What role does debt basis play in determining the taxability of operating distributions to shareholders?
> True or False. For purposes of determining head of household filing status, the taxpayer’s mother or father is considered to be a qualifying person of the taxpayer (even if the mother or father does not qualify as the taxpayer’s dependent) as long as the
> Sophia recently won a tax case litigated in the 7th Circuit. She recently heard that the Supreme Court denied the writ of certiorari. Should she be happy or not, and why?
> Assume Rafael can earn an 8 percent after-tax rate of return. Would he prefer $1,000 today or $1,500 in five years?
> Paula could not reach an agreement with the IRS at her appeals conference and has just received a 90-day letter. If she wants to litigate the issue but does not have sufficient cash to pay the proposed deficiency, what is her best court choice?
> Marlon and Latoya recently started building a house. They had to pay $300 to the county government for a building permit. Is the $300 payment a tax? Why or why not?
> Jonah has the choice of paying Rita $10,000 today or $40,000 in ten years. Assume Jonah can earn a 12 percent after-tax rate of return. Which should he choose?
> Assume Ellina earns a 10 percent after-tax rate of return, and that she owes a friend $1,200. Would she prefer to pay the friend $1,200 today or $1,750 in four years?
> Shane has never filed a tax return despite earning excessive sums of money as a gambler. When does the statute of limitations expire for the years in which Shane has not filed a tax return?
> Jamarcus, a full-time student, earned $2,500 this year from a summer job. He had no other income this year and will have zero federal income tax liability this year. His employer withheld $300 of federal income tax from his summer pay. Is Jamarcus requir
> The estate of Monique Chablis earned $450 of income this year. Is the estate required to file an income tax return?
> Molto Stancha Corporation had zero earnings this fiscal year; in fact, they lost money. Must they file a tax return?
> In reviewing the tax rate schedule for a single taxpayer, Chuck notes that the tax on $75,000 is $5,183.75 plus 25 percent of the taxable income over $37,650. What does the $5,183.75 represent?
> Explain why the gross estate includes the value of certain property transferred by the decedent at death, such as property held in joint tenancy with the right of survivorship, even though this property is not subject to probate.
> Explain the purpose of adding prior taxable gifts to current taxable gifts and show whether these prior gifts could be taxed multiple times over the years.
> Describe the limitations on the deduction of transfers to charity.
> Are taxpayers required to include all realized income in gross income? Explain.
> Explain how a purchase of realty could result in a taxable gift.
> Under what circumstances will a deposit of cash to a bank account held in joint tenancy be considered a completed gift?
> Define fair market value for transfer tax purposes.
> Explain why Congress felt it necessary to enact a gift tax to complement the estate tax.
> Identify the “per se” companies for which a check-the-box election cannot be made for U.S. tax purposes in the countries listed below. Consult the Instructions to Form 8832, which can be found on the “Forms & Pubs” site on the IRS website, www.irs.gov. a
> Colleen is a citizen and bona fide resident of Ireland. During the current year, she received the following income: o Cash dividends of $2,000 from a U.S. corporation stock. o Interest of $1,000 on a U.S. corporation bond. o Royalty of $100,000 from
> Petoskey Stone, Inc., a U.S. corporation, received the following sources of income during the current year. Identify the source of each item as either U.S. or foreign. a. Interest income from a loan to its German subsidiary. b. Dividend income from Gran
> Camille, a citizen and resident of Country A, received a $1,000 dividend from a corporation organized in Country B. Which statement best describes the taxation of this income under the two different approaches to taxing foreign income? a. Country B will
> True or False: Non-subpart F income always qualifies for tax deferral until it is repatriated back to the United States. Explain.
> True or False: All foreign taxes are creditable for U.S. tax purposes. Explain.
> Do after-tax rates of return for investments in either interest or dividend paying securities increase with the length of the investment? Why or why not?
> Why does the United States use a “basket” approach in the foreign tax credit limitation computation?
> Why is a treaty important to a nonresident investor in U.S. stocks and bonds?
> Briefly describe the two different methods for apportioning research and experimental expenditures (R&E) to foreign source taxable income in the computation of the foreign tax credit limitation.
> Briefly describe the two different methods for apportioning interest expense to foreign source taxable income in the computation of the foreign tax credit limitation.
> Why are the income source rules important to a U.S. nonresident?
> What role does the foreign tax credit limitation play in U.S. tax policy?
> Henri is a resident of the United States for U.S. tax purposes and earns $10,000 from an investment in a French company. Will Henri be subject to U.S. tax under a residence-based approach to taxation? A source-based approach?
> How does a residence-based approach to taxing worldwide income differ from a source-based approach to taxing the same income.
> Distinguish between an outbound transaction and an inbound transaction from a U.S. tax perspective.
> 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 sett
> What is needed to implement the conversion strategy?
> Euro Corporation, a U.S. corporation, operates through a branch in Germany. During 2016 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
> Cuyahoga County, Ohio has a sales tax rate of 7.75 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.tax.
> Brad Carlton operates Carlton Collectibles, a rare coin shop in Washington, D.C., that ships coins to collectors in all 50 states. Carlton also provides appraisal service upon request. During the last several years the appraisal work has been done in eit
> Lars operates Keep Flying, Incorporated, a used airplane parts business, in Laramie, Wyoming. Lars employs sales agents that visit mechanics in all 50 states to solicit orders. All orders are sent to Wyoming for approval, and all parts are shipped via co
> Describe the administrative burden that businesses face in collecting sales taxes.
> Discuss possible reasons why the Commerce Clause was included in the U.S. Constitution.
> Why do states and local jurisdictions assess taxes?
> Oak Corp., a calendar-year corporation, was formed three years ago by its sole shareholder, Glover, and has always operated as a C corporation. However, at the beginning of this year, Glover made a qualifying Selection for Oak Corp., effective January 1.
> Harry, Hermione, and Ron formed an S corporation called Bumblebore. Harry and Hermione both contributed cash of $25,000 to get things started. Ron was a bit short on cash but had a parcel of land valued at $60,000 (basis of $50,000) that he decided to co
> When must an S corporation make estimated tax payments?
> What two factors increase the difference between present and future values?
> If a corporation has been an S corporation since inception, describe how its operating distributions to its shareholders are taxed to the shareholders.
> Why is a shareholder’s basis in an S corporate stock adjusted annually?
> Apple Union (AU), a C corporation with a March 31 year-end, uses the accrual method of accounting. If AU elects to be taxed as an S corporation, what will its year-end and method of accounting be (assuming no special elections)?
> Theodore, Alvin, and Simon are equal shareholders of Timeless Corp. (an S corporation). Simon wants to terminate the S election, but Theodore and Alvin disagree. Can Simon unilaterally elect to have the S election terminated? If not, what would Simon nee
> JB Corporation is a C corporation owned 80 percent by Jacob and 20 percent by Bauer. Jacob would like JB to make an S election but Bauer is opposed to the idea. Can JB elect to be taxed as an S corporation without Bauer’s consent? Explain.
> How do the tax laws treat family members for purposes of limiting the number of owners an S corporation may have?
> Why can’t large, publicly traded corporations be treated as S corporations?
> What are the limitations on the number and type of shareholders an S corporation may have? How are these limitations different from restrictions on the number and type of shareholders C corporations or partnerships may have?
> Joy is a 30% partner in the JOM Partnership when she sells her entire interest to Hope for $72,000 cash. At the time of the sale, Joy’s basis in JOM is $44,000 (which includes her $6,000 share of JOM liabilities). JOM does not have any hot assets
> The concept of the time value of money suggests that $1 today is not equal to $1 in the future. Explain why this is true.
> Jerry is a 30% partner in the JJM Partnership when he sells his entire interest to Lucia for $56,000 cash. At the time of the sale, Jerry’s basis in JJM is $32,000. JJM does not have any debt or hot assets. What is Jerry’s gain or loss on t
> List two common situations that will cause a partner’s inside and outside basis to differ.
> In general, what effect does an operating distribution have on the partnership?
> Under what circumstances will a partner recognize a loss from an operating distribution?
> What distinguishes operating from liquidating distributions?
> Absent any special elections, what effect does a sale of partnership interest have on the partnership?
> Under what circumstances can a partner recognize both gain and loss on the sale of a partnership interest?
> How do hot assets affect the character of gain or loss on the sale of a partnership interest?
> For an accrual-method partnership, are accounts receivable considered unrealized receivables? Explain.
> Under what circumstances will the gain or loss on the sale of a partnership interest be characterized as ordinary rather than capital?
> The president recently vetoed a tax act passed by the House and Senate. Is the tax act dead? If not, what will it take for the act to be passed?
> Joey is a 25% owner of Loopy LLC. He no longer wants to be involved in the business. What options does Joey have to exit the business?
> Larry’s tax basis in his partnership interest at the beginning of the year was $10,000. If his share of the partnership debt increased by $10,000 during the year and his share of partnership income for the year is $3,000, what is his tax basis in
> Broken Rock LLC was recently formed with the following members: What is the required taxable year-end for Broken Rock LLC? Name Tax Year End Capital/Profits % George Allen Elanax Corp. December 31 33.33% June 30 33.33% Ray Kirk December 31 33.34%
> Breslin, Inc. made a capital contribution of investment property to its 100 percent-owned subsidiary, Crisler Company. The investment property had a fair market value of $3,000,000 and a tax basis to Breslin of $2,225,000. a. What are the tax consequence
> Under what circumstances will a liquidating corporation be allowed to recognize loss in a non-pro rata distribution?
> Under what circumstances does a corporate shareholder receive tax deferral in a complete liquidation?
> Explain whether all shareholders receive the same tax treatment in a complete liquidation of a corporation.
> Why do the shareholders of the target corporation usually prefer to sell the stock of the target corporation to the acquiring corporation?
> Are the tax consequences the same whether a shareholder contributes property to a corporation in a §351 transaction or as a capital contribution?
> Explain whether the receipt of boot by the shareholder in a §351 transaction causes the transaction to be fully taxable.
> What are the five basic parts of an internal research memo?
> List the key statutory requirements that must be met before a corporate formation is tax-deferred under §351.
> Why does Congress allow tax deferral on the formation of a corporation?
> Contrast how a taxpayer’s tax basis in property received in a property transaction will be affected if the transaction results in gain exclusion versus gain deferral.
> Distinguish between exclusion and deferral as it relates to a property transaction.
> Wolverine Corporation made a distribution of $500,000 to Jim Har, Inc. in partial liquidation of the company on December 31 of this year. Jim Har, Inc. owns 100% of Wolverine Corporation. The distribution was in exchange for 50% of Jim Har, Inc.’s stock
> Using the facts from the previous problem, Oriole Corporation proposes to pay Larry $100,000 and give him an installment note that will pay him $30,000 per year for the next 10 years plus a market rate of interest. Will this arrangement allow Larry to tr
> Paladin, Inc. reported taxable income of $1,000,000 this year and paid federal income taxes of $340,000. The company reported a capital gain from sale of investments of $150,000, which was partially offset by a $100,000 net capital loss carryover from
> Gator, Inc. reported taxable income of $1,000,000 this year and paid federal income taxes of $340,000. Included in the company’s computation of taxable income is gain from sale of a depreciable asset of $50,000. The income tax basis of the asset
> Boilermaker, Inc. reported taxable income of $500,000 this year and paid federal income taxes of $170,000. Not included in the company’s computation of taxable income is tax-exempt income of $20,000, disallowed meals and entertainment expenses of
> This year Jolt Inc. reported $40,000 of taxable income before any charitable contribution deduction. Jolt contributed $10,000 this year to Goodwill Industries, a public charity. Compute the company’s current E&P. Taxable income before charit
> What is an ad valorem tax? Name an example of this type of tax.
> Hawkeye Company reports current E&P of $300,000 this year and accumulated E&P at the beginning of the year of $200,000. Hawkeye distributed $400,000 to its sole shareholder, Ray Kinsella, on December 31 of this year. Ray’s tax basis in his Hawkeye stock
> Bulldog Corporation reported taxable income of $500,000 this year before any deduction for any payment to its sole shareholder and employee, Georgia Brown. Bulldog chose to pay a bonus of $100,000 to Georgia at year-end. Bulldog Corporation is subject
> Gopher Corporation reported taxable income of $500,000 this year. Gopher paid a dividend of $100,000 to its sole shareholder, Sven Anderson. Gopher Corporation is subject to a flat rate tax of 34%. The dividend meets the requirements to be a qualified
> What must a shareholder consider in computing the amount of a noncash distribution to include in gross income?
> True or False: A calendar-year corporation has positive current E&P of $100 and an accumulated deficit (negative) E&P of $200. A cash distribution of $100 to the corporation’s sole shareholder at year-end will not be treated as a dividend because total E
> In general, what is the concept of earnings and profits designed to represent?
> Why might a shareholder who is also an employee prefer receiving a dividend instead of compensation from a corporation?
> What is meant by the term double taxation of corporate income?
