Question: What are the potential U.S. tax

> William is a single writer (age 35) who recently decided that he needs to save more for retirement. His 2018 AGI before the IRA contribution deduction is $66,000 (all earned income). a. If he does not participate in an employer-sponsored plan, what is th

> Describe how goodwill with a zero basis for tax purposes but not for book purposes leads to a permanent book–tax difference when the book goodwill is written off as impaired.

> John (age 51 and single) has earned income of $3,000. He has $30,000 of unearned (capital gain) income. a. If he does not participate in an employer-sponsored plan, what is the maximum deductible IRA contribution John can make in 2018? b. If he does par

> XYZ Corporation has a deferred compensation plan under which it allows certain employees to defer up to 40 percent of their salary for five years. (For purposes of this problem, ignore payroll taxes in your computations). a. Assume XYZ has a marginal tax

> Leslie participates in IBO’s nonqualified deferred compensation plan. For 2018, she is deferring 10 percent of her $300,000 annual salary. Based on her deemed investment choice, Leslie expects to earn a 7 percent before-tax rate of return on her deferred

> In 2018, Nitai (age 40) contributes 10 percent of his $100,000 annual salary to a Roth 401(k) account sponsored by his employer, AY Inc. AY Inc., matches employee contributions to the employee’s traditional 401(k) account dollar for dollar up to 10 perce

> Tommy (age 47) and his wife, Michelle (age 49), live in Columbus, Ohio, where Tommy works for Callahan Auto Parts (CAP) as the vice-president of the brakes division. Tommy’s 2018 salary is $360,000. CAP allows Tommy to participate in its nonqualified def

> Alex is 31 years old and has lived in Los Alamos, New Mexico, for the last four years where he works at the Los Alamos National Laboratory (LANL). LANL provides employees with a 401(k) plan and for every $1 an employee contributes (up to 9 percent of the

> Ian retired in June of 2017 at the age of 69 (he turned 70 in August of 2017). Ian’s retirement account was valued at $490,000 at the end of 2016 and $500,000 at the end of 2017. He has had all of his retirement accounts open for 15 years. What is Ian’s

> Jacquiline is unmarried and age 32. Even though she participates in an employer-sponsored retirement plan, Jacquiline contributed $3,000 to a traditional IRA during the year. Jacquiline files as a head of household, her AGI before the contribution is $43

> Penny is 57 years old and she participates in her employer’s 401(k) plan. During the year, she contributed $2,000 to her 401(k) account. Penny’s AGI is $29,000 after deducting her 401(k) contribution. What is Penny’s saver’s credit in each of the followi

> For purposes of determining a taxpayer's deductible home mortgage interest, does it matter when the taxpayer incurred the debt to acquire the home? Explain.

> Desmond is 25 years old and he participates in his employer’s 401(k) plan. During the year, he contributed $3,000 to his 401(k) account. What is Desmond’s saver’s credit in each of the following alternative scenarios? a. Desmond is not married and has no

> Spartan Builders Corporation is a builder of high-end housing with locations in major metropolitan areas throughout the Midwest. At June 30, 2018, the company has deferred tax assets totaling $10 million and deferred tax liabilities of $5 million, all of

> Access the 2017 Annual Report for Facebook, Inc., and answer the following questions. a. Using information from the company’s Income Statement and Income Taxes footnote, what was the company’s effective tax rate for 2017? Show how the rate is calculated.

> You have been assigned to compute the income tax provision for Tulip City Flowers, Inc. (TCF) as of December 31, 2018. The company’s Income Statement for 2018 is provided below: Tulip City Flowers, Inc.  Statement of Operations       at Decembe

> You have been assigned to compute the income tax provision for Motown Memories, Inc. (MM) as of December 31, 2018. The Company’s Income Statement for 2018 is provided below: Motown Memories, Inc.  Statement of Operations       at December 31, 2

> Karane Enterprises, a calendar year manufacturer based in College Station, Texas began business in 2017. In the process of setting up the business, Karane has acquired various types of assets. Below is a list of assets acquired during 2017: During 2017

> Yuki (age 45 at year-end) has been contributing to a traditional IRA for years (all deductible contributions) and her IRA is now worth $50,000. She is trying to decide whether she should roll over her traditional IRA into a Roth IRA. Her current marginal

> Fizbo Corporation is in the business of breeding and racing horses. Fizbo has taxable income of $5,000,000 other than from these transactions. It has nonrecaptured §1231 losses of $10,000 from 2014 and $13,000 from 2012. Consider the following transacti

> Sherry, who is 52 years of age, opened a Roth IRA three years ago. She has contributed a total of $12,000 to a Roth IRA ($4,000 a year). The current value of the Roth IRA is $16,300. In the current year, Sherry withdraws $14,000 of the account balance to

> John is trying to decide whether to contribute to a Roth IRA or traditional IRA. He plans on making a $5,000 contribution to whichever plan he decides to fund. He currently pays tax at a 32 percent marginal income tax rate but he believes that his margin

> Juanita owns a principal residence in New Jersey, a cabin in Montana, and a houseboat in Hawaii. All of these properties have mortgages incurred before 2017 on which Juanita pays interest. What limits, if any, apply to Juanita’s home mortgage interest de

> Jimmer has contributed $15,000 to his Roth IRA and the balance in the account is $18,000. In the current year, Jimmer withdrew $17,000 from the Roth IRA to pay for a new car. If Jimmer’s marginal ordinary income tax rate is 24 percent, what amount of tax

> Hill Corporation is in the leasing business and faces a marginal tax rate of 21 percent. It has leased a building to Whitewater Corporation for several years. Hill bought the building for $150,000 and claimed $20,000 of depreciation deductions against th

> Metro Corp. traded Land A for Land B. Metro originally purchased Land A for $50,000 and Land A’s adjusted basis was $25,000 at the time of the exchange. What is Metro’s realized gain or loss, recognized gain or loss, and adjusted basis in Land B in each

> James and Kate Sawyer were married on New Year’s Eve of 2017. Before their marriage, Kate lived in New York and worked as a hair stylist for one of the city’s top salons. James lives in Atlanta where he works for a public accounting firm earning an annua

> Derek and Meagan Jacoby recently graduated from State University and Derek accepted a job in business consulting while Meagan accepted a job in computer programming. Meagan inherited $75,000 from her grandfather who recently passed away. The couple is de

> Thriller Corporation has one class of voting common stock, of which 1,000 shares are issued and outstanding. The shares are owned as follows: Thriller Corporation has current E&P of $300,000 for this year and accumulated E&P at January 1 of thi

> Suppose Vince dies this year with a gross estate of $25 million and no adjusted prior gifts. Calculate the amount of estate tax due (if any) under the following alternative conditions. a. Vince leaves his entire estate to his spouse, Millie. b. Vince lea

> USCo, a U.S. corporation, has decided to set up a headquarters subsidiary in Europe. Management has narrowed its location choice to either Spain, Ireland, or Switzerland. The company has asked you to research some of the income tax implications of settin

> Windmill Corporation manufactures products in its plants in Iowa, Canada, Ireland, and Australia. Windmill conducts its operations in Canada through a 50 percent owned joint venture, CanCo. CanCo is treated as a corporation for U.S. and Canadian tax purp

> Simon is a 30% partner in the SBD Partnership, a calendar year-end entity. As of the end of this year, Simon has an outside basis in his interest in SBD of $188,000, which includes his share of the $60,000 of partnership liabilities. On December 31, SBD

> Assume a calendar-year corporation has a deficit (negative) current E&P of $100 and accumulated E&P of $100. Under this circumstance, a cash distribution of $100 to the corporation’s sole shareholder on June 30 will not be treated as a dividend because t

> Carrie D’Lake, Reed A. Green, and Doug A. Divot share a passion for golf and decide to go into the golf club manufacturing business together. On January 2, 2018, D’Lake, Green, and Divot form the Slicenhook Partnership

> Daisy has developed a viable new business idea. Her idea is to design and manufacture cookware that remains cool to the touch when in use. She has had several friends try out her prototype cookware and they have consistently given the cookware rave revie

> Cartman Corporation owns 90 shares of SP Corporation. The remaining 10 shares are owned by Kenny (an individual). After several years of operations, Cartman decided to liquidate SP Corporation by distributing the assets to Cartman and Kenny. The tax basi

> Timpanogos Inc. is an accrual-method calendar-year corporation. For 2018, it reported financial statement income after taxes of $1,152,000. Timpanogos provided the following information relating to its 2018 activities: Required: a. Reconcile book inco

> Compute HC Inc.’s current year taxable income given the following information relating to its 2018 activities. Also, compute HC’s Schedule M-1 assuming that HC’s federal income tax expense for book purposes is $30,000. • Gross profit from inventory sales

> Compute MV, Corp.’s 2018 taxable income given the following information relating to its year 1 activities. Also, compute MV’s Schedule M-1 assuming that MV’s federal income tax expense for book purposes is $100,000. • Gross profit from inventory sales of

> Independence Corporation needs to replace some of the assets used in its trade or business and is contemplating the following exchanges: Exchange Asset Given Up by Independence Asset Received by Independence  A Office building in Chicago, IL Piece

> Convers Corporation (calendar year-end) acquired the following assets during the current tax year: Asset  Placed in Service Date Original Basis  Machinery October 25 $70,000  Computer Equipment February 3 $10,000  Delivery Truck* March

> In the current year, Jill, age 35, received a job offer with two alternative compensation packages to choose from. The first package offers her $90,000 annual salary with no qualified fringe benefits, requires her to pay $3,500 a year for parking, and pa

> Sylvana is given a job offer with two alternative compensation packages to choose from. The first package offers her $250,000 annual salary with no qualified fringe benefits. The second package offers $235,000 annual salary plus health and life insurance

> Distinguish between exclusion and deferral in a property transaction.

> Santini’s new contract for 2018 indicates the following compensation and benefits: Benefit Description Amount  Salary $130,000  Health insurance $9,000  Restricted stock granted $2,500  Bonus $5,000  Hawaii trip $4,000  Group-term life

> People sometimes confuse the applicable credit with the exemption equivalent. Describe how these terms differ and how they are related.

> What is a permanent establishment, and why is it an important part of most income tax treaties?

> What is the primary goal of the United States in negotiating income tax treaties with other countries?

> Compare and contrast general sales tax nexus and the new “Amazon” rule creating sales tax nexus in New York.

> States are arguing for economic income tax nexus; provide at least one reason for and one against the validity of economic income tax nexus.

> When are partnerships mandated to adjust the basis of their assets (inside basis) when a partner sells a partnership interest or receives a partnership distribution?

> Describe when a corporate shareholder must defer gains on the receipt of distributions of property from the complete liquidation of a subsidiary corporation.

> In a stock acquisition, describe the difference (if any) between the tax basis of assets held by an acquired corporation and the tax basis of the shares held by a corporate acquirer?

> Describe the applicable credit and the purpose it serves in the gift and estate tax.

> If entities taxed as partnerships and S corporations are both flow-through entities for tax purposes, why might an owner prefer one form over the other for tax purposes? List separately the tax factors supporting the decision to operate as either as an e

> Explain when an acquiring corporation would prefer to buy the target corporation’s assets directly in an acquisition.

> Reveille Corporation experienced a complete loss of its lumber mill as the result of a fire. The company received $2 million from the insurance company. Rather than rebuild, Reveille decided to distribute the $2 million to its two shareholders. No sto

> In general, what causes a stock distribution to be taxable to the recipient?

> What is the limitation on a deductible IRA contribution for 2018?

> Why might a corporation issue a stock distribution to its shareholders?

> Briefly describe the process of computing a corporation’s minimum tax credit carryover.

> ELS, an S corporation, reported a business loss of $1,000,000. Ethan, ELS’s sole shareholder, is involved in ELS’s daily business activities and he reports $1,200,000 of taxable income from sources other than ELS. What must you know in order to determine

> Deductions for traditional IRAs and contributions to Roth IRAs are phased out based on modified AGI (MAGI). In general terms how does MAGI for purposes of determining the traditional IRA deduction differ from AGI and how does it differ from MAGI for purp

> In its first year of existence, SMS, an S corporation, reported a business loss of $10,000. Michelle, SMS’s sole shareholder, reports $50,000 of taxable income from sources other than SMS. What must you know in order to determine whether she can deduct t

> How does the double taxation of corporate distributions affect whether an individual chooses to operate a business as a C corporation or as flow-through entity?

> Would a corporation with a small amount of current year taxable income (before the net operating loss deduction) and a large net operating loss carryover have a tax liability for the current year? Explain.

> What is the due date for a calendar year corporation tax return Form 1120 for 2018? Is it possible to extend the due date? Explain.

> For tax purposes, how is the compensation paid to an S corporation shareholder similar to compensation paid to an owner of an entity taxed as a partnership? How is it different?

> Why might it be a good tax planning strategy for an S corporation with one shareholder to pay a salary to the shareholder on the low end of what the services are potentially worth?

> Are taxpayers allowed to claim depreciation on assets they use for both business and personal purposes? What are the tax consequences if the business use drops from above 50 percent in one year to below 50 percent in the next?

> Describe the like-kind property requirements for real property for purposes of qualifying for a like-kind exchange. Explain whether land held for investment by a corporation will qualify as like-kind property with land held by an individual for personal

> Why might a business elect to claim a reduced §179 expense amount in the current year rather than claiming the maximum amount?

> What are the carryback and carryover periods for a net operating loss? Does it depend on the size of the corporation? Explain.

> Which of the following items is not a permanent book-tax difference? a. Tax-exempt interest income. b. Tax-exempt insurance proceeds. c. Domestic production activities deduction. d. Meal expenses. e. First-year expensing under §179.

> Lewis and Laurie are married and jointly own a home valued at $240,000. They recently paid off the mortgage on their home. The couple borrowed money from the local credit union in January of 2018. How much interest may the couple deduct in each of the fo

> Stephen transferred $17,500 to an irrevocable trust for Graham. The trustee has the discretion to distribute income or corpus for Graham’s benefit, but is required to distribute all assets to Graham (or his estate) not later than Graham’s 21st birthday.

> Cedar Corporation reported a net operating loss in 2018 of $25,000,000. In 2019, Cedar reported taxable income before any NOL carryovers of $20,000,000. What is Cedar’s taxable income in 2019 and any NOL carryover to 2020?

> MWC Corp. is currently in the sixth year of its existence (2018). In 2013– 2017, it reported the following income and (losses) (before net operating loss carryovers or carrybacks). 2013: ……………………………($ 70,000) 2014: ……………………………($ 30,000) 2015: …………………………

> Cuyahoga County, Ohio has a sales tax rate of 8.0 percent. Determine the state, local, and transit (a local transportation district) portions of the rate. You can find resources on the State of Ohio website, including the following link: http://www.ta

> Under what circumstances must a corporate shareholder recognize gains in a complete liquidation?

> How do self-employed taxpayers report home office deductions on their tax returns?

> Do all shareholders receive the same tax treatment in a complete liquidation of a corporation? Explain.

> Are companies allowed to decide who can and cannot participate in nonqualified deferred compensation plans? Briefly explain.

> Describe how goodwill amortized for tax purposes but not for book purposes (i.e., no impairment) leads to temporary book-tax differences.

> Explain why the tax law imposes constructive stock ownership rules on stock redemptions.

> Harold owns a condo in Hawaii that he plans on using for the rest of his life. However, to ensure his sister Maude will own the property after his death, Harold deeded the remainder of the property to her. He signed the deed transferring the remainder in

> Assuming adequate amounts of corporate E&P, what is the formula for determining the amount of a noncash distribution a shareholder must include in gross income?

> Seven years ago, Halle (currently age 41) contributed $4,000 to a Roth IRA account. The current value of the Roth IRA is $9,000. In the current, year Halle withdraws $8,000 of the account balance to use as a down payment on her first home. Assuming Halle

> Paris participates in her employer’s nonqualified deferred compensation plan. For 2018, she is deferring 10 percent of her $320,000 annual salary. Assuming this is her only source of income and her marginal income tax rate is 32 percent, how much does de

> Euro Corporation, a U.S. corporation, operates through a branch in Germany. During 2018 the branch reported taxable income of $1,000,000 and paid German income taxes of $300,000. In addition, Euro received $50,000 of dividends from its 5% investment in t

> Marissa participates in her employer’s nonqualified deferred compensation plan. For 2018, she is deferring 10 percent of her $320,000 annual salary. Assuming this is her only source of income and her marginal income tax rate is 32 percent, how much tax d

> Longhaul Real Estate exchanged a parcel of land it held for sale in Bryan, Texas for a warehouse in College Station, Texas. Will the exchange qualify for like-kind treatment?

> Emily purchased a building to store inventory for her business. The purchase price was $760,000. Emily also paid legal fees of $300 to acquire the building. In March, Emily incurred $2,000 to repair minor leaks in the roof (from storm damage earlier in t

> Franco converted a building from personal to business use in May 2016 when the fair market value was $55,000. He purchased the building in July 2013 for $80,000. On December 15 of this year, Franco sells the building for $40,000. On the date of the sale,

> Are real property taxes subject to any deduction limitations? Explain.

> Can C corporations use the cash method of accounting? Explain.

> On January 1, year 1, Tyra works for Hatch Corporation. New employees must choose immediately between receiving seven NQOs (each NQO provides the right to purchase for $5 per share 10 shares of Hatch stock) or 50 restricted shares. Hatch’s stock price is

> LNS corporation reports book income of $2,000,000. Included in the $2,000,000 is $15,000 of tax-exempt interest income. NS reports $1,345,000 in ordinary and necessary business expenses. What is LNS corporation’s taxable income for the year?

> On January 1, year 1, Jessica received 10,000 shares of restricted stock from her employer, Rocket Corporation. On that date, the stock price was $10 per share. On receiving the restricted stock, Jessica made the 83(b) election. Jessica’s restricted shar