Questions and Answers of Concepts In Federal Taxation

Following is a list of information for Peter and Amy Jones for the current tax year. Peter and Amy are married and have three children, Aubrynne, Bryson, and Caden. They live at 100 Main Street,
Kelly and Chanelle Chambers, ages 47 and 45, are married and live at 584 Thoreau Drive, Boston, MA 59483. Kelly’s Social Security number is 111-11-1111 and Chanelle’s is 222-22-2222. The Chambers
Joe is a single, self-employed individual who owns his own business. During 2023, Joe reported $$200,000$ gross income and $$60,000$ of business expenses. He also paid $$30,000$ in alimony
For 2023, Mario, a single individual with no dependents, receives income of $$55,000$ and incurs deductible expenses of $$9,000$.a. What is Mario’s taxable income assuming that the expenses are
In March 2023, Otter Corporation sends people to the state capital to lobby the legislature to build a proposed highway that is planned to run through the area where its business is located.a. If
For vs. From AGI. During 2023, Kent, a 40-year-old single taxpayer, reports the following items of income and expense:The amounts above are before any limitations. What is Kent’s taxable income for
Capitalization vs. Expense. Sam owns a small apartment building (this is the only rental building Sam owns). During the year Sam incurs the following expenditures:Discuss the proper tax treatment for
Political Contributions and Lobbying Expenses. Eljay, LLP owns several apartment complexes and office buildings. The leasing and management of these buildings constitutes Eljay’s only business
During January and February of the current year, Big Bang LLP incurs $$13,000$ in travel, feasibility studies, and legal expenses to investigate the feasibility of opening a new entertainment
John Broward owns 1,500 shares of Silver Fox Corporation common stock. John purchased the 1,500 shares on April 17, 2011, for $$21,000.$ On December 8, 2022, John sells 750 shares for $$5,000.$
Mr. Cougar owns 1,000 shares of Western Corporation common stock, which was purchased on March 8, 2011, for $$12,000.$ In 2023, Mr. Cougar buys and sells Western Corporation stock as follows. On
Sally is an attorney who computes her taxable income using the cash method of accounting. Sage Corporation, owned 40% by Sally’s brother, 40% by her cousin, and 20% by her grandmother, uses the
Rachel Schurtz is a high school English teacher. In her spare time, she likes to make her own body lotion, lip gloss, and bath and shower gel. She uses the bath products herself and gives them to her
Emily is an interior decorator who does consulting work for several furniture stores. Additionally, she has been designing and creating rubber stamps for the past several years. She sells the stamps
Chuck, a dentist, raises prize rabbits for breeding and showing purposes. Assume that the activity is determined to be a hobby. During the current year, the activity generates the following items of
During the current year, Kim incurs the following expenses with respect to her beachfront condominium in Hawaii:During the current year, Kim used the condominium 20 days for vacation. She rented it
Bryce, a bank official, is 40 years old, unmarried and has no dependents. During 2023 he engages in the following activities and transactions:a. Being an avid fisherman, Bryce develops an expertise
Using the following facts, determine Jaron’s 2023 taxable income.1. In November 2021, when his wife died, Jaron left the CPA firm he was working for and started his own practice so he could have
Danielle Anderson, your client and a cash method taxpayer, works full-time at a music store located in a mall. She assists the manager in buying decisions, serves customers on the sales floor, and
John and Kathy Brown have just been audited and the IRS agent disallowed the business loss they claimed in 2021. The agent asserted that the activity was a hobby, not a business. John and Kathy live
Given the following information for Jane Cole, complete Schedule D of Form 1040 through Part III.• Stock options, which she purchases on February 14 of the current year for $$850,$ expire on
In 2017, Harry and Mary purchased Series EE bonds, and in 2023 redeemed the bonds, receiving $$500$ of interest and $$1,500$ of principal. Their income from other sources totaled $$30,000.$
Stan rented an office building to Clay for $$3,000$ per month. On December 29, 2022, Stan received a deposit of $$4,000$ in addition to the first and last months’ rent. Occupancy began on
Ed owns Oak Knoll Apartments. During the year, Fred, a tenant, moved to another state. Fred paid Ed $$1,000$ to cancel the two-year lease he had signed. Ed subsequently began renting the unit to
Sally W. Emanual, a teacher, had the following dividends and interest during 2022:Additional information pertaining to Sally Emanual includesThe taxable portion of the pension is $$7,000.$ Sally
Jim and Linda are your tax clients. They were divorced in 2018, and the divorce decree stated that Jim was to make monthly payments to Linda. The court designated $$300$ per month as alimony and
On January 5, 2023, Rita left the United States for Germany, where she had accepted an appointment as vice president of foreign operations. Her employer, USA Corporation, told her the assignment
In 2011, Charlie paid $$2.8$ million cash to Venice Corporation to acquire some of its common stock, which is qualified small business stock. In 2023, he sells the stock for $$11.2$ million.a.
Pat was divorced from her husband in 2013. During the current year, she received alimony of $$18,000$ and child support of $$4,000$ for her 11-year-old son, who lives with her. Her former husband
Paige, Social Security number 111-22-3333, is the vice president of marketing (Australia) for International Industries, Inc. (III). III is headquartered at 123 Main Street, Los Angeles, California
Alice Johnson, Social Security number 222-23-3334, is a single taxpayer and is employed as a secretary by State University of Florida. She has the following items pertaining to her income tax return
In 2012, Ellen purchased a house for $$150,000$ to use as her personal residence. She paid $$30,000$ and borrowed $$120,000$ from the local savings and loan company. In 2014, she paid
Jim inherits stock (a capital asset) from his brother, who died in March 2023, when the property had a $$20.7$ million FMV. This property is the only property included in his brother’s gross
What is the first day that an individual could sell a capital asset purchased on March 31, 2023, and have a holding period of more than one year?
Phil, a cash-basis taxpayer, sells the following marketable securities, which are capital assets during 2023. Determine whether the gains or losses are long-term or short-term. Also determine the net
Sylvia, a dentist with excellent skills as a carpenter, started the construction of a house that she planned to give to her son as a surprise when he returned from military service overseas. She
Bud received 200 shares of Georgia Corporation stock from his uncle as a gift on July 20, 2022, when the stock had a $$45,000$ FMV. His uncle paid $$30,000$ for the stock on April 12, 2006. The
Daniel receives 400 shares of A&M Corporation stock from his aunt on May 20, 2023, as a gift when the stock has a $$60,000$ FMV. His aunt purchased the stock in 2014 for $$42,000.$ The taxable
Kathleen owns 500 shares of Buda Corporation common stock which was purchased on March 20, 2009, for $$48,000.$ On October 10 of the current year, she receives a distribution of 500 stock rights.
Martha Lou owns 100 shares of Blain Corporation common stock. She purchased the stock on July 25, 2000, for $$4,000.$ On May 2 of the current year, she receives a nontaxable distribution of 100
Trisha, who is single and has taxable income of $$300,000,$ sells the following capital assets in 2023 with gains and losses as shown:a. Determine Trisha’s increase in income tax liability as a
Donna files as a head of household in 2023 and has taxable income of $$110,000$ including the sale of a stock held as an investment for two years at a gain of$$20,000.$ Only one asset was sold
To better understand the rules for offsetting capital losses and how to treat capital losses carried forward, analyze the following data for an unmarried individual for the period 2020 through 2023.
On December 31, 2022, Phil purchased $$20,000$ of newly issued bonds of Texas Corporation for $$16,568.$ The bonds are dated December 31, 2022. The bonds are 9%, 10-year bonds paying interest
On January 1, 2021, Swen paid $$184,000$ for $$200,000$ of the 8%, 20-year bonds of Penn Corporation, issued on January 1, 2017, at par. The bonds are held as an investment.Determine the gain and
During 2023, Gary, who is single, receives a $$90,000$ salary and has no deductions for AGI. In 2022, Gary had a $$5,000$ STCL and no other capital losses or capital gains. Consider the following
On February 10, 2023, Gail purchases 20 calls on Red Corporation for $$250$ per call. Each call represents an option to buy 100 shares of Red stock at $$42$ per share any time before November 25,
Dan owns 500 shares of Rocket Corporation common stock. The stock was acquired two years ago for $$30$ per share. On October 2, 2023, Dan writes five calls on the stock, which represent options to
On January 1, 2022, Sean purchased an 8%, $$100,000$ corporate bond for $$92,277.$ The bond was issued on January 1, 2022, and matures on January 1, 2027. Interest is paid semiannually, and the
In 2018, the Ryan Corporation sold a capital asset and incurred a $$40,000$ LTCL that was carried forward to subsequent years. That sale was the only sale of a capital asset that Ryan made until
Betty incurs the following transactions during the current year. Without considering the transactions, her 2023 AGI is $$92,000.$ Analyze the transactions and answer the following questions:• On
Calvin, whose tax rate is 35% and 15% for ANCG, is considering two alternative investments on January 1, 20Y1. He can purchase $$100,000$ of 10% bonds due in five years or purchase $$100,000$ of
It is August 20, 2023, and Andy, whose tax rate is 32%, owns stock of Wendys and stock of Dublin. The FMV of each stock is $$10,000,$ and the commission to sell either stock is $$15.$ Andy has no
The following information relates to two married couples who each file jointly:Compute the 2023 tax due or refund due for each couple. Smiths Millers Wages and salaries $50,000 $115,000 Taxable
Tom is a single individual who claims the standard deduction. During 2023, he receives $$10,000$ of wages and $$540$ of dividends.a. Compute Tom’s taxable income assuming he is not a dependent
Carl has $$75,000$ of salary and $$13,500$ of itemized deductions. Carol has $$95,000$ of salary and $$17,100$ of itemized deductions. They are married and under age 65.a. Compute their
John and Carole file a joint return and have three children:Jack, David, and Kristen. All three children live at home the entire year. Below is information about each of the children for 2023:•
Anna, age 65, who lives with her unmarried son, Mario, received $$7,000,$ which was used for her support during the year. The sources of support were as follows:The Social Security benefits are
Bill and Mary plan to marry in December 2023. Bill’s salary is $$125,000$ and he owns his residence. His itemized deductions total $$24,100.$ Mary’s salary is $$101,000.$ Her itemized
Which of the following taxpayers must file a 2023 return?a. Amy, age 19 and single, has $$8,050$ of wages, $$800$ of interest, and $$350$ of self employment income.b. Betty, age 67 and single,
For the following independent situations, determine the filing status for the years in question (all individuals are U.S. citizens).a. Wayne and Celia had been married for 24 years before Wayne died
Jim and Pat are married, file jointly, and have one dependent (12-year-old qualifying child). Jim receives a $$92,000$ salary. Pat is self employed. Her sole proprietorship’s revenues are
Lucy is 17 years old and a dependent of her parents. She receives $$9,000$ of wages from a part-time job and $$10,400$ of taxable interest from bonds she inherited. Her parents are married, file
In 2023, Morgan is single, is a full-time student, and lives with her parents. She receives $$4,000$ of taxable interest income from some bonds she inherited. Determine whether the kiddie tax
In 2023, Eli is single, age 16, and a dependent of his parents. They are married, file jointly, and have taxable income of $$350,000.$ Eli does not have any itemized deductions. Determine his tax
Lana, an unmarried taxpayer with AGI of $$204,400,$ has three qualifying children, all under age 17. What is the amount of her child tax credit?
Virginia is a cash-basis, calendar-year taxpayer. Her salary is $$90,000,$ and she is single. She plans to purchase a residence in 2024. She anticipates her property taxes and interest will total
Gail and her husband have a son when her husband dies unexpectedly on January 1, 2023. Gail asks you, her tax professional, how her husband’s death affects her taxes. Determine Gail’s income tax
Andrea, who is a head of household and in the 37% tax bracket, is interested in reducing her taxes. She is considering several alternatives. For each alternative listed below, indicate how much tax
Zachary L. (SSN 123-45-6789) and Cici K. Mao (SSN 987-65-4321) reside at 520 Chestnut Street, Philadelphia, Pennsylvania 19106. They are both under 65 years old and have one dependent (their son,
Tracy M. Kidwell (SSN 433-33-3333) is single, 12 years old, and a dependent of her parents. She resides at 600 S. Maestri Place, New Orleans, LA 70130. Tracy’s only income is $$9,000$ of taxable
Carlos inherits 100 shares of Allied Corporation stock from his father. The stock cost his father $$8,000$ and had a $$25,000$ FMV on the date of his father’s death in 2023. The alternate
Sally and Tom are married, have three young children, and file a joint return in 2023. If they have adjusted gross income (AGI) of $$90,000$ and itemized deductions of $$10,000,$ what is their
The Bruin Corporation, a C corporation, is owned 100% by John Bean and had taxable income in 2023 of $$500,000.$ John is also an employee of the corporation. In December 2023, the corporation has
The PDQ Partnership earned ordinary income of $$150,000$ in 2023. The partnership has three equal partners, Pete, Donald, and Quint. Quint, who is single, uses the standard deduction, and has other
Tax Rates. Latesha, a single taxpayer, had the following income and deductions for the tax year 2023:a. Compute Latesha’s taxable income and federal tax liability for 2023 (round to dollars and
Tax Rates. Based on the amounts of taxable income below, compute the federal income tax payable in 2023 on each amount assuming the taxpayers are married filing a joint return. Also, for each amount
Marginal Tax Rate. Jill and George are married and file a joint return. They expect to have $$490,000$ of taxable income in the next year and are considering whether to purchase a personal
Gift Tax. Betty, a married taxpayer, makes the following gifts during the current year (2023): $$20,000$ to her church, $$100,000$ to her daughter, and $$40,000$ to her husband. What is the
Estate Tax. Clay, who was single, died in 2023 and has a gross estate valued at $$8.5$ million. Six months after his death, the gross assets are valued at $$9$ million. The estate incurs funeral
Comparison of Tax Entities.a. Keith Thomas and Trent Brooks began a new consulting business on January 1, 2023. They organized the business as a C corporation, KT, Inc. During 2023, the corporation
Partnership Income. Howard Gartman is a 40% partner in the Horton & Gartman Partnership.During 2023, the partnership reported the total items below (100%) on its Form 1065:Howard and his wife
Interest and Penalties. In 2023, 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 federal
Statute of Limitations. In April 2023, Dan is audited by the IRS for the year 2021. During the course of the audit, the agent discovers that Dan’s deductions for business travel are unsubstantiated
What is meant by the term owner-partner?
Discuss how a controlled foreign corporation (US corporation owns more than 10 percent)is taxed.
Lenore, a single taxpayer with adjusted gross income of $67,000, is covered by her employer's pension plan. She makes a $5,500 contribution to her IRA during the current year.a. How much of the
Ghon is a married taxpayer who retired from his job at Smithfield Printing in 2017. During 2018, he turns 70 1/2 and begins withdrawing the $215,000 (balance December 31, 2017) in assets in his
Hector is a single taxpayer with adjusted gross income of $125,000. What is the maximum contribution that he can make to a Roth IRA for the current year?
On September 1, 2018, Beaconsfield Corporation grants Albert a nonqualified stock option to acquire 500 shares of the company’s stock for $8 per share. The fair market value of the stock on the
On July 1, 2018, Howard is granted the right to acquire 500 shares of the Matoney Corporation for $15 per share. The option qualifies under the company’s incentive stock option plan. The current
On May 10, 2018, Somerton Inc., grants Louise a nonqualified stock option to acquire 700 shares of the company’s stock for $11 per share. The fair market value of the stock on the date of grant is
Lavinia owns an advertising agency. In February 2018, Lavinia purchases a building for $125,000. Lavinia spends $275,000 rehabilitating the building for use as her advertising agency office. The
John is single and has $75,000 income from his job at Lawndale Ice Cream Company. He wants to invest $150 a month in an IRA but is not sure which type he qualifies for and whether this would be a
On July 8, 2018, Cynthia and her daughter Constance agree to exchange land they held for investment. Both tracts are worth $18,000. Cynthia acquired her land 4 years earlier for $9,000. Constance
Grant Industries' warehouse is condemned by the city on August 18, 2018. Because of widespread publicity leading up to the condemnation, Grant anticipates it and purchases a replacement warehouse on
Aretha sells her house on June 9, 2018, for $220,000 and pays commissions of $10,000 on the sale. She had purchased the house for $60,000 and made capital improvements costing $15,000. What are
Mai, a single taxpayer, sells her residence in the suburbs for $300,000. She bought the house twelve years ago for $60,000 and made $30,000 of improvements to it. Mai buys a new downtown condominium
Kerri and John are married. On May 12, 2018, they sell their home for $190,000 and purchase another residence costing $225,000. What is Kerri and John’s realized and recognized gain in each of the
Gary and Gertrude are married on April 8, 2017. They use Gertrude’s home as their residence. Gertrude purchased the home on November 14, 2015, for $60,000. On February 19, 2018, Gertrude is

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