What tax planning should be done before exercising incentive stock options?
> What is the difference between tax avoidance and tax evasion?
> What are the Statements on Standards for Tax Services? Who issues them?
> What property is subject to the intangible tax?
> What is the most common wealth tax and how is it levied?
> What employment taxes are imposed on an employee and an employer?
> What three factors are generally used to determine the percentage of corporate income allocated to a particular state?
> How does a franchise tax differ from an income tax?
> Suntan Corporation sells its products nationwide over the Internet. It has production facilities, warehouses, and offices only in the state of Florida. It has sales in excess of $600,000 for the year to customers in Arizona. It has no physical presence i
> What is nexus?
> What is a SALT practice?
> What are two fiduciary entities and how are they created? Differentiate the grantor, trustee, and beneficiary of a trust.
> Define tax expenditure?
> Which version of the tax code is applicable today?
> Explain the realization principle.
> What is a tax? How does a tax differ from a fine?
> Discuss the factors to consider when choosing between taking the child and dependent care credit and participating in an employer-sponsored qualified dependent care assistance program.
> Assume a modification to the tax law is proposed that allows taxpayers with no dependent children to claim a $500 dependency deduction per pet (up to a maximum of two pets) if the taxpayer spends at least $2,000 per year maintaining each animal. Would yo
> Prior to 1986, all consumer interest expense was deductible. In 1986, Congress eliminated the deduction for consumer interest expense, including interest paid on car loans and credit card balances. Why do you think Congress made this change?
> If Congress reduces the corporate income tax rates, how would this affect deferred tax liabilities and deferred tax assets?
> Your friend recently read a newspaper article that said the largest of the Fortune 500 companies do not pay the federal income tax expense reported on their financial statements. The tax they pay is frequently a lower number. Your friend asks you to expl
> List three types of expenses or allowances that can cause temporary differences between book and taxable income and explain how their financial accounting treatment differs from their tax treatment. Why do you think the treatments differ?
> Why are committee reports useful to a tax researcher?
> Michael’s friend suggests that he file Form 5213: Election to Postpone Determination to Whether the Presumption Applies That an Activity Is Engaged in for Profit if he expects to incur losses in his new activity. If he files this form within the first th
> Orlando purchased a time-share property in Hawaii that he can use for five weeks each year. If Orlando uses this property for his vacations during the year and rents the property to others when he chooses not to use it, can he deduct any expenses related
> Evan is setting up a new business. He can operate the business as a sole proprietorship or he can incorporate as a regular C corporation or as an S corporation. He expects that the business will have gross income of $130,000 in the first year with expens
> Would an employee who first becomes a participant in a pension plan at age 52 generally prefer to have a defined benefit plan or a defined contribution plan? Explain.
> On O’s Favorite Giveaway Show, the host gave 100 audience members debit cards, each one for $15,000, with the stipulation that the audience members donate the money to their favorite charitable cause (they cannot keep the money for themselves or give it
> John and Mary are divorcing. John demands that Mary pay him $75,000 alimony in the first year after the divorce, $50,000 in the second year, and $25,000 in the third and all subsequent years until he dies or remarries. What are the income tax ramificatio
> Congress has the power to tax income “from whatever source derived.” Do you believe that this allows Congress the discretion to tax municipal bond interest (or other tax-exempt income) earned throughout a tax year retroactively if the law to make this in
> Some politicians have proposed changing the way Social Security benefits are taxed. One proposal would increase the amount of Social Security benefits included in gross income to 100 percent. A tax rate of 100 percent would then apply for some high-incom
> Compare the benefits of a $4,000 deduction and a $4,000 tax credit for two single taxpayers, one with taxable income of $50,000 and the other with taxable income of $200,000.
> What is the after-tax interest rate that a corporation in the 38 percent tax bracket pays on a loan of $100,000 at 7 percent interest?
> Differentiate the tax treatment of an individual’s capital losses from the tax treatment of corporate capital losses.
> Evaluate allowing married individuals with dual incomes to choose to file a joint tax return or to file as two single individuals as a remedy for the marriage penalty.
> Evaluate the sales tax and the income tax using Adam Smith’s four canons of taxation.
> If the Congress were to enact a flat tax, do you believe that there should be any exclusions or deductions from income before the single tax rate is applied? Explain
> Is a property tax generally a progressive, proportional, or a regressive tax? Explain.
> Walter used the cash method to account for income from his cattle ranch. During an audit in year 3, the IRS auditor discovered a document from a customer indicating that Walter sold 115 head of cattle to the customer two years earlier for $77,000. The do
> What is the maximum income tax rate that applies to the employee salary, the employment tax rate(s) on the salary, and the capital gain rate(s) on the long-term capital gains, for these four single individual taxpayers in 2017 (excluding Medicare surtaxe
> Joe owes Willy $5,000 from an old gambling debt. Joe knows that there is no way he can repay the debt in the near future. He asks Joe if he will take a $25,000 life insurance policy that has a cash surrender value of $4,200 and release him from the debt.
> How do rulings issued by the IRS benefit both the IRS and taxpayers?
> Revenue-raising bills (such as tax bills) are supposed to originate in the House of Representatives. How could a senator initiate a tax bill?
> Tax law provisions change over time. Explain how this affects tax planning and tax research.
> Briefly describe the basic elements of the tax model.
> When Keith created a new corporation as the sole shareholder, he was advised by his accountant to treat 50 percent of the amount invested as a loan and 50 percent as a purchase of stock. Explain the advantages and disadvantages of this structure rather t
> What do you think the effect would be if Congress changes the law so that retirement plan contributions are included in taxable income at the time they are made rather than taxing the payment when received in retirement?
> From the perspective of both the taxpayer and the IRS, what are the advantages and disadvantages of the statute of limitations?
> The scandal on backdating stock options introduced new terminology to describe these controversial practices. Describe what you think each of these terms means. a. Backdating b. Repricing c. Reloading d. Spring-loading e. Bullet-dodging
> Construct a scenario in which the tax treatment of stock options is very unfavorable for the employee.
> Cindy is president and sole shareholder of Chipsmart Corporation. Through her hard work (frequently putting in 70 hours per week), she has managed to triple the number of clients and revenue in the past year. Chipsmart has never paid a dividend to Cindy,
> Go to the IRS Web site (www.irs.gov) and locate Publication 502: Medical and Dental Expenses. What expenses qualify for impairment-related work expenses? How do employees deduct these expenses, and does an AGI floor (percentage) limit apply to them?
> Go to the IRS Web site (www.irs.gov) and locate Publication 501: Exemptions, Standard Deduction, and Filing Information. What documentation is necessary for a taxpayer with impaired vision to qualify for the additional standard deduction for blindness?
> Go to www.taxfoundation.org (the Web site for the Tax Foundation). a. What is Tax Freedom Day? b. When were Tax Freedom Days in 2015 and 2016?
> What is a tax service?
> Where would you find information about the IRS
> Briefly describe the statistical information available when you search the IRS website for statistics.
> Go to www.legalbitstream.com and locate Announcement 2002–18. What is the IRS’s policy on taxing frequent flyer miles?
> Go to the IRS Web site (www.irs.gov) and locate Publication 915: Social Security and Equivalent Railroad Retirement Benefits. Determine how much of the Social Security benefits must be included in income for a single individual who had $20,000 in dividen
> Go to www.irs.gov/irb/ (the IRS site containing Internal Revenue Bulletins). Locate the Definition of Terms section in a recent IRB. Differentiate between the following terms as used by the IRS in its rulings: amplified, modified, clarified, and distingu
> Go to www.aicpa.org (the AICPA’s Web site) and search for Statements on Standards for Tax Services. Read the history section of the most recent version of the Statements on Standards for Tax Services. What reasons were provided for revising the SSTS?
> Go to the IRS site (www.irs.gov) and search for “Circular No. 230.” Download a copy of Treasury Circular 230: Regulations Governing Practice before the Internal Revenue Service. a. Read §10.33 and then list four best practices for tax advisors. b. Read
> Go to www.irs.gov/irb/ (the IRS site containing Internal Revenue Bulletins). Locate and read IRS Notice 2008-14, 2008-4 IRB 310 and answer the following questions. a. What is the penalty for filing a frivolous tax return? b. What are the first three br
> Go to Gap Inc.’s Web site (www.gapinc.com) and locate its annual report. Find the note on income taxes. a. What was Gap’s effective tax rate for its two most recent fiscal years? b. How much was Gap’s valuation allowance for its two most recent fiscal
> Find an article on the Internet that describes how a traditional IRA can be converted into a Roth IRA. Summarize the process explaining any tax costs associated with the conversion. Include the URL for the article.
> What is the rationale for taxing unemployment compensation?
> Go to www.legalbitstream.com. Locate and read Revenue Ruling 2003–102. What type of medicines and drugs can be reimbursed through a flexible spending arrangement (FSA) according to this ruling? What change took effect in 2011?
> Go to www.legalbitstream.com. Locate and read Regulation Section 1.62–2(j), example 6. If an employer has an otherwise accountable plan but reimburses employees at 60 cents per mile, how is the reimbursement treated?
> Sarah pays $800 per month for her five-year-old daughter to attend a private kindergarten from 8:30 A.M. until 2:30 P.M. and after-school care until 5:30 P.M. The price of the kindergarten without the after-school care is $300 per month. Assuming Sarah p
> Howard is a single parent with an 11-year-old dependent son. The son currently attends sixth grade at public school. Howard accepts a temporary foreign assignment from his employer, which is expected to last from August through December. Because of the u
> Charlene provides 100 percent of the support for her elderly handicapped mother, Amanda. Amanda insists on living alone in her own apartment even though she has a severe hearing impairment. Amanda has always liked cats, so Charlene purchased a cat that i
> Don has a very painful terminal disease and has learned that marijuana may mitigate his pain. Don lives in a state in which it is legal to use the drug if under the direction of a medical doctor. Can Don deduct the cost of the marijuana as a medical expe
> Suzanne owns a vacation home at the beach in which she lived for 30 days and rented out for 61 days during the current year. Her gross rental income is $2,600. Her total expenses for the vacation home are as follows: Mortgage interest……………………….$1,500 Pro
> Marino Corporation pays $6,500 to rent a 10-seat skybox for three football games to use for business entertainment at each game. The price for a regular nonluxury box seat at each game is $45. How much can Marino Corporation deduct for this entertainment
> A minister receives an annual salary of $16,000 in addition to the use of a church parsonage that has an annual rental value of $6,000. The minister accepted this minimal salary because he felt that was all the church could afford to pay. He plans to rep
> Alice and Manny agree to divorce. Alice proposes that Manny purchase and assign to her a life insurance policy on his life as part of the divorce agreement. She wants Manny to continue paying the premiums on this policy for the next 10 years. Manny wants
> For each of the following independent situations, identify whether the item would be primarily a tax or a nontax factor in tax planning. a. The taxpayer lost a quarter of her net worth when the dot-com bubble burst and does not want to own any investmen
> Locate and read the following two cases: J.B.S. Enterprises, Inc., TC Memo 1991-254, 61 TCM 2829, 1991 PH TC Memo 91,254 Summit Publishing Company, Inc., TC Memo 1990-288, 59 TCM 833, 1990 PH TC Memo 90,288 List those facts that you feel most influenced
> Locate and read Greg McIntosh, TC Memo 2001-144, 81 TCM 1772, RIA TC Memo 2001144 (6/19/2001). Answer the following questions. a. What requirements must be met for a taxpayer to recover litigation costs from the IRS? b. Was the taxpayer in this case ab
> Fred Fisher is a licensed scuba diver who lives in Key Largo. He is employed full-time as an engineer. Five years ago he had been employed as a professional diver for a salvage company. While working for the salvage company, he became interested in marin
> Your clients, Sonny and his wife, Honey, believe in worshiping Ta-Ra, the Sun God. To practice their religious beliefs, they take a weeklong trip to Hawaii to worship Ta-Ra. The cost of this pilgrimage (including airfare, hotel, and meals) is $2,800. Son
> Last year your client, Barney Bumluck, worked part-time for Timely Tax Return Preparation Service. Barney was promised an hourly wage plus a commission. He worked under this arrangement from early February until April 15. His accrued pay amounted to $900
> Your client, Ms. I. M. Gorgeous, is an aspiring actress. She has managed to earn a living doing television commercials but was unable to get the acting parts she really wanted. She decided to have botox injections in her forehead and collagen enhancement
> Samantha has been unemployed for some time and is very short of money. She learned that the local blood bank has a severe shortage of her type of blood and is therefore willing to pay $120 for each blood donation. Samantha gives blood twice a week for 12
> Thomas ran for Congress, raising $2 million for his campaign. Six months after losing the election, auditors discovered that Thomas kept $160,000 of the campaign funds and used the money to purchase a vacation home. What are the tax consequences for this
> Gamma Corporation, a calendar-year accrual-basis taxpayer, operates department stores. Alpha Corporation and Beta Corporation are wholly-owned domestic subsidiaries of Gamma Corporation and file a consolidated federal tax return under Gamma Corporation’s
> Ben is the chief executive officer of a restaurant chain based in Maine. Ben began the business 15 years ago and it has grown into a multimillion-dollar company, franchising restaurants all over the country. Ben has a new interest, however, in horse bree
> Briefly explain Adam Smith’s four canons of taxation.
> Gary Sanders owns his own real estate business. He has a reputation within the community for honesty and integrity and believes that this is one of the reasons his firm has been so successful. Gary was a 30 percent shareholder in an unsuccessful fast-foo
> Jennifer, age 40, has accumulated $40,000 in her traditional IRA. She would like to withdraw $22,000 from her IRA to pay for her daughter’s college expenses. She plans to use $15,000 for tuition and $7,000 for room and board. Write a letter to Jennifer s
> Robert, age 35, has accumulated $36,000 in his traditional IRA. He recently married and would like to withdraw $25,000 from his IRA for a down payment on his first house. Write a letter to Robert stating the tax implications of his proposed withdrawal.
> McGuire Corporation is planning to acquire a corporate jet to increase the efficiency and security of its executives who will use the jet for both business trips and personal vacations. McGuire Corporation wants to know how it should determine the amount
> Martin Martindale, the 40-year-old founder and president of Martindale Corporation (an accrual-basis, calendar-year C corporation), owns 60 percent of the stock and receives a salary of $600,000. Four unrelated shareholders own the rest of the stock equa
> Two years ago, Micro Corporation granted Alisa, their General Manager, 20,000 incentive stock options with an exercise price of $15 per share. The stock currently trades at $40 per share, but Alisa expects its price to continue to increase. She wants to
> Eileen files as head of household and earns a salary of $75,000. She has a 4-year-old dependent daughter for whom she pays $5,000 in annual day care expenses so that she can work. Eileen’s employer offers a dependent care flexible spending arrangement in
> Sharon has not worked outside the home since her first child was born five years ago and the younger of her two children is now three. She thinks they are old enough to go to a day care center so she can return to work. Sharon received two job offers. Ma
> Laura and Bryan’s daughter, Lillian, starts college in a few months. What tax issues should they consider when they pay for Lillian’s college tuition and related expenses.
> Martin, a single man, contributes a painting to an art museum in the current year. The museum is thrilled to get the painting because it fits its Impressionist collection. Martin purchased the painting 10 years ago for $50,000. The painting is currently
> What guidelines are provided by the Statement on Standards for Tax Services No. 3 regarding a CPA’s reliance on information supplied by the client for use in preparing the client’s tax return?
> What Constitutional Amendment allowed implementation of an income tax? In what year was it ratified?
> Manuel plans to make a significant contribution to his favorite charity with one of the following assets. Which asset would you recommend Manuel contribute and why? a. Stock acquired five years ago at a cost of $13,000. The current fair market value is
