Question: Stephanie’s owns a land (adjusted basis

> Mary purchased an annuity that pays her $ 500 per month for the rest of her life. She paid $70,000 for the annuity. Based on IRS annuity tables, Mary's life expectancy is 16 years. How much of the first $500 payment will Mary include in her gross income

> On December 30, 2017, Maud sold land to her son, Charles, for $50,000 cash and a 7% installment note for $350,000, payable over 10 years. Maud's cost of the land was $150,000. In October 2019, after Charles had paid $60,000 on the principal of the note,

> On June 30, 2018, Kelly sold property for $240,000 cash and a $960,000 note due on September 30, 2019. The note will also pay 6% interest, which is slightly higher than the Federal rate. Kelly's cost of the property was $400,000. She is concerned that Co

> Kay, who is not a dealer, sold an apartment house to Polly during the current year (2018). The closing statement for the sale is as follows: During 2018, Kay collected $9,000 in principal on the installment note and $2,000 of interest. Kay's basis in t

> Ted purchased equipment and used materials to develop a patent. The development costs were deducted on prior returns. The bases and fair market values of the assets are presented below. Sarah has made an offer to purchase the assets. Under one plan, sh

> Jeffrey Boyd, the president of Eagle Furniture Company (average annual gross receipts of $30 million), has prepared the company's financial statements and income tax returns for the past 15 years. In July 2019, however, he hires you to prepare the 2018 c

> Raven Finance Company experiences bad debts of about 3% of its outstanding loans. At the end of the year, the company had outstanding receivab1es of $18 million. This balance included $2 million of accrued interest receivable Raven's loan 10ss reserve fo

> How do the all events and economic performance requirement apply to the following transactions by an accrual basis taxpayer? a. The company guarantees its product for six months. At the end of 2018, customers had made valid claims for $600,000 that were

> Blue Company, an architectura1 first has a bookkeeper who maintains a cash receipts and disbursements journal. At the end of the year (2018), the company hires you to convert the cash receipts and disbursements into accrual basis revenues and expenses. T

> Compute Mary's income or deductions for 2018 using (1) the cash basis and (2) the accrual basis for each of the following: a. In May 2018, Mary paid a license fee of $1,200 for the period June 1, 2018, through May 31, 2019. b. In December 2018, Mary coll

> Gold, Inc., is an accrual basis taxpayer. In 2018, an employee accidentally spilled hazardous chemicals on leased property. The chemicals destroyed trees on neighboring property, resulting in $30,000 of damages. In 2018, the owner of the property sued Go

> Heather owns 400 shares of Diego Corporation common stock for which she paid $4,000. She receives a nontaxable stock dividend of 20 shares of preferred stock on her common stock. The fair market values on the date of distribution of the preferred stock d

> In 2017, Juan entered into a contract to write a book. The publisher advanced Juan $50,000, which was to be repaid out of future royalties. If the book was not completed by the end of 2018, however, Juan would be required to repay the publisher for the a

> Zorn conducted his professional practice through Zorn, Inc. The corporation uses a fiscal year ending September 30 even though the business purpose test for a fiscal year cannot be satisfied. For the year ending September 30, 2018, the corporation paid Z

> The Cardinal Wholesale Company is an S corporation that began business on March 1, 2018. Robert, a calendar year taxpayer, owns 100% of the Cardinal stock. He has $400,000 taxable income from other sources each year. Robert will work approximately 30 hou

> Theresa has a 2017 Form 1040 Schedule D, line 16 gain of $45,000. There is also a $45,000 gain on the form's line 19. What is the nature of the gain? What a1ternative tax rate applies to it?

> Adrian has a 2017 Form 4797, line 9 gain of $56,000. He also has one transaction on his 2017 Form 1040 Schedule D, Part 1 a loss of $58,000. What is Adrian's AGI from these events?

> On August 10, 2016, Jasper purchased business equipment for $40,000. On his 2016 tax return, $40,000 of 179 immediate expense was taken on the equipment. On July 14, 2017, Jasper sold the equipment for $12,000. What is the nature of disposition gain or l

> Sasha and Tara are married, filing jointly. Their correctly determined 2018 taxable income is $127,000. This taxable income includes a $5,000 1231 gain from the sa1e of business land that was included in their $22,000 of net long term capital gain. None

> Tan Corporation purchased depreciable tangible personal property for $100,000 in 2016 and immediately expensed the entire cost under 179 In 2018, when the property was worth $80,000, Tan distributed it as a dividend to the corporation's sole shareholder.

> Miguel receives tangible personal property as an inheritance in 2016. The property was depreciated by the deceased (Miguel's father), and Miguel will also depreciate it. At the date of the deceased's death, the property was worth $532,000. The deceased h

> Anna received tangible personal property with a fair market value of $65,000 as a gift in 2016. The donor had purchased the property for $77,000 and had taken $77,000 of depreciation. Anna used the property in her business. Anna sells the property for $2

> On July 1, 2018, Katrina purchased tax-exempt bonds (face value of $75,000) for $82,000. The bonds mature in five years, and the annual interest rate is 6%. The market rate of interest is 2% a. How much interest income and/or interest expense must Katrin

> On January 1, 2009, Stephanie Bridges acquired depreciable real property for $50,000. She used straight-line depreciation to compute the asset's cost recovery. The asset was sold for $96,000 on January 3, 2018, when its adjusted basis was $38,000. a. Wha

> On May 2, Hannah Weather (Social Security Number: 111-22-333) acquired residential rental rea1 estate for $450,000. Of the cost, $100,000 was allocated to the land and $350,000 to the building. On August 20, 2017, the building, which then had an adjusted

> On June 1, 2014, Skylark Enterprises (not a corporation) acquired a retail store building for $500,000 (with $100,000 being allocated to the land). The store building was 39-year real property, and the straight-line cost recovery method was used. The pro

> Copper Industries (a sole proprietorship) sold three 9 1231 asset during 2018. Data on these property dispositions are as follows: a. Determine the amount and the character of the recognized gain or 10ss from the disposition of each asset. b. Assuming

> Amber Industries (a sole proprietorship) sold three 1231 asset during 2018. Data on these property dispositions are as follows: a. Determine the amount and the character of the recognized gain or loss from the disposition of each asset. b. Assuming tha

> Siena Industries (a sole proprietorship) sold three 1231 asset during 2018. Data on these property dispositions are as follows: a. Determine the amount and the character of the recognized gain or loss from the disposition of each asset. b. Assuming tha

> Keshara has the following net § 1231 results for each of the years shown. What would be the nature of the net gains in 2017 and 2018? Tax Year Net 5 1231 Loss Net 5 1231 Gain 2013 $18,000 2014 33,000 2015 42,000 2016 $41,000 2017 30,000

> Bob owns a farming sole proprietorship. During the year, Bob sold a milk cow that he had owned for 15 months and a workhorse that he had owned for 66 months. The cow had an adjusted basis of $38,000 and was sold for $55,000. The horse had an adjusted bas

> Jenny purchased timber on a 100-acre tract of 1and in South Dakota in March 2016 for $100,000. On January 1, 2018, the timber had a fair market va1ue of $145,000. Because of care1ess cutting in November 2018, when the fair market va1ue was $158,000, the

> Gray, Inc., a C corporation, has taxable income from operations of $1,452,000 for 2018. It also has a net long-term capital loss of $355,000 from the sale of a subsidiary's stock. The year 2018 is the first year in the last 10 years that Gray has not had

> Sally owns real property for which the annual property taxes are $9,000. She sells the property to Kate on March 9, 2018, for $550,000. Kate pays the real property taxes for the entire year on October 1, 2018. a. How much of the property taxes can be ded

> Asok’s AGI for 2018 is $133,050. Included in this AGI is a $45,000 25% long term capital gain and a $13,000 0%/15%/20% long term capital gain. Asok is sing1e and uses the standard deduction. Compute his taxable income, the tax liability, and the tax savi

> For 2018, Wilma has properly determined taxable income of $36,000, including $3,000 of unrecaptured 1250 gain and $82,000 of 0%/15%/20% gain. Wilma qualifies for head-of-household filing status. Compute Wilma's tax liability and the tax savings from the

> For 2018, Ashley has gross income of $38,350 and a $5,000 long-term capital loss. She claims the standard deduction. Ashley is 35 years old and unmarried with two dependent children. How much of Ashley's $5,000 capital loss carries over to 2019?

> Phil and Susan Hammond are married taxpayers filing a joint return. The couple have two dependent children. Susan has wages of $34,000 in 2017 Phil does not work due to a disability, but he is a buyer and seller of stocks. He generally buys and ho1ds for

> Roger inherited 100 shares of Periwink1e stock when his mother, Emily, died Emily had acquired the stock for a total of $60,000 on November 15, 2014. She died on August 10, 2018, and the shares were worth a total of $55,000 at that time. Roger sold the s

> Consuela was a tenant in a campus apartment. She is a student at State University. Her lease began on August 1, 2018, and was due to expire on July 31, 2019. However, her landlord sold the building, and the new owner wanted to demolish it to build a reta

> Hilde purchased all of the rights to patent on a new garden tool developed by a friend of hers who was an amateur inventor. The inventor had obtained the patent rights, set up a manufacturing company to produce and sell the garden tool, and produced subs

> Benny purchased $400,000 of Peach Corporation face value bonds for $320,000 on November 13, 2017. The bonds had been issued with $80,000 of original issue discount because Peach was in financial difficulty in 2017. On December 3, 2018, Benny sold the bon

> Melaney has had a bad year with her investments. She 1ent a friend $8,000; the friend did not repay the loan when it was due and then declared bankruptcy. The 10an is totally uncollectible. Me1aney a1so was notified by her broker that the Oak corporate b

> Maria meets all of the requirements (subdivided realty). In 2018, she begins selling lots and sells four separate lots to four different purchasers. She also sells two contiguous lots to another purchaser. The sales price of each lot is $30,000. Maria's

> Determine the additional Medicare taxes for the individuals. a. Mario, who is single, earns wages of $440,000 in 2018. b. George and Shirley are married and file a joint return in 2018. During the year, George earns wages of $138,000, and Shirley earns w

> Cisco, a calendar year taxpayer who is age 63, owns a residence in which he has lived for 21 years. The residence is destroyed by fire on August 8, 2018. The adjusted basis is $190,000, and the fair market value is $320,000. Cisco receives insurance proc

> Karl purchased his residence on January 2, 2017, for $260,000, after having lived in it during 2016 as a tenant under a lease with an option to buy clause. On August 1, 2018, Karl sells the residence for $315,000. On June 13, 2018, Karl purchases a new r

> Wanda, a calendar year taxpayer, owned a building (adjusted basis of $250,000) in which she operated a bakery that was destroyed by fire in December 2018. She receives insurance proceeds of $290,000 for the building the following March. Wanda is consider

> Cabel’s warehouse, which has an adjusted basis of $380,000 and a fair market value of $490,000 is condemned by an agency of the Federal government to make way for a highway interchange. The initial condemnation offer is $425,000 After substantial negotia

> In two unrelated transactions, Laura exchanges property that qualifies for like-kind exchange treatment. In the first exchange, Laura gives up land purchased in May 2016 (adjusted basis of $20,000; fair market value of $17,000) in exchange for a differen

> Kareem owns a pickup truck that he uses exclusively in his business. The adjusted basis is $22,000, and the fair market value is $14,000. In March 2018, Kareem exchanges the truck for another truck (worth $14,000) that he will use exclusively in his busi

> Hun age 93, has accumulated substantia1 assets during his life. Among his many assets are the following, which he is considering giving to Koji, his grandson Hun has been in ill hea1th for the past five years. His physician has informed him that he pro

> On December 28, 2018, Kramer sells 150 shares of Lavender, Inc. stock for $77,000. On January 10, 2019, he purchases 100 shares of the same stock for $82,000. a. Assuming that Kramer's adjusted basis for the stock sold is $65,000, what is his recognized

> Helene and Pauline are twin sisters who live in Louisiana and Mississippi, respectively. Helene is married to Frank, and Pauline is married to Richard. Frank and Richard are killed in an auto accident in 2018 while returning from a sporting event. Helene

> In 2018, Bianca earned a salary of $164,000 from her employer. Determine the amount of FICA taxes and Medicare taxes withheld from her salary.

> Karen Samue1s (Socia1 Security number 123-45-6789) makes the following purchases and sales of stock: Assuming that Karen is unable to identify the particular lots that are sold with the original purchase, determine the recognized gain or l0ss on each t

> Chee purchases Tan, Inc. bonds for $108,000 on January 2m 2018. The face value of the bonds is $100,000; the maturity date is December 31, 2022; and the annual interest rate is 5%. Chee will amortize the premium only if he is required to do so. Chee sell

> Ricky owns stock in Dove Corporation. His adjusted basis for the stock is $90,000. During the year, he receives a distribution from the corporation of $75,000 that is labeled a return of capital (i.e., Dove has no earnings and profits) a. Determine the t

> Nissa owns a building (adjusted basis On January 1, 2018) that she rents to Len, who operates a restaurant in the building. The municipal hea1th department closed the restaurant for three months during 2018 because of health code violations. Under MACRS,

> Kareem bought a renta1 house in March 2013 for $300,000, which $50,000 is allocated to the 1and and $250,000 to the building. Early in 2015, he had a tennis court built in the backyard at a cost of $7,500. Kareem has deducted $30,900 for depreciation on

> Anne sold her home for $290,000 in 2018. Selling expenses were $17,400. She purchased it in 2012 for $200,000. During the period of ownership, Anne did the following: • Deducted $50,500 office-in-home expenses, which included $4,500 in depreciation. (Ref

> In 2018, Maria records self-employed earnings of $135,000. Using the format illustrated in the tax, compute Maria's self-employment tax liability and the allowable income tax deduction for the self-employment tax paid

> Julie, being self-employed, is required to make estimate payments of her tax liability for the year. Her tax liability for 2017 was $ 25,000, and her AGI was less than $150,000. For 2018, Julie ultimately determines that her income tax liability is $18,0

> Jane, who is expecting to finish college in May 2018, is fortunate to have already arranged full-time employment after graduation. She will begin work on July 1, 2018, as a staff accountant at a nearby professional services firm with a starting salary of

> In each of the following independent situations, determine the maximum withholding allowances that Eli (an employee) is permitted on Form w-4. a. Eli is single with no dependents b. Eli is married to a non employed spouse, and they have no dependents. c.

> Rafael and Lucy, married taxpayers, each contribute $29,00 to their respective 401(k) plans offered through their employers. The AGI reported on the couple's joint return is $39,000. Determine their credit for retirement plan contributions (the Saver's C

> During 2018, Greg Cruz (1401 Orangedale Road, Troy, MI 48084) works for Maple Corporation and Gray Company. He earns $90,000 at Maple Corporation, where he is a full-time employee. Greg also works part-time for Gray Company for wages of $50,000. a. Did G

> In each of the following independent situations, determine the amount of FICA that should be withheld from the employee’s 2018 salary by the employer. a. Harry earns a $50,000 salary, files a joint return, and claims four withho1ding allowances b. Haze1

> Jason, a single parent, lives in an apartment with his three minor children, whom he supports. Jason earned $27,40o during 2018 and uses the standard deduction. Calculate the amount, if any, of Jason's earned income credit.

> Which of the following individuals qualifies for the earned income credit for 2018? a. Thomas is single, is 21 years of age, and has no qualifying children. His income consists of $9,000 in wages. b. Shannon, who is 27 years old, maintains a household fo

> Bonnie, who is single and itemizes deductions, reports a zero taxable income for 2018. She incurs positive timing adjustments of $200,000 and AMT exclusion items of $100,000 for the year. What is Bonnie's AMT credit carry over to 2019?

> Lynn, age 45, is single and has no dependents. Her income and expenses for 2018 are reported as follows. The $64,000 business income is from Apex Office Supplies Company, a sole proprietorship that Lynn owns and operates. Apex claimed MACRS depreciatio

> Farr is single, has no dependents and does not itemize her deductions She reports the following items on her 2018 tax return. a. Determine Farr's AMT adjustments and preferences for 2018. b. Calculate Farr's AMT for 2018. Bargain element from the e

> Amos incurred and expensed intangible drilling costs (IDC) of $70,000 His net oil and gas income was $60,000. What is the amount of Amos's preference for IDC?

> Emily owns a coal mine (basis of $12,000 at the beginning of the year) that qualifies for a 15% depletion rate. Gross income from the property was $140,000, and net income before the percentage depletion deduction was $60,000 What is Emily's tax preferen

> During the current year, Yoon earned $10,000 in interest on corporate bonds and incurred $13,000 of investment interest expense related to the bond holdings. Yoon also earned $5,000 interest on private activity bonds that were issued in 2014 and incurred

> Elijah is single. He holds a $12,000 AMT credit from 2017. In 2018, his regular tax liability is $28,000 and his tentative minimum tax is $24,000 Does Elijah owe AMT in 2018? How much (if any) of the AMT credit can Elijah use in 2018?

> Christopher regularly invests in internet company stocks, hoping to become wealthy by making an early investment in the next high-tech phenomenon In 2012, Christopher purchased 3,000 shares of Flicks Net, a film rental company, for $15 per share shortly

> In 2018, Liza exercised an incentive stock option that had been granted to her in 2015 by her employer, Weather Corporation. Liza acquired 100 shares of Weather stock for the option price of $190 per share. The fair market value of the stock at the date

> Burt, the CFO of Amber, Inc., was granted incentive stock options in 2013. Burt exercised the stock options in February 2017 when the exercise price was $75,00o and the fair market value of the stock was $90,000. He sold the stock in September 2018 for $

> In 2018, Geoff incurred $900,000 of mine and exploration expenditures. He elects to deduct the expenditures as quickly as the tax law allows for regular income tax purposes. a. How will Geoff's treatment of mine and exploration expenditures affect his re

> Archie runs a small mineral exploration business (as a sole proprietorship) In 2016, he purchased land (for $68,000) where he suspected a magnesium deposit was located. He incurred $18,000 of exploration cost related to the development of the magnesium m

> Angela, who is single, incurs circulation expenditures of $270,000 during 2018. She is deciding whether to deduct the entire $270,000 or to capitalize the expenses and deduct them over a three-year period. Angela is in the 37% bracket for regular income

> Lisa records nonrefundable Federal income tax credits of $65,000 for the year. Her regular income tax liability before credits is $190,000, and her TMT is $150,000 a. What is Lisa's AMT? b. What is Lisa's regular income tax liability after credits?

> Calculate the exemption amount for the following cases in 2018 for a married taxpayer filing jointly and for a married taxpayer filing separately In addition, use Microsoft Excel to express your solutions for the taxpayer who is married filing jointly. P

> Arthur Wesson, an unmarried individual who is age 68, reports taxable income of $510,000 in 2018. He records positive AMT adjustments of $80,000 and preferences of $35,000. Arthur itemizes his deductions, and his regular tax liability in 2018 is $109,390

> Five years ago Gerald invested $150,000 in a passive activity, his sole investment venture. On January 1, 2017, his amount at risk in the activity was $30,000. His shares of the income and losses were as follows: Gerald holds no suspended at-risk or pa

> Yanni, who is single, provides you with the following information 2018. a. What is Yanni's 2018 taxable income? b. What is Yanni's 2018 AMT1? c. What is Yanni's 2018 TMT? Salary $250,000 State income taxes 25,000 Mortgage interest expense ($480,000

> Seojun acquired an activity several years ago, and in the current year, it generates a loss of $ 50,000. Seojun has AGI of $140,000 before considering the 10ss from the activity. If the activity is a bakery and Seojun is not a materia1 participant, what

> Dorothy acquired a 100% interest in two passive activities: Activity A in January 2013 and Activity B in 2014. Through 2016, Activity A was profitab1e, but it produced 10sses of $200,000 in 2017 and $100,000 in 2018. Dorothy has passive activity income f

> For calendar year 2018, Stuart and Pamela Gibson file a joint return reflecting AGI of $350,000. Their itemized deductions are as follows: Calculate the amount of itemized deductions the Gibsons may claim for the year $48,600 Casualty loss in a Fed

> Evan is single and has AGI of $277,300 in 2018. His potential itemized deductions before any limitations for the year total $52,300 and consist of the following: After all necessary adjustments are made, what is the amount of itemized deductions Evan m

> Bart and Elizabeth Forrest are married and have no dependents They have asked you to advise them whether they should file jointly or separately in 2018. They present you with the following information: If they file separately Bart and Elizabeth will sp

> On December 27, 2018, Roberta purchased four tickets to a charity ball sponsored by the city of San Diego for the benefit of underprivileged children Each ticket cost $200 and had a fair market value of $35. On the same day as the purchase, Roberta gave

> Liz have AGI of $130,000 in 2018. She donated Bluebird Corporation stock with a basis of $10,000 to a qualified charitable organization on July 5, 2018 a. What is the amount of Liz's deduction assuming that she purchased the stock on December 3, 2017, an

> This year, Nadia donates $4,000 to Eastern University’s athletic department. The payment guarantee’s that Nadia will have preferred seating at football games near the 50-yard line. Assume that Nadia subsequently buys four $100 game tickets. How much can

> Malcolm owns 60% and Buddy owns 40% of Magpie Corporation. On July 1, 2018, each lends the corporation $30,000 at an annual interest rate of 5% Malcolm and Buddy are not related. Both shareholders use the cash method of accounting, and Magpie Corporation

> Norma, who is single and uses the cash method of accounting, lives in a state that imposes an income tax. In April 2018, she files her state income tax return for 2017 and pays an additional $1,000 in state income taxes. During 2018, her withholdings for

> Zhou owns a non rental business with two separate departments. Department A generates net income of $70,000, and Department B generates a net loss of $58,000. Zhou participates 800 hours in the operations of Department A and 300 hours in the operations o

> During 2018, Susan incurred and paid the following expenses for Beth (her daughter), Ed (her father), and herself: Beth qualifies as Susan's dependent, and Ed would also qualify except that he receives $7,400 of taxable retirement benefits from his for