Question: Roscoe contributes a personal use asset, adjusted

> In 2018, Meghann Carlson, a single taxpayer, has QB! of $110,000 and modified taxable income of $78,000 (this is also her taxable income before the QB! deduction). Given this information, what is Meghann's QB! deduction?

> Mio was transferred from New York to Germany. He lived and worked in Germany for 340 days in 2018. Mio's salary for 2018 is $190,000. What is Mio's foreign earned income exclusion? (In your computation, round any division to four decimal places before co

> Cordero, Inc., is a calendar year taxpayer and a CFC for the entire tax year. Yancy Company, a U.S. corporation, owns 75% of Cordero's one class of stock for the entire year. Cordero's Subpart F income for the year is $450,000, and no distributions were

> Franco owns a 600Ai interest in the Dulera LLC. On Decen1ber 31 of the current tax year, his basis in the LLC interest is S 128,000. The fair market value of the interest is $140,000. Dulera then distributes to Franco $30,000 cash and equipment with an a

> J\1abel and Alan, who are in the 32% tax bracket, recently acquired a fast food franchise. Both of them will work in the business and receive a salary of $175,000. They anticipate that the annual profits of the business, after deducting salaries, will be

> Fred, who is self employed, travels from Denver to Miami primarily on business. He spends five days conducting business and two days sightseeing. His expenses are $400 (airfare), $150 per day (meals), and $300 per night (lodging). What are Fred's deducti

> Dion, an S shareholder, owned 20%. of Meadow Brook's stock for 292 days and 25% for the remaining 73 days in the year. Using the per-day allocation method, compute Dion's share of the following S corporation items. Schedule K Totals Dion's Schedule

> Valentino is a patient in a nursing home for 45 days in 2018. While in the nursing home, he incurs total costs of S 13,500. Medicare pays $8,000 of the cost5. Valentino receives $15,000 from his long-term care insurance policy, which pays while he is in

> Samantha recently was employed by an accounting firm. During the year, she spends $2,500 for a CPA exam review course and begins working on a law degree in night school. Her law school expenses were $4,200 for tuition and $450 for books (which are not a

> In 2018, Miranda records net earnings from self-employment of $146,000. She reports no other gross income. Determine the amount of Miranda's self-employment tax and her for AGI income tax deduction.

> In 2018, the CEO of Crin1son, Inc., entertains seven clients at a skybox in Memorial Stadium for an athletic event. Substantive business discussions occurred at various times during the event. The box costs $2,000 per event and seats 10 people. (The cost

> On April 5, 2018, Kinsey places in service a new automobile that cost $36,000. He does not elect § 179 expensing, and he elects not to take any available additional first-year depreciation. The car is used 70% for business and 30% for personal use in eac

> In 2018, McKenzie purchased qualifying equipment for his business that cost $212,000. The taxable incon1e of the business for the year is $5,600 before consideration of any§ 179 deduction. a. Calculate McKenzie's § 179 expense deduction for 2018 and any

> Donna donates stock in Chipper Corporation to die American Red Cross on September 10, 2018. She purchased the stock for $18,100 on December 28, 2017, and it had a fair market value of $27,000 when she made the donation. a. What is Donna's charitable cont

> In 2018, Simon, age 12, has interest income of $4,800 and no earned income. He has no investment expenses. Determine Simon's net unearned income and total tax liability.

> Plum Corporation will begin operations on January 1. Earnings for the next five years are projected to be relatively stable at about $80,000 per year. The shareholders of Plum are in the 32% tax bracket. Evaluate whether Plum should operate as a C corpor

> Troy's financial records for the year reflect the following: Calculate Troy's net investment income and his current investment interest deduction. How is any potential excess investment interest deduction treated? Interest income from bank savings

> Pierre, a cash basis, unn1arried taxpayer, had $1,400 of state income tax withheld during 2018. Also in 2018, Pierre paid $455 that was due when he filed his 2017 state incon1e tax return and made estimated payments of $975 toward his 2018 state income t

> Paul and Sonja, who are married, had itemized deductions of $13,200 and Issue ID $400, respectively, during 2018. Paul suggests that they file separately-he will itemize his deductions from AGI, and she will claim the standard deduction. a. Evaluate Paul

> Compute the 2018 standard deduction for the following taxpayers. a. Margie is 15 and claimed as a dependent by her parent5. She has $800 in dividend income and $1,400 in wages from a part-time job. b. Ruby and Woody are married and file a joint tax retur

> Elizabeth makes the following interest-free loans during the year. The relevant Federal interest rate is 5%, and none of the loans are motivated by tax avoidance. All of the loans were outstanding for the last six months of the tax year. Identify the Fed

> In late 2017, Randy and Rachel Erwin paid $7,000 in legal fees, adoption fees, and other expenses directly related to the adoption of an infant son, Jameson. In 2018, the year in which the adoption becon1es final, they pay an additional $8,000. Their AG!

> Casper and Cecile divorced in 2018. As part of the divorce settlement, Casper transferred stock to Cecile. Casper purchased the stock for $25,000, and it had a market value of $43,000 on the date of the transfer. Cecile sold the stock for $40,000 a month

> Camilo's property, with an adjusted basis of $155,000, is condemned by the state. Camilo receives property with a fair market value of S 180,000 as compensation for the property taken. a. What is Camilo's realized and recognized gain? b. What is the basi

> Before any debt cancellation, the insolvent KuhnCo holds business equipment, its only asset, with a fair market value of SI million and related liabilities of Sl.25 million. The lender agrees to cancel $400,000 of the liabilities. KuhnCo has no other lia

> Compute the 2018 tax liability and d1e n1arginal and average tax rates for die following taxpayers (use me 2018 tax rate schedules in Appendix A for d1is purpose). a. Chandler, who files as a single taxpayer, has taxable income of $94,800. b. Lazare, who

> Duke and Jacquie Coleman, married filing jointly, will establish a n1anufacturing business. The couple anticipates that the business will be profitable immediately due to a patent that Jacquie holds; prof its for the first year will be about $300,000 and

> Before any debt cancellation, PeppersCo holds business land with a $2.4 million fair market value, a SI million tax basis, and a related mortgage of $3 million. In lieu of foreclosure, the lender reduces the mortgage principal by $1.3 million. What are t

> Last year Aleshia identified $15,000 as a nonbusiness bad debt. In that tax year, before considering the tax implications of the nonbusiness bad debt, Aleshia had $100,000 of taxable income, of which $12,000 consisted of short-term capital gains. This ye

> Hamlet acquires a 7-year class asset on November 23, 2018, for $100,000. Hamlet does not elect immediate expensing under § 179. He does not claim any available additional first-year depreciation. Calculate Hamlet's cost recovery deductions for 2018 and 2

> Arianna's personal residence has an adjusted basis of $230,000 and a fair market value of $210,000. Arianna converts the personal residence to rental property. What is Arianna's gain basis' What is her loss basis?

> On May 9, 2016, Calvin acquired 250 shares of stock in Aero Corporation, a new startup company, for $68, 750. Calvin acquired the stock directly from Aero, and it is classified as§ 1244 stock (at the time Calvin acquired his stock, the corporation had $9

> Shanna, a calendar year and cash basis taxpayer, rents property from Janice. As part of the rental agreement, Shanna pays $8,400 rent on April 1, 2018, for the 12 months ending March 31, 2019. a. How, much is Shanna's deduction for rent expense in 2018?

> Lopez acquired a building on June 1, 2012, for $1 million. Calculate Lopez's cost recovery deduction for 2018 if the building is: a. Classified as residential rental real estate. b. Classified as nonresidential real estate.

> Noelle's diamond ring was stolen in 2017. She originally paid $8,000 for the ring, but it was worth considerably more at the tin1e of the theft. Noelle filed an insurance claim for the stolen ring, but the claim was denied. Because the insurance claim wa

> Sandstorm Corporation decides to develop a new, line of paints. The project begins in 2018. Sandstorm incurs the following expenses in 2018 in connection with the project: The benefits from the project will be realized starting in July 2019. If Sandsto

> Stanford owns and operates two dry cleaning businesses. He travels to Boston to discuss acquiring a restaurant. Later in the month, he travels to New York to discuss acquiring a bakery. Stanford does not acquire the restaurant but does purchase the baker

> Discuss the application of a general sales tax. a. Do all states impose a general sales tax? b. Does the Federal government impose a general sales tax?

> Meredith, who is single, would like to contribute $5,500 to her Roth IRA. What is the maximum amount that Meredith can contribute if her AGI is $121,000?

> Myers, who is single, reports compensation income of $70,000 in 2018. He is an active participant in his employer's qualified retirement plan. Myers contributes $5,500 to a traditional IRA. Of the $5,500 contribution, how much can Myers deduct? Phase out

> Compute the income tax liability for each of the following unrelated calendar year C corporations. a. In 2017, Darter Corporation has taxable income of $68,000. b. In 2017, owl Corporation has taxable income of $10,800,000. c. In 2018, Toucan Corporation

> Cherry Corporation, a calendar year C corporation, is formed and begins business on April 1, 2018. In connection with its formation, Cherry incurs organizational expenditures of $54,000. Determine Cherry Corporation's deduction for organizational expendi

> Pineview Company, a single member LLC, placed a $5,000 asset that is ineligible for full expensing in service on June 1, 2018. The asset has a three-year MACRS class life; no bonus depreciation was taken on this asset. Complete the table below by providi

> Brennen sold a machine used in his sole proprietorship for $180,000. The machine was purchased eight years ago for $340,000. Depreciation up to the date of the sale for regular income tax purposes was $210,000 and $190,000 for AMT purposes. What, if any,

> In March 2018, Serengeti exercised an ISO that had been granted by his employer, Thunder Corporation, in December 2015. Serengeti acquired 5,000 shares of Thunder stock for the exercise price of $65 per share. The fair market value of the stock at the da

> Alison incurs the following research expenditures. a. Determine the amount of qualified research expenditures. b. Assuming that the base amount is $50,000, determine Alison's incremental research activities credit. In-house wages In-house supplies

> During 2018, Lincoln Company hires seven individuals who are certified to be members of a qualifying targeted group. Each employee works in excess of 600 hours and is paid wages of $7,500 during the year. Determine the amount of Lincoln's work opportunit

> Emily spent $135,000 to rehabilitate a certified historic building (adjusted basis of $90,000) that originally had been placed in service in 1935. What is Emily's rehabilitation expenditures tax credit?

> In terms of Adam Smith's canon of economy in collection, how does the Digging Deeper Federal income tax fare?

> The Code contains provisions that are "friendly" to specific groups of taxpayers. Among these are the following. • Senior citizens. • Married taxpayers. • Employed taxpayers. • Taxpayers with children. • Self-employed taxpayers. Provide justification f

> Justin performs services for Partridge, Inc., and receives compensation of $85,000 for the year. Determine the tax consequences of Social Security and Medicare on Justin's take-home pay if: a. Justin is classified as an employee of Partridge. b. Justin i

> Assun1e the san1e facts as in Problem 1, except that George is a C corporation rather than an individual and is in the 25% marginal tax bracket (combined Federal and state rate). Which investment strategy would maxin1ize George, Inc.'s annual return'

> George comes to you asking for your advice. He wants to invest $10,000 either in a debt security or in an equity investment. His choices are shown below. • Redbreast Corporation bond, annual coupon rate of 7.5%. • City of Philadelphia general obligation

> Refer to the facts in the preceding problem. Assume that Blue Corporation disposes of the manufacturing asset at the beginning of year 7 for $40,000. Compute the amount of gain or loss recognized for book and tax purposes. What is the book-tax difference

> Using an on line research service, find the audited financial staten1ents of a major U.S. corporation. a. List son1e of the items that the corporation reports as having different treatment for tax and financial accounting purposes. These items often are

> In April of the current year, Blue Corporation purchased an asset to be used in its manufacturing operations for $100,000. Blue's management expects the asset to ratably provide valuable services in the production process for eight years and have a salva

> Wayside Fruit Company is a sole proprietorship owned by Neil Stephenson. The company's records reflect the following: Compute the net income before tax for book purposes and the amount of taxable income for Wayside Fruit Company. Sales revenue $185

> Lark Corporation is considering the acquisition of an asset for use in its business over the next five years. However, Lark must decide whether it would be better served by leasing the asset or buying it. An appropriate asset could be purchased for $15,0

> With which of the two perspectives to business forms, conduit or entity, is each of the following most consistent' a. Limited liability for the entity's owners. b. Unlimited life for the entity. c. The ability of owners to participate directly in the ma

> Marketplace, Inc., has recognized over time that a certain percentage of its customer accounts receivable will not be collected. To ensure the appropriate matching of revenues and expenditures in its financial reports, Marketplace uses the reserve method

> Sparrow Corporation is considering the acquisition of an asset for use in it5 business over the next five years. However, Sparrow must decide whether it would be better served by leasing the asset or buying it. An appropriate asset could be purchased for

> The exclusion of state and local bond interest from Federal income tax often is criticized as creating a tax haven for the wealthy. Critics, however, often fail to take into account the effect of n1arket forces. In recent months, the long-term taxexen1pt

> Comn1ent on these statements. a. The tax law is created and administered in the same way as other Federal provisions. b. Most taxpayers find it too expensive and time-consuming to sue the government in a tax dispute.

> When taxes are "too high," taxpayers start to cheat on their taxes and dangerous consequences can result. Evaluate this statement. Give at least two examples to illustrate your conclusions.

> The trend in state income taxation is to move to an apportionment formula that places extra weight on the sales factor. Several states now use sales-factor-only apportionment. Explain why this development is attractive to the taxing states.

> Assume that Parchment in (1) is a general partnership rather than a corporation. Respond to parts (a), (b), and (c). Would your answer change if Parchment were an LLC that ''checked the box" to be taxed as a partnership? Explain.

> Assume that Parchment in (1) elects S corporation status at the time of its creation. Respond to parts (a), (b), and (c).

> Parchment, Inc., is created with the following asset and liability contributions. Jake and Fran each receive 100 shares of Parchment common stock. a. Prepare a financial accounting balance sheet for Parchment. Discuss the relevance of conduit theory an

> 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, while Wanda is employed part-time as a paralegal for a law firm. During 2018, the Deans had th

> Rank the following items from the lowest to highest authority in the Federal tax law system. a. Interpretive Regulation. b. Legislative Regulation. c. Letter ruling. d. Revenue Ruling. e. Internal Revenue Code. f. Proposed Regulation.

> The Haas Corp., a calendar year S corporation, has two equal shareholders. For the year ended December 31, year 6, Haas had net income of $60,000, which included $50,000 from operations and $10,000 from investment interest income. There were no other tra

> An S corporation has 30,000 shares of voting common stock and 20,000 shares of nonvoting common stock issued and outstanding. The S election can be revoked voluntarily with the consent of the shareholders holding, on the day of the revocation, the follow

> In which of the following cases will Federal law prohibit a state from imposing a tax on net income? a. The business has a retail outlet store in the state. b. The business has its corporate headquarters in the state and generates sales from there. c. Or

> Olinto, Inc., reports taxable income (before special deductions and net operating loss deduction) of $92,000. Included in that amount is $12,000 interest and dividends income. Forty percent of Olinto's property, payroll, and sales are in its home state.

> Fox Corp., an S corporation, had an ordinary loss of $36,500 for the year ended December 31, year 2. At January 1, year 2, Duffy owned 500A. of Fox's stock. Duffy held the stock for 40 days in year 2 before selling the entire 500A. interest to an unrelat

> Village Corp., a calendar year corporation, began business in year 1. Village made a valid S corporation election on December 5, year 4, with the unanimous consent of its shareholders. The eligibility requirements for S status continued to be met through

> Peter, a 25% partner in Gold & Stein Partnership, received a $20,000 guaranteed payment in the current year for deductible services rendered to the partnership. Guaranteed payments were not made to any other partner. Gold & Stein's current-year p

> A reduction of a partner's share of partnership liabilities will have what effect on the partner's basis in the partnership interest? a. There is no effect on partnership basis. b. The same result (basis reduction and/ or gain recognition) as if the par

> When a partner's share of partnership liabilities increases, that partner's basis in the partnership interest: a. Increases by die partner's share of the liabilities b. Decreases by the partner's share of the liabilities. c. Decreases, but not to less t

> At the inception of a partnership, Black acquires a 50% interest in Decorators Partnership by contributing property with an adjusted basis of $250,000. Black recognizes a gain if: I. The fair market value of the contributed property exceeds its adjusted

> Sonja Bishop operates a small international firm named Tile, Inc. A new treaty between the United States and Spain conflicts with a Section of the Internal Revenue Code. Sonja asks you for advice. If she follows the treaty position, does she need to disc

> Adelyn has a tentative general business credit of $42,000 for the current year. Her net regular tax liability before the general business credit is $107,000, and her tentative minimum tax is $88,000. Compute Adelyn's allowable general business credit for

> Determine the taxpayer's current-year (1) economic income and (2) gross income for tax purposes from the following events. a. San1's en1ployment contract as chief executive of a large corporation was terminated, and he was paid $500,000 not to work for

> Jang, a resident of Washington (which imposes a general sales tax), goes to Critical Thinking Oregon (which does not impose a general sales tax) to purchase his automobile. Will Jang successfully avoid the Washington sales tax? Explain.

> Repeat the computations of Problem 36, but now assume that State A is a sales-factor-only state and that State B uses the following weights: sales .70, payroll .15, and property .15. Data from Problem 36: PinkCo, Inc., operates in two states, both of w

> In the current year, Dylan earned taxable and tax-exempt interest from the following investments. Dylan purchased all of the bonds on their issuance date. In addition, Dylan borrowed funds with which to purchase the 2010 private activity bond and incur

> Wolfgang, who is age 33, records AGI of $125,000. He incurs the following itemized deductions for 2018. a. Calculate Wolfgang's itemized deductions for AMT purposes. b. What is the total amount of his AMT adjustments from these items? Medical expen

> Buford sells an apartn1ent building for $720,000. His adjusted basis is $500,000 for regular income tax purposes and $550,000 for AMT purposes. Calculate Buford's: a. Gain for regular income tax purposes. b. Gain for AMT purposes. c. AMT adjustment, if a

> Falcon has a sole proprietorship that owns a silver mine that she purchased several years ago for $925,000. The adjusted basis at the beginning of the year is $400,000. For the year, Falcon deducts depletion of $700,000 (greater of cost depletion of $290

> Blue Sky, Inc., a U.S. corporation, is a manufacturing concern that sells most of its products in the United States. It also conducts some business in the European Union through various branches. During the current year, Blue Sky reports taxable income o

> Sarah incorporates her small business but does not transfer the machinery and equipment used by the business to the corporation. Instead, the machinery and equipment are leased to the corporation for an annual rent. What tax reasons might Sarah have for

> Your ophthalmologist, Dr. Hunter Francis (55 Wheatland Drive, Hampton, CT 06247), has been very pleased with the growth of his practice in the 15 years he has been in business. This growth has resulted, at least in part, because he has aggressively marke

> Gray Chemical Company manufactured pesticides that were toxic. Over the course of several years, the toxic waste contaminated the air and water around the company's plant. Several employees suffered toxic poisoning, and the Environmental Protection Agenc

> Green Corporation hires six individuals on January 4, 2018, all of whom qualify for the work opportunity credit. Three of these individuals receive wages of $8,500 during 2018, and each individual works more than 400 hours during the year. The other thre

> Junie's share of her S corporation's net operating loss is $50,000, but her stock basis is only $30,000. Point out the Federal income tax consequences that Junie must face.

> In January 2017, Iris Corporation purchased and placed in service a certified historic structure building that houses retail businesses. The cost was $300,000, of which $25,000 applied to the land. In modernizing the facility, Iris Corporation incurred $

> Oak Corporation holds the following general business credit carryovers. If the general business credit generated by activities during 2018 equals $36,000 and the total credit allowed during the current year is $60,000 (based on tax liability), what amo

> On March 2, 2018, the two 50% shareholders of a calendar year corporation decide to elect S status. One of the shareholders, Terry, purchased her stock from a previous shareholder (a nonresident alien) on January 18, 2018. Identify any potential problems

> PinkCo, Inc., operates in two states, both of which equally weight the three apportionment factors. PinkCo reports the following results for the year. Compute the apportionment percentage for both states. Amounts are stated in millions of dollars. S

> Continue with the facts of Problem 34. Using the format of compute state taxable income for HippCo, assuming also that the taxpayer recognized $225,000 of net rent income during the year from a warehouse building in Montana. Federal taxable income still