Question: What is a surviving spouse? Explain the

> Liang pays $12,000 in interest on debt which was used to purchase portfolio investments. He receives $6,000 in interest from a certificate of deposit, $4,200 in royalties, and $2,000 in interest on municipal bonds during the year. His investment-relate

> Stoycho and Selen are married. Their marginal tax rate is 28%. They have the following investment income for 2016 and 2017: Their adjusted gross income before considering the investment income is $84,050 in 2016 and $73,500 in 2017. Stoycho and Sele

> Marjorie is single and has the following investment income: Interest on savings…………………………………$2,900 Municipal bond interest…………………………….1,500 Dividends………………………………………………..7,600 She pays investment interest expense of $15,000. The interest expense relate

> Mandy is interested in purchasing a new automobile for personal use. The dealer is offering a special 1.9% interest rate on new cars. Last fall, she opened a home equity line of credit with her bank. If she uses the line of credit to purchase the car,

> Astrid originally borrowed $600,000 to acquire her home. When the balance on the original mortgage is $540,000, she purchases a ski chalet by borrowing $500,000, which is secured by a mortgage on the chalet. Astrid pays $45,000 in interest on her home

> What is the difference between an expense and a loss?

> Keith bought his home several years ago for $110,000. He paid $10,000 down on the purchase and borrowed the remaining $100,000. When the home is worth $230,000 and the balance on his mortgage is $40,000, Keith borrows $120,000 using a home equity loan.

> On March 1, Roxanne acquires a house for $160,000. She pays $20,000 down and borrows the remaining $140,000 by obtaining a 15-year mortgage. Roxanne pays $3,500 in closing costs and $2,500 in points in purchasing the house. During the year, she pays $

> For each of the following situations, state whether the taxpayer's action is tax evasion or tax avoidance: a. Tom knows that farm rent received in cash or farm produce is income subject to tax. To avoid showing a cash receipt on his records, he rented 50

> Robin purchases a new home costing $80,000 in 2016. She pays $8,000 down and borrows the remaining $72,000 by securing a mortgage on the home. She also pays $1,750 in closing costs, $1,600 in points to obtain the mortgage, $900 in qualified mortgage ins

> Rocco owns a piece of land as investment property. He acquired the land in 1994 for $18,000. On June 1, 2017, he sells the land for $80,000. As part of the sale, the buyer agrees to pay all of the property taxes ($3,600) for the year. a. What is Rocco’

> Frank and Liz are married. During 2017, Frank has $2,800 in state income taxes withheld from his paycheck, and Liz makes estimated tax payments totaling $2,200. In May 2018, they receive a state tax refund of $465. What is the proper tax treatment of

> Simon is single and a stockbroker for a large investment bank. During 2017, he has withheld from his paycheck $2,250 for state taxes and $400 for city taxes. In June 2018, Simon receives a state tax refund of $145. What is the proper tax treatment of

> Jesse is a resident of New Jersey who works in New York City. He also owns rental property in South Carolina. During 2017, he pays the following taxes: New Jersey State estimated tax payments……………………………………………..$ 850 New York City income tax withheld

> Paula lives in Arkansas, a state, which imposes a state income tax. During 2017, she pays the following taxes: Federal tax withheld………………………………5,125 State income tax withheld………………………1,900 State sales tax – actual receipts…………………370 Real estate tax ……

> Lian is 56 years old and is injured in an automobile accident this year. She is hospitalized for 4 weeks and misses 3 months of work after getting out of the hospital. The costs related to her accident are Hospitalization……………………………$ 16,100 Prescriptio

> Ramona owns 20% of the stock of Miller, Inc. Miller reports the following items for the current year: Sales………………………………………………………………$3,400,000 Gain on sale of stock held for 2 years…………………... 250,000 Cost of goods sold……………………………………………..1,800,000 Operat

> Rebecca and Irving incur the following medical expenses during the current year: Medical insurance premiums ………………………..$4,500 Hospital…………………………………………………………...950 Doctors………………………………………………………….1,925 Dentist ……………………………………………………………...575 Veterinarian……………

> Hector is 66 years of age. During the year, his wife dies. Identify the tax issue(s) posed by the facts presented. Determine the possible tax consequences of each issue that you identify.

> Troy’s 2015 tax return is audited. The auditor determines that Troy inadvertently understated his ending inventory in calculating his business income. The error creates an additional tax liability of $5,000. The IRS charges interest on the additional

> Tina owns and operates Timely Turn Tables (TTT) as a sole proprietorship. TTT's taxable income during the current year is $80,000. In addition to the TTT income, Tina has the following income and expenses during the current year: Interest income………………

> Jacqueline is single. In June 2017, she receives a refund of $250 from her 2016 state tax return. Her 2016 itemized deductions were $8,000. In October 2017, her 2015 state tax return is audited, and she has to pay an additional $340 in state taxes. Du

> Myrth is 67, single, and has poor hearing. She pays $300 for special equipment attached to her phones to amplify a caller's voice. Identify the tax issue(s) posed by the facts presented. Determine the possible tax consequences of each issue that you id

> Lois is single. She provides more than 50% of the support for her mother who lives in a nursing home. Her mother receives $4,000 from Social Security and $7,000 in dividends. Identify the tax issue(s) posed by the facts presented. Determine the possib

> Kahn is 21 years old and a full-time student. He lives at home with his parents and pays less than half of his support. During the year, he earns $6,400 working as a sales clerk in a department store. Identify the tax issue(s) posed by the facts presen

> This is the final part of a six part problem that allows you to prepare the 2016 tax return for Laurie and Lynn Norris. As with the previous parts, this part of the problem will ask you to prepare a portion of their tax return. You should then complete

> RESEARCH PROBLEM Amanda graduated summa cum laude in marketing from State University. As an honor student, she was a member of Beta Gamma Sigma, an honorary business fraternity. She has agreed to donate $250,000 to State if the university uses the pro

> Ozzello Property Management is organized as a partnership. The owners, Lorenzo, Erwin, and Michelle, share profits and losses 30:30:40. Ozzello has the following results for the current year: Management fees………………………………………$230,000 Long-term gain on sa

> What is the federal income tax base?

> Ben is single and works as a lawyer. His mother lives in a nursing home which costs $30,000 per year. Ben pays $10,000, his mother pays $6,000, and her health insurance policy pays the remaining $14,000. His mother's only income for the year is $9,000

> The Internet is a useful resource for tax planning. One useful tax planning tool can be found at the Turbo Tax web site (http://www.turbotax.com). At this site, by clicking on the tax Tax calculator and Tips and then clicking on Tax Caster you can estim

> With the recent changes in the tax law definition of a dependent, it is interesting to compare how the United States definition of a dependent differs throughout the world. Go to the Australian Government Tax webpage at http://www.ato.gov.au/. Type the

> Ross and Jessica are married and have one child, Joy, who is two years old. Ross is a recent college graduate and works as a software engineer. Jessica is a full-time student at Hendrick College, and attends classes in the Fall and Spring semesters. R

> Leroy and Amanda are married and have 3 dependent children. During the current year, they have the following income and expenses: Salaries…………………………………………$120,000 Interest income………………………………..45,000 Royalty income………………………………….27,000 Deductions for AGI

> You have just been hired as a tax accountant by a local public accounting firm. One partner is impressed by your writing skills and asks you to write a one-page memo to a client describing the general rules on the deductibility of meals and entertainmen

> Casandra and Gene are married and have a daughter who is a junior at State University. Their adjusted gross income for the year is $78,000, and they are in the 25% marginal tax bracket. They paid their daughter's $3,500 tuition, $450 for textbooks, and

> Royce received an antique watch as a gift from his grandfather. The fair market value of the watch is $12,500. The watch has been missing all year and is not covered by insurance. Identify the tax issue(s) posed by the facts presented. Determine the

> Jose donates stock worth $20,000 to the United Way. He purchased the stock several years ago for $8,000. His adjusted gross income is $60,000. Identify the tax issue(s) posed by the facts presented. Determine the possible tax consequences of each issu

> Diedre is single and has dividend income of $7,500 and a $6,000 long-term capital gain. She pays $9,000 of investment interest. The interest expense relates to all of the assets in her portfolio. Diedre has no tax-exempt income, her marginal tax rate

> During the current year, Inge sells stock purchased three years ago at a loss of $9,000. She also owns a 10% interest in Chatham, Inc., which is organized as an S corporation. Chatham reports ordinary income of $80,000 and a short-term capital gain of

> Donna bought her home several years ago for $200,000. She paid $20,000 down on the purchase and borrowed the remaining $180,000. When the home is worth $280,000 and the balance on the mortgage is $120,000, she borrows $110,000 using a home equity loan.

> Dwight purchases a new home costing $100,000 in the current year. He pays $15,000 down and borrows the remaining $85,000 by securing a mortgage on the home. He also pays $2,000 in closing costs, and $1,700 in points to obtain the mortgage. He pays $7,5

> Tom, an executive for a large corporation, enjoys the challenge of preparing his tax return. He is aggressive in preparing his return and searches through all the available publications to reduce his tax liability. In all the years Tom has completed hi

> Why is a taxpayer's filing status important?

> What limitations are placed on miscellaneous itemized deductions?

> What is an ad valorem tax? What is the significance of an ad valorem tax?

> Elki would like to invest $50,000 in tax-exempt securities. He now has the money invested in a certificate of deposit that pays 5.75% annually. What rate of interest would the tax-exempt security have to pay to result in a greater return on Elki's inve

> What is the standard deduction? Explain its relationship to a taxpayer's itemized deductions.

> Under what circumstances can a married person file as a head-of-household?

> Refer to problem 71. In the following year, Jawan has the following capital gains and losses: Short-term capital loss………………………………..$ 1,300 Long-term capital gain………………………………….8,600 Long-term capital loss…………………………………..4,100 What is the effect of the c

> What is a multiple support agreement? When is a multiple support agreement necessary?

> Which parent is entitled to claim the dependency exemption for a child when the parents are divorced? Can the other parent ever claim the dependency exemption?

> What are the five tests that must met for an individual to be considered a dependent as a qualifying child? As a qualifying relative? Briefly explain each test.

> What is the difference between a personal exemption and a dependency exemption? Are all taxpayers allowed a personal exemption?

> What determines who must file a tax return?

> Compare and contrast the American Opportunity Tax Credit with the Lifetime Learning Tax Credit.

> Does the child-care credit help promote a progressive tax rate structure? Explain.

> Art is in the 28% marginal tax bracket for 2017. He owes a $10,000 bill for business expenses. Since he reports taxable income on a cash basis, he can deduct the $10,000 in either 2017 or 2018, depending on when he makes the payment. He can pay the bi

> What are the general criteria for eligibility for the child- and dependent-care credit?

> Is the child credit refundable? Explain.

> Merlene owns a bookstore. The store needs repainting, but she is short of cash to hire a painter. Fred is a painter who enjoys fine mystery novels. Merlene makes a deal with Fred to have him paint the bookstore for any 30 mystery novels Merlene has in

> What are the general criteria for eligibility for the earned income credit?

> Can all taxpayers who claim a child as a dependent receive a child tax credit for that child? Explain.

> Why did Congress enact the "kiddie tax"?

> What is the standard deduction amount for a dependent? Under what conditions can a dependent claim the same standard deduction as a single individual who is not a dependent?

> Explain the operation of the itemized deduction phase-out. What stops a taxpayer from losing all itemized deductions under the phase-out?

> Explain how the deduction allowed for a charitable contribution of ordinary income property is different from the deduction for the donation of long-term capital gain property.

> What limits are placed on deductions for charitable contributions?

> Inga, an attorney, completed a job for a client in November 2017. If she bills the client immediately, she will receive her $10,000 fee before the end of the year. By delaying the billing for a month, she will not receive the $10,000 until 2018. What

> Why is interest paid on a loan used to purchase municipal bonds not deductible?

> In 2011, Awnings, Inc., issues $200,000 of 15%, 20-year bonds payable at par. During 2017, when Awnings' bonds are trading at 93, the company purchases and retires $100,000 par value of the bonds. Identify the tax issue(s) posed by the facts presented.

> In what year(s) are points paid to acquire a loan deductible? Explain.

> Which types of interest are deductible as itemized deductions? What limitations (if any) are imposed on the deduction?

> Explain the limitations placed on deductions for medical expenses.

> One general requirement for deduction is that the expense be the taxpayer's, not that of another. Is this always true? Explain.

> What is(are) the main difference(s) between deductions for AGI and deductions from AGI?

> Harold works for the Zanten Corporation. Ken is self-employed. Zanten pays all of Harold's medical insurance premiums, whereas Ken purchases medical insurance from his insurance agent. Explain how the payments of Ken's and Harold's medical insurance a

> Chapter 6 discusses expenditures of individuals that are deductible for adjusted gross income (e.g., alimony) and explains the advantage of having an expenditure classified as a deduction for adjusted gross income. Chapter 8 discusses expenditures that

> Jay is single and works as a salesman. In December of the current year, he is selected as the company's outstanding salesperson. In recognition of this honor, he receives a $75,000 bonus, which puts him in the 39.6% tax bracket. Jay owns 2,400 shares

> Tom has $40,000 to invest and seeks your advice. A partner at Global Investments has proposed two investment opportunities: a real estate limited partnership or a five-year investment contract that will pay interest of 8% annually and return his origina

> Michiko and Saul are planning to attend the same university next year. The university estimates tuition, books, fees, and living costs to be $12,000 per year. Michiko's father has agreed to give her the $12,000 she needs to attend the university. Saul ha

> Herman sells his carpet-cleaning business to Elki. As part of the sales agreement, Elki pays Herman $3,000 for his agreement not to open another carpet-cleaning business in the area for 3 years. Identify the tax issue(s) posed by the facts presented.

> Marlene opens an outdoor sports complex that features batting cages, miniature golf, and a driving range. She invests $100,000 of her own money and borrows $750,000 from her bank. She uses $475,000 of the loan proceeds to acquire land and construct the

> Post Haste, incorporated in 2015, suffers a net operating loss of $80,000 in 2017. Post Haste had a net operating loss of $30,000 in 2015 and taxable income of $65,000 in 2016. Allison, the financial vice president of Post Haste, expects 2018 to be a b

> Habiby, Inc., has the following income and expenses for 2015 through 2018. What is the amount of tax that Habiby should pay each year? 2015 $ 280,000 $ 300,000 $ 290.000 (180,000) (200,000) 2016 2017 2018 $ 320,000 (220,000) Income Expenses Taxabl

> The Graves Corporation was incorporated in 2016 and incurred a net operating loss of $35,000. The company’s operating income in 2017 was $47,000. Because of a downturn in the local economy, the company suffers a net operating loss of $21,000 in 2018.

> Faith, who is single, sells the following assets during 2017: • 20,000 shares of qualified small business stock at a loss of $62,000. Faith bought the stock in 2012. • 1,200 shares of Geelong Industries at a gain of $4,500. Faith bought the stock in 2014

> Andy sells the following assets during the year. Gain (Loss) Personal automobile…………..$ (2,000) ABC stock……………………………4,800 Per

> Jamila is involved in an auto accident during the current year that totally destroys her car. She purchased the car 2 years ago for $28,000. Jamila used the car in her business 75% of the time over the past 2 years. She had properly deducted $4,000 in

> Marsha owns a two-family condominium in southern California that she paid $140,000 for in 2002. One unit has 2,400 square feet of space, and the other has 1,600 square feet. Marsha uses the 2,400-square-foot unit as a vacation home and rents the other

> Kevin is the sole proprietor of Murph's Golf Shop. During the current year, a hurricane hits the beach near Kevin's shop. His business building, which has a basis of $60,000, is damaged. In addition, his personal automobile, for which he paid $22,000,

> Ghon and Li own a home on Lake Gibran. During a heavy rainstorm, the lake overflows and floods the basement, which is used as their family room. The entire contents of the basement (rug, furniture, stereo, and so on) are destroyed. The insurance adjuster

> During her vacation, Janita found a gold bar from a sunken ship while she was scuba diving off Texas. Identify the tax issue(s) posed by the facts presented. Determine the possible tax consequences of each issue that you identify.

> Since graduating from college, Mabel has used the firm of R&P to prepare her tax returns. Each January, Mabel receives a summary information sheet, which she fills out and sends to R&P along with the appropriate documentation. Because she has always rece

> Jorge and his wife own a beachfront vacation home in Savannah, Georgia. During the year, high winds from a tropical storm shatter a sliding glass door and rain from the storm causes extensive water damage to the kitchen. Fortunately, during a calm in t

> Leona owns 300 shares of Ross Industries. She acquired the shares on February 17, 2015, for $6,500. On September 17, 2017, she acquires another 200 shares of Ross for $4,800. Two weeks later, a lawsuit is filed against Ross for patent infringement, an

> Ed owns 500 shares of Northern Company for which he paid $15,000 several years ago. On November 24, he purchases an additional 350 shares for $6,300. Ed sells the original 500 shares for $10,000 on December 14. What are the effects of the December 14

> Darlene owns 500 shares of Sandmayor, Inc., common stock that she purchased several years ago for $20,000. During the current year, the Sandmayor stock declines in value. Darlene decides to sell the stock to realize the tax loss. On December 17, she s

> Howard Company is 100% owned by Rona. During the current year, Howard sells some land to Rona for $50,000 that had cost Howard $80,000 and that had a fair market value of $100,000. Write a letter to Rona explaining the tax effects of the sale.

> Elliot sells some stock to his sister, Nancy, for $4,000. His basis in the stock is $6,000. Several years later, Nancy sells the stock for $7,000. a. What is the effect of the sales on Elliot and Nancy? b. Assume that the subsequent sale by Nancy is