Questions and Answers of Concepts in Federal Taxation 2021

=+ attorney to minimize all transfer taxes and fulfill the client’s objectives.
=+ c Review all documents related to estate and gift planning and work with the client’s
=+ c Review the client’s retirement plans to assure compliance with the law and possible new alternatives.
=+ c Review tax returns to ensure that, through proper tax planning, the client is maximizing his or her after-tax cash flow.
=+ c Recommend an investment strategy, including risk analysis and asset allocation.
=+ c Review the client’s insurance coverage for adequacy and appropriateness.
=+c Determine the client’s financial goals and objectives.
=+If a taxpayer is in the 24% marginal tax bracket, would he or she prefer $100 of tax credits or $300 of tax deductions?
=+7 Describe compliance and procedural matters for filing tax returns
=+6 Describe tax planning considerations for various tax matters
=+5 Explain the basic income tax rules of capital gains and losses
=+4 Explain the basic income tax rules relating to business entities
=+3 Calculate the income tax for individuals
=+2 Determine the amount of deductions from Adjusted Gross Income
=+1 Use the tax formula to compute an individual’s taxable income
=+• U.S. v. Cumberland Public Service Co., 38 AFTR 978, 50-1 USTC ¶9129 (USSC, 1950)
=+Read the following two cases and explain why the Supreme Court reached different conclusions for cases involving similar facts and issues:• CIR v. Court Holding Co., 33 AFTR 593, 45-1 USTC
=+Co. for which he paid $10,000 several years ago, and the shares are now worth $200,000. For each of the situations above, what are the principal tax issues that Rick should consider?
=+liability is very high. He read in a financial journal that the contribution of appreciated stock to a charitable organization is a good idea for tax purposes. He has some stock in Apple
=+reduce his personal income taxes. Assume the farm is a valid business and Rick materially participates in the activity of the farm. • Because of his high income, Rick’s income tax
=+the farm. In years 2–4, labor costs and maintenance would be the primary financial outlays. No revenue would be earned until year 5 when Rick believes the farm will be very profitable, generating
=+considering the purchase of several apartment buildings for rental purposes. He believes the apartments would generate a tax loss of approximately $100,000 in each of the first three years, then
=+I:1-50 Rick Cabela, a high income client, has contacted you for advice regarding two new proposed business ventures and other tax planning ideas. Rick already operates a highly successful
=+death. You mention the possibility of making gifts each year to his children. Explain how annual gifts to his children will reduce both his income during lifetime and his estate tax at death.
=+salary from the business and his dividends and interest, Pedro has taxable income of approximately $700,000 per year and is clearly in the top individual marginal tax bracket.Pedro is married and
=+I:1-49 Pedro Bourbone is the founder and owner of a highly successful small business and, over the past several years, has accumulated a significant amount of personal wealth. His portfolio of
=+Will the statute of limitations prevent the IRS from issuing a deficiency assessment for 2018, 2016, or 2011? Explain.
=+to report $40,000 of gross business income on his 2016 return. Gross income of $60,000 was reported in 2016. The agent also discovers that Dan failed to file a tax return in 2011.
=+I:1-48 Statute of Limitations. In April 2020, Dan is audited by the IRS for the year 2018. During the course of the audit, the agent discovers that Dan’s deductions for business travel and
=+A Form 1099 is reported to the IRS.
=+c. Dale fails to report $120 of dividends from a stock investment. His taxable income is$40,000 and he has no other unusually large itemized deductions or business expenses.
=+b. Craig has AGI of $20,000 from wages and uses the standard deduction.
=+a. Connie has a $20,000 net loss from her unincorporated business (a cattle ranch). She also received a $200,000 salary as an executive of a corporation.
=+I:1-47 IRS Audits. Which of the following individuals is most likely to be audited?
=+Paul sent a check with his return to the IRS for the balance due of $8,000. He is relieved that he has completed his filing requirement for 2019 and has met his financial obligation to the
=+federal income tax return. He did not file his 2019 income tax return until December 4, 2020 (due date was April 15, 2020) and no extensions of time to file the return were filed.Below are amounts
=+I:1-46 Interest and Penalties. In 2019, Paul, who is single, has a comfortable salary from his job as well as income from his investment portfolio. However, he is habitually late in filing his
=+Howard and Dawn have two children. During 2020, Dawn had $4,500 in federal income taxes withheld from her salary, and Howard made four estimated tax payments of $2,500 each ($10,000 total).
=+Howard and his wife Dawn, who file a joint return, also had the following income and deductions from sources not connected with the partnership:Income Dawn’s salary $40,000 Qualified dividends
=+I:1-45 Partnership Income. Howard Gartman is a 40% partner in the Horton & Gartman Partnership. During 2020, the partnership reported the total items below (100%) on its Form 1065:Ordinary income
=+liability of KT, LLC and Keith for 2020. Ignore any additional tax on net investment income, and ignore the qualified business income deduction.
=+b. Instead of organizing the consulting business as a C corporation, assume Keith and Trent organized the business as a limited liability company, KT, LLC. KT made a distribution of $350,000 each
=+expenses of $800,000 before any payments to Keith or Trent. During 2020, KT paid dividends to Keith and Trent in the amount of $350,000 each. Assume that Keith’s wife earned $130,000 from her
=+a. Keith Thomas and Trent Brooks began a new consulting business on January 1, 2020. They organized the business as a C corporation, KT, Inc. During 2020, the corporation was successful and
=+I:1-44 Comparison of Tax Entities.
=+ million rather than $8.5 million and the tentative estate tax before credits was$7,235,800?
=+e. How would your answer change in partsa, b, and c if Clay’s gross estate was $18.5
=+whether the alternate valuation date should be elected?
=+d. Alternatively, if, six months after his death, the gross assets in Clay’s estate declined in value to $7.5 million, can the administrator of Clay’s estate elect the alternate valuation
=+c. What is the amount of estate tax owed if the tentative estate tax (before credits) is$3,235,800?
=+b. What is the tax base for computing Clay’s estate tax?
=+a. What is the amount of Clay’s taxable estate?
=+I:1-43 Estate Tax. Clay, who was single, died in 2020 and has a gross estate valued at$8.5 million. Six months after his death, the gross assets are valued at $9 million. The estate incurs funeral
=+ What is the amount of Betty’s taxable gifts for the current year (assuming she does not elect to split the gifts with her spouse)?
=+I:1-42 Gift Tax. Betty, a married taxpayer, makes the following gifts during the current year(2020): $20,000 to her church, $100,000 to her daughter, and $40,000 to her husband.
=+b. What is the tax savings if the residence is acquired?
=+a. What is their marginal tax rate for purposes of making this decision?
=+I:1-41 Marginal Tax Rate. Jill and George are married and file a joint return. They expect to have $425,000 of taxable income in the next year and are considering whether to purchase a personal
=+c. Taxable income of $375,000.d. Taxable income of $700,000.
=+I:1-40 Tax Rates. Based on the amounts of taxable income below, compute the federal income tax payable in 2020 on each amount assuming the taxpayers are married filing a joint return. Also, for
=+c. For tax planning purposes, which of the three rates in Part b is the most important?
=+b. Compute Latesha’s marginal, average, and effective tax rates.
=+a. Compute Latesha’s taxable income and federal tax liability for 2020 (round to dollars and ignore the qualified business income deduction and self-employment taxes for this problem).
=+Tax Rates. Latesha, a single taxpayer, had the following income and deductions for the tax year 2020:INCOME: Salary $100,000 Business Income 25,000 Interest income from taxable bonds 10,000
=+b. Why do tax professionals have a perfect opportunity to perform financial planning for their clients?
=+a. How do taxes impact financial planning for a client?
=+I:1-36 Many tax professionals have moved into the field of financial planning for their clients.
=+c. The omission of rental income that is greater than 25% of the taxpayer’s reported gross income
=+a. Fraud (e.g., failure to file a tax return)b. Disallowance of tax deduction items
=+I:1-33 What is the statute of limitations for transactions involving:
=+b. Why would the IRS or a taxpayer settle or compromise a case based on the “hazards of litigation”?
=+I:1-31a. What does the term “hazards of litigation”mean in the context of taxation?
=+b. Is it likely that all items on Anya’s return will be audited?
=+a. Under what circumstances is it possible that the IRS will review each line item on her tax return?
=+I:1-30 Anya is concerned that she will be audited by the IRS.
=+b. Of what importance are Congressional committee reports to tax practitioners?
=+a. Name the three Congressional committee reports that are issued in connection with a new tax bill.
=+I:1-27 Congressional committee reports are an important source of information concerning the legislative enactment of tax law.
=+ Why wouldn’t the tax researcher just consult the IRC since it is the highest authority?Similarly, why is there a need for administrative rulings and court decisions?
=+I:1-26 The Internal Revenue Code is the most authoritative source of income tax law. In trying to resolve an income tax question, however, a tax researcher also consults administrative rulings
=+What is Quint’s taxable income in 2020?
=+who is single, uses the standard deduction, and has other income of $15,000 (not connected with the partnership) in 2020. He receives a $30,000 distribution from the partnership during the year.
=+I:1-24 The PDQ Partnership earned ordinary income of $150,000 in 2020. The partnership has three equal partners, Pete, Donald, and Quint. Quint,
=+What is Schedule K-1, what is its purpose, and who receives the form?
=+I:1-23 Partnerships and S corporations are flow-through entities. In connection with filing annual tax returns, these entities must prepare Schedule K-1s.
=+how does the tax law use partner basis adjustments to prevent double taxation of partnership income?
=+I:1-22 For flow-through entities, such as partnerships,
=+single taxpayer, is in the 37% marginal tax bracket.How would you respond to Bruin Corporation?Consider only income taxes for this problem, and ignore the net investment income tax.
=+corporation. In December 2020, the corporation has decided to distribute $400,000 to John and has asked you whether it would be better to distribute the money as a dividend or salary. John, a
=+I:1-19 The Bruin Corporation, a C corporation, is owned 100% by John Bean and had taxable income in 2020 of $500,000. John is also an employee of the
=+have adjusted gross income (AGI) of $90,000 and itemized deductions of $10,000, what is their taxable income for 2020?
=+I:1-18 Sally and Tom are married, have three young children, and file a joint return in 2020. If they
=+b. Why is it so difficult to design a “fair” tax structure?
=+a. Discuss what is meant by horizontal equity and vertical equity as it pertains to the income tax.
=+I:1-14 Two commonly recognized measures of the fairness of an income tax structure are “horizontal equity” and “vertical equity.”
=+3. Local ad valorem property tax
=+b. Using the five characteristics, evaluate the following tax structures:1. Federal income tax 2. State sales tax
=+I:1-13 A “good” tax structure has five characteristics.a. Briefly discuss the five characteristics.
=+the standpoint of paying Social Security taxes, would Carolyn’s Social Security taxes increase or decrease if she becomes an employee? Why?(Assume Carolyn will earn less than $200,000.)
=+I:1-11 Carolyn operates a consulting business as a sole proprietor (unincorporated). Carolyn has been approached by one of her major clients to become an employee. If she accepts the new job, she

Showing 1 - 100 of 391