Questions and Answers of Concepts In Federal Taxation

Ariel has worked for Sander Corporation for 30 years. Sander has a pension plan in which it matches employee contributions by up to 5% of the employee’s salary. Ariel retires during the current
Ikleberry is a self-employed fisherman. He buys a health insurance policy by donating 1,000 salmon filets to the Nordisk Insurance Company’s annual Christmas party.During the year, Ikleberry
Salina is an apartment manager and is paid $6,000 per year. The owner of the apartments offered her the option of a $300-per-month living allowance or the use of an apartment rent-free. Salina chose
Taki was injured in an airplane crash. He sues the airline and receives $4,400 for his pain and suffering, $3,300 for lost wages while he recuperated from his injuries, and$7,000 in punitive damages.
Sonya purchases a house for $65,000. The seller had listed the house for sale at$80,000 but got into financial trouble and had to accept Sonya’s $65,000 offer to avoid bankruptcy.
Bud borrows $20,000 from a friend. Before he can repay any of the loan, the friend dies.His friend’s will provides that any amounts owed to him are to be forgiven upon his death.
Perry Corporation leases a building to Jimison Corporation for $10,000 per month.The terms of the lease provide that any improvements to the building will revert to Perry upon termination of the
Christina Ruiz provides you with the following information regarding her investment income.In addition, Northwestern Publishing Inc. issued a 5% stock dividend on August 15.Christina received 25
Carmin Kovach is single and has two children from her previous marriage. Anika, 9, lives with Carmin. Julius, 11, lives with his father, Ray. Carmin pays alimony of $400 per month to Ray. The
LO5 Explain the difference in the tax treatment of business and nonbusiness bad debts.
LO6 Martin receives the following tax bills, related to a rental dwelling, from the county treasurer:Special assessment for installing sidewalks and streets $12,000 Real property tax on dwelling for
LO6 During the current year, Carson pays $1,500 in child support and $2,000 in alimony to his ex-wife. What is Carson’s allowable deduction, and how should it be deducted on his tax return?
LO9,10 Kevin and Jill are married and file a joint return. Kevin is 52 and is not an active participant in a qualified employee pension plan, while Jill is 48 and is an active participant in a
Jennifer is self-employed. At Christmas, she gives the elevator operator in the building where her office is located a pair of gloves. She makes similar gifts to the two parking lot attendants who
LO1 Differentiate primary tax law authorities and secondary tax law authorities.
LO2 Briefly describe the three categories of primary authorities and the types of authorities within each category.
LO5 Name the types of secondary authorities.
LO2 On what grounds have tax protesters challenged the income tax?
LO2 The Internal Revenue Code is just one part of the U.S. Code. Explain.
LO2 Name the subdivisions of the Internal Revenue Code.
LO2 What would be the general nature of Sec. 612? Sec.6601?
LO2 How many chapters are within Subtitle A?
LO2 What are some things to look out for when reading the Code?
LO2 Give examples of how the Code is sometimes used to achieve economic and social objectives.
LO2 Briefly describe the process by which a new tax law is passed.
LO2 What three reports are issued as part of the legislative process?
LO2 How are the Joint Conference Committee and the Joint Committee on Taxation different?
LO3 What is a Treasury regulation? Is it binding on the courts?
LO3 Differentiate an interpretive regulation and a legislative regulation.
LO3 Differentiate a proposed regulation and a temporary regulation.
LO3 What are revenue rulings? revenue procedures?
LO3 How are a revenue ruling and a Treasury regulation different? a revenue ruling and a private letter ruling?
LO3 What does it mean when the IRS issues an acquiescence or nonacquiescence?
LO3 What impact would an IRS announcement of nonacquiescence to a court decision have on a taxpayer in a similar situation?
LO2 Name the other types of pronouncements issued by the IRS, and briefly describe their content.
LO3 What are the three trial courts? Which is most important?
LO3 What is meant by the Golsen rule?
LO3 Do district courts have to follow the decisions of all circuit courts?
LO3 What does it mean when the Supreme Court issues a writ of certiorari?
LO5 Why do some court decisions have two or three different citations?
LO5 Describe the two major categories of tax services.
LO5 When can a researcher rely on an editorial opinion expressed in the tax services?
LO5 Differentiate a cited case and a citing case.
LO5 What is meant by the history of a cited case?
LO6 What are some advantages of the CD-ROM, commercial on-line, and Internet platforms for CATR?
LO6 Which CATR services are available in your business, school, or university library?
LO6 Use any print or CATR service to find the following information about the American Recovery and Reinvestment Act of 2009:a. The public law number and enactment dateb. A reference to the full text
LO7 What is the distinction between tax compliance and tax planning?
LO8 Briefly describe the steps involved in tax research.
Sam is an executive with a U.S. corporation. During the current year, he is working in another country. His employer provides a corporation-owned residence for Sam that is located three miles from
Grace, the minister of the local United Methodist Church, has some tax questions regarding her employment status. This is her first year as a United Methodist minister after having served as a
Fingeland’s Forest Choppers is a corporation engaged in the production of timber Communication Skills and lumber. Two years ago, Fingeland’s reforests a clear-cut area by planting nurserygrown
Evelyn is the president and sole shareholder of Ephron Corporation. Ephron is an accrual basis taxpayer and uses a calendar year. Evelyn is a cash basis, calendar-year taxpayer.During the second half
The Miller family has owned several large apartment buildings for many years. They organized Miller Properties, Inc., to own and manage the properties. The corporation is an accrual basis taxpayer
Marjorie is a software systems engineer for Hacker Corporation. In November 2007, Communication Skills she inherited two parcels of land in Brower Township from her grandfather. Her grandfather’s
Ernie’s Farm and Garden Implement Store sells, repairs, and services farm and garden Communication Skills equipment. In 2009, the state attorney general began to investigate customers’ complaints
Lydia and Andre are divorcing this year. Because they are hotly contesting the terms of Communication Skills the settlement, they will not file a joint return for the current year. Lydia receives a
LO1,3,4 Most expenditures that have a business purpose and meet the ordinary, necessary, and reasonable requirements are deductible. However, specific rules must be adhered to in determining the
LO1 What requirements must be met for meal and entertainment expenses to be deductible?
LO1 How does an entertainment expense directly related to business differ from an entertainment expense associated with business?
LO1,3,4 What records are necessary to properly document travel, entertainment, and gift expenses?
LO4 Under what circumstances are business gifts deductible?
LO4 Explain the criteria used to determine whether an educational expense is deductible or nondeductible, and how education expenses are deducted on a taxpayer’s return.
LO4 Can an education expense incurred by one taxpayer be deductible whereas the same expense incurred by another taxpayer is not deductible? Explain.
LO4 Is all compensation paid to an employee deductible?Discuss the circumstances in which employee compensation cannot be deducted.
LO5 What accounting method must be used to account for bad debts that result from the sale of merchandise or the provision of services?
LO5 Explain how the tax benefit rule may apply to bad debt deductions.
LO4 What activities qualify for the qualified production activities deduction?
LO4 Explain how a taxpayer determines qualified production activities income and how a taxpayer calculates their qualified production activities deduction.
LO6 What requirements must be met to deduct life insurance premiums paid on an employee’s policy?
LO6 Are sales taxes deductible? Explain.
LO6 Are all legal fees paid by a taxpayer deductible?Explain.
LO6 Why are deductions for adjusted gross income‘‘better’’ than deductions from adjusted gross income?
LO7 What is an accountable employee expense reimbursement plan? What is the significance of such a plan?
LO8 Why are self-employed taxpayers allowed to deduct their medical insurance premiums and part of their self-employment tax for adjusted gross income?
LO9 Are all taxpayers allowed a deduction for contributions to a conventional individual retirement account? Explain.
LO9,10 How does the tax treatment of a conventional IRA differ from a Roth IRA?
LO10 Who is eligible to make and receive contributions to a Coverdell Education Savings Account?
LO11 Is the interest on education loans always deductible?Explain.
LO11 Explain the general requirements that must be met to obtain a deduction for moving expenses and the type of moving expenses that are deductible.
LO2 Pablo is a computer sales representative and spends only 4 days a month in the office. His office is 18 miles from home. Pablo spends 3 nights a month traveling to his out-of-town clients.a. What
LO2 Julianita is a sales representative for a food distributor and spends only 1 day of the week in the office. Her office is 12 miles from home. She also has a part-time job as a bartender.
LO2 Cassandra owns her own business and drives her van 15,000 miles a year for business and 5,000 miles a year for commuting and personal use. She purchases a new van in 2010 and wants to claim the
LO2 Mario owns his own business and drives his car 15,000 miles a year for business and 7,500 miles a year for commuting and personal use. He wants to claim the largest tax deduction possible for
LO3 Juanita travels to San Francisco for 7 days. The following facts are related to the trip:a. If she spends 4 days on business and 3 days sightseeing, what amount may she deduct as travel
LO6 The Kimpton Corporation pays the following taxes during 2010:Also, the county treasurer notifies Kimpton that it is being assessed a special real estate tax of $64,000 for upgrading the sidewalks
LO7 Mona works for Leonardo Corporation as a sales representative. Leonardo gives her a travel allowance of $350 per month. During the current year, she spends the following amounts on valid travel
LO7 Alvin is an employee of York Company. During the year, he incurs the following employment-related expenses:a. How should Alvin treat these expenses if York Company has an accountable employee
LO8 Evelyn is single and a self-employed engineer. During 2010, Evelyn’s income from her engineering business is $55,000. Evelyn pays $3,100 for her medical insurance policy.a. How should the
LO8 Thomas is single and a self-employed architect. During 2010, Thomas’s income from his business is $128,000. He also pays $2,200 for a medical insurance policy.a. How should the medical
LO11 Myron graduates from college this year and lands a job with the Collingwood Corporation in Dallas. After accepting the job, he flies to Dallas to find an apartment.Myron uses $2,000 his
Marjorie is an accountant and Alana is an attorney. They have been business acquaintances for about 10 years. They meet every Friday at 6 P.M. at a local tavern to socialize.As always happens with
Salvador is an insurance representative for the Hendricken Insurance Company.Recently, he heard that the controller of his largest account, Gore Plastics, was asking other insurance representatives
Carla has a B.S. degree in history and is employed as an administrative assistant for a public accounting firm. After work, she attends Wittman College, where she is enrolled in an accounting course.
Vince is the third-highest-paid executive for Sensor Corporation, a publicly traded corporation. His salary is $1,250,000.
Jake loaned his cousin, Arnold, $10,000 in March 2008 to open a cybercafe in Santa Barbara. Arnold signed a loan agreement to pay Jake 7% interest annually, with the principal due in 2011. Jake
Susan loaned $2,000 to her minister a year ago. The loan is not evidenced by a note and does not bear interest. The minister has moved out of town without paying her back. She doesn’t want to
The Copeland Corporation acquires a machine for $5,000 and pays $250 in state sales tax. The machine has a tax life of 7 years.
The town of Dinsmore passed a bill requiring that all homes be connected to the town sewer system. Baskin Ridge is the only section of town that does not have town sewers. Dinsmore will finance the
Scott is single and wants to maximize his retirement income. He contributes the maximum allowable to his company’s qualified pension plan. His adjusted gross income for the year is $73,000.

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