person. None of the individuals whom Blake supports has any income o

> Jane is 20 years old and is a sophomore at Lake University. She is a full-time student and does not have any gross income. Jane spends the holidays and summers at home with her parents. Her total support for the current tax year is $30,000, including a s

> Bob provides more than half of his mother's support. His mother earns $6,000 per year as a hairdresser. She lives in an apartment across town. Bob is unmarried and has no children. What is Bob's most advantageous filing status? a. Single b. Head of hous

> Brad and Angie are married and file a joint return. For year 14, they had income from wages in die amount of $100,000 and had the following capital transactions to report on their income tax return: What is the amount of capital loss carryover to year

> Herbert was employed for the first six months of 2018 and earned $90,000 in salary. During the next six months, he collected $8,800 of unemployn1ent compensation, borrowed $12,000 (using his personal residence as collateral), and withdrew $2,000 fron1 hi

> Conner purchased 300 shares of Zinco stock for $30,000 in year 1. On May 23, year 6, Conner sold all the stock to his daughter Alice for $20,000, its tl1en fair market value. Conner realized no other gain or loss during year 6. On July 26, year 6, Alice

> A gain on the sale of which of the following assets will not result in a capital gain? a. Stock in a public company b. A home used as a personal residence c. Goodwill of a corporation d. Inventory of a corporation

> Marsha exchanged land in Florida with an FMV of $72,700 and an adjusted basis of $40,000 for land in lowa with an FMV of $57,700. Marsha also assumed a $5,000 liability on the land received in the transaction and was relieved of a $20,000 liability on th

> Marsha exchanged land in Florida with an FMV of $72,700 and an adjusted basis of $40,000 for land in Iowa with an FMV of $57,700. Marsha also paid $5,000 cash in the transaction and received an automobile worth $20,000. What is Marsha's recognized gain o

> Chad owned an office building that was destroyed in a tornado. The adjusted basis of the building at the time was $890,000. After the deductible, Chad received an insurance check for S950,000. He used S900,000 of the insurance proceeds to purchase a new

> Chad owned an office building that was destroyed in a tornado. The adjusted basis of the building at the time was $890,000. After the deductible, Chad received an insurance check for $850,000. He used the $850,000 to purchase a new building that same yea

> Agnes sold 50 shares of ABC stock to her son, Steve, in year 4 for $42,000. She bought the stock eight years ago for $50,000. Steve sold the stock to an unrelated parry in year 6 for $60,000. How much gain will Steve recognize from the sale in year 6? a.

> Rick purchased 100 shares of XYZ stock on April 4, year 4, for $8,600. He sold 50 shares on Febn1ary 8, year 5, for $3,000. He then bought another 50 shares of XYZ on March 1, year 5, for $3,200. How much loss will Rick realize in year 5? a. $0 b. $1,30

> Jerry inherits an asset from his uncle, who purchased the asset five days before he died. Which of the following statements is correct? a. If Jerry sells the asset a few days after receiving it, any gain or loss on the sale will be short term. b. Jerry's

> Alice gifted stock to her son, Bob, in year 5. Alice bought the stock in year 1 for The value of the stock on the date of gift was $6,400. Bob sold the stock in year 7 for $ 15,800. What is Bob's recognized gain or Joss on the sale in year 7? a. $0 b. $7

> Emmy contributes $40,000 to MeldCo in exchange for a 30% ownership interest. During the first year of operations, MeldCo earns a profit of $200,000. At the end of that year, MeldCo holds liabilities of $75,000. Calculate Emmy's basis for her ownership in

> Danny received the following interest and dividend payments this year. What amount should Danny include in his gross incon1e? Source Amount $1,200 City of Atlanta bond interest U.S. Treasury bond interest State of Georgia bond interest Ellis Compan

> Which statement below is correct? a. Real property is depreciated using the half-year convention. b. Residential real estate is depreciated over a 39-year life. c. One-half month of depreciation is taken for the month that real property is disposed of. d

> 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. Section 179 expensing was not elected. Using the excerpt of the MACRS half-year convention table below, what is

> Data, Inc., purchased and placed in service a $5,000 computer on August 24, year 3. This is the only asset purchase during the year. Section 179 expensing was not elected. The computer was sold during year 5. Using the excerpt of the MACRS half-year conv

> Sam rents his second home. During the current year, he reported a $40,000 net loss from the rental. Assume Sam actively participates in the rental activity and no phase out lin1itations apply. What is the greatest amount of the rental loss that Sam can d

> What is the correct order of applying the loss limitation rules? a. Passive loss limits, tax basis, at-risk amount b. Tax basis, at-risk amount, passive loss limits c. At-risk an1ount, tax basis, passive loss limits d. Passive loss limits, at-risk amount

> An apartment building was acquired in 2009 by an individual taxpayer. The depreciation taken on the building was $123,000, and the building was sold for a $34,000 gain. What is the maximum amount of 25%gain?

> Sissie owns two items of business equipment. Both were purchased in 2014 for $100,000, both have a 7-year MACRS recovery period, and both have an adjusted basis of $37,490. Sissie is considering selling these asset5 in 2018. One of them is worth $60,000,

> Jacob purchased business equipment for $56,000 in 2015 and has taken $35,000 of regular MACRS depreciation. Jacob sells the equipment in 2018 for $26,000. What is the amount and character of Jacob's gain or loss?

> Renata Corporation purchased equipment in 2016 for $180,000 and has taken $83,000 of regular MACRS depreciation. Renata Corporation sells the equipment in 2018 for $110,000. What is the amount and character of Renata's gain or loss?

> Amy, Becky, and Chau form a business entity with each contributing the following. Their ownership percentages will be as follows. Becky's land has a $20,000 mortgage that is assumed by the entity. Chau is an attorney who receives her ownership intere

> Elliott has the following capital gain and loss transactions for 2018. After the capital gain and loss netting process, what is the amount and character of Elliott's gain or loss? $ 1,500 Short-term capital gain Short-term capital loss (3,600) Long