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business
federal taxation 2019

Questions and Answers of Federal Taxation 2019

LCD Corporation purchased residential real property for \(\$ 385,000\) (exclusive of land cost) and placed it in service on August 16, 2018. Compute MACRS depreciation on the property for 2018 and
Refer to the facts in Problem 43 and assume the property purchased is nonresidential rental property. Compute MACRS depreciation on the property for 2018 and 2019 , assuming the property is not
In the current year, James Jar Co., a calendar year taxpayer, incurred the following research and experimentation expenditures (R\&E): Salaries- \$150,000; and Materials- \(\$ 100,000\).a. If James
In 2018, Mary Kelly drove her personal car 2,800 miles for business purposes. She also incurred \$182 in parking fees and \$191 in turnpike tolls connected with her business trips. None of her
On Monday, Harvey Leonard travels from Chicago to New York on a business trip. The trip lasts five days. Three days of the trip are spent conducting business activities and two days are spent on
Norma, a single taxpayer, had 2018 taxable income before the qualified business income deduction of \(\$ 650,000\), of which \(\$ 500,000\) was qualified business income earned through her sole
Generally, what is "at risk"?
On what date was the Tax Reform Act of 1986 enacted, and what significance does this date have for losses derived from passive activities in 2018?
What is a "suspended loss"? How can suspended losses offset nonpassive income?
What carryforward procedure applies to business net operating losses?
Billy Bob is at risk for \(\$ 10,000\) in Partnership A and \(\$ 22,000\) in Partnership B on January 1, 2018. Both partnerships are passive activities to Billy Bob. Billy Bob's share of net income
What would be your answer to Problem 31 if Billy Bob's share of net income from Partnership A was \(\$ 9,000\) and his loss from Partnership B was \(\$ 25,000\) ?Problem 31Billy Bob is at risk for
In 2018, Wilmah Lansing invested in the Triple-K Limited Partnership by paying \(\$ 15,000\) cash and signing a \(\$ 40,000\) nonrecourse note. She also pledged \(\$ 25,000\) worth of securities for
Refer to the facts in Problem 33 and assume that Triple-K allocated to Wilmah net income of \(\$ 10,000\) from operations in 2018 . What amount does Wilmah have at risk as of January 1,2019 ? Would
Refer to the facts in Problem 33 and assume instead that Triple- \(\mathrm{K}\) allocated to her a loss of \(\$ 60,000\) in 2018 . What amount does Wilmah have at risk as of January 1, 2019?Problem
In 2003, Keith Jackson invested in a partnership known as Astonishing Discoveries, Ltd. He was a limited partner. Mr. Jackson paid \(\$ 25,000\) cash and, along with all other partners, signed a
Tammy Faye Jones owned three passive activities in 2018 (she had no suspended losses prior to 2018):How much is her passive loss deduction (against nonpassive income) and suspended loss for each
Brent Fullback owned four passive activity interests in 2018:On March 2, 2018, Fullback sold his entire interest in A-1 for \(\$ 15,000\). His basis in the activity on January 1, 2018, was \(\$
Jean Kelley owned three limited partnership interests in 2018:How much is her passive loss deduction (against nonpassive activities) and suspended loss for each activity? 2018 Allocated Date Gain/
Teri Frazier owned three businesses and rental properties in 2018. During the year, her hair salon business experienced a \(\$ 32,000\) net loss. She participated 200 hours in the hair salon
Darian Basemore owned an interest in five businesses in 2018. His level of participation and percentage of ownership in each enterprise is as follows:In which activity, if any, will Darian be
Dave Eichoff had adjusted gross income for 2018 of \(\$ 122,000\) before any passive losses or other rental activities. He owned a mountain cabin in Idaho, which he rented for 125 days and which was
Diane Parker acquired an interest in a movie theater in June 2006. The theater broke even from 2006 to 2013. Parker did not actively participate in the activity during those years. She participated
Mary Beth is a CPA, devoting 3,000 hours per year to her practice. She also owns an office building in which she rents out space to tenants. She devotes none of her time to the management of the
Assume the same facts as in Problem 46, except that Mary Beth is a real estate agent. She works 1,000 hours per year as a real estate agent and 1,200 hours per year managing her office building. How
Max Computer Center incurred the following casualty and theft losses in 2018:Compute the casualty and theft loss for each item listed. Event b. C a. b. Robbery-Equip. Fire-Truck Fire-Equip. Event
In 2018, Mary Jackson had the following income and deductions listed on her individual income tax return:Compute the amount of Mary's 2018 net operating loss. Business income Interest income on
Ralph Sample had the following income and deductions listed on his 2018 income tax return:Compute the amount of Ralph's 2018 net operating loss. Salary Business income Interest income on personal
During 2018, Jane Mason incurred the following home expenses:Assume that Jane qualified for the home office deduction, all of the above expenditures qualified for the deduction as home office
In 2018, Joan Cannon incurred the following expenses relating to her vacation home:During 2018, Joan personally used the vacation home for 20 days. Determine the rental expense deduction that she is
Refer to Problem 52, Part (c) and assume the IRS approach to allocating normal expenses allowable to all taxpayers is used. Based on these facts, what rental expense deductions are allowable in 2018
Which of the following is not a passive activity?a. Owning a limited partnership interest in an oil and gas limited partnershipb. Having rental-residential propertiesc. Owning a business and not
Benson Company experienced partial destruction of a warehouse from a tornado. The warehouse had a basis of \(\$ 200,000\) at the time of the casualty. Its fair market value before the accident was
Which of the following taxpayers would be least likely to qualify for a home office deduction?a. Self-employed individualb. Employee with an office on the employer's premisesc. Owner of property held
Bob White owned a cabin in the Great Smoky Mountains. He used it for 16 days and rented it out for 190 days during the year. Which of the following is true?a. All allocated expenses are deductible
John Henderson's portable sawmill was completely destroyed by a fire and he carried no insurance on the property. The adjusted basis for depreciation of the sawmill building and equipment at the time
Assume that the sawmill in Problem 58 was damaged by the fire but not completely destroyed. Just before the fire the sawmill had a fair market value of \(\$ 50,000\) and immediately after the fire
Comprehensive Problem (Tax Return Problem). Harvey and Betty Duran, both age 37 , are married with one dependent child. Determine their taxable income from the following information for 2017, and
Comprehensive Problem. Michael Rambo, single and calendar year taxpayer, is the sole owner of Slice-It Pizza Company, a sole proprietorship. Michael materially participated in the activity. In 2018,
Research Problem. Clients Buddy and Debbie Jamison are considering converting their private vacation home to rental property. They have asked for advice as to the tax aspects of owning such property.
What is the definition of a casualty loss?
The deduction for a federal casualty loss is the smaller of the basis of the asset or the reduction in its fair market value, reduced by what three amounts?
Are rent and royalty expenses deductible as itemized deductions?
Are the expenses of being in the trade or business of wagering limited to wagering income?
Oliver Olms pays all of his father's medical expenses for the year, which total \(\$ 8,800\). Oliver also pays over half of his father's support but is unable to claim his father as a dependent
You have a heart ailment. On the advice of your doctor, you install an elevator in your home so you will not have to climb the stairs. It costs \(\$ 15,000\) to install the elevator. The elevator has
In 2018 Tom and Shannon Shores, both age 40 , filed a joint return and paid the following medical expenses:In addition, they incurred the following medical expenses for Tom's mother who is totally
Assume the same facts as in Problem 24, except that the insurance company reimbursed Tom and Shannon $4,100 of their hospital and doctor's bills. Determine the medical expense deduction.Problem
Blake sold a house to Miranda on July 1. Blake paid the entire calendar-year property taxes of \(\$ 4,380\) on June 1. How much will each of them be entitled to deduct for the year?
Carlos Diego paid the following expenses during 2018:What is Carlos's tax expense deduction for 2018? Property tax on real estate State sales tax Sales tax on purchase of automobile License plate
During the following years Adolpho T. (single) had (1) withheld, (2) paid (by check - presumably estimated tax payments or paid with the extension) and (3) received a refund of the following amounts
In 2018, Sally Morris, a single taxpayer, pays \(\$ 3,000\) of interest on qualified student loans. Her AGI is \(\$ 40,000\). What is her qualified student loan interest deduction in 2018 ?
Assume the same facts as in Problem 31, except that Sally has AGI of $70,000$70,000. What is her qualified student loan interest deduction in 2018?Problem 31The interest paid on Josephine Young's
The interest paid on Josephine Young's personal residence for the year 2018 totals \(\$ 4,800\); the interest paid on her personal credit card is \(\$ 80\); the interest paid on a note to the
Mike and Sally Card file a joint return for the 2018 tax year. Their adjusted gross income is \(\$ 65,000\) and they incur the following interest expenses: Qualified education loans Personal loan
Greg Grove pays \(\$ 50,000\) interest in 2018 on his mortgage on his principal residence. It has an interest rate of 4 percent and balance of \(\$ 1,250,000\) during the year. He took out the
Matilda Moore has \(\$ 21,000\) of investment interest expense and \(\$ 7,000\) of net investment income in 2018. How much of the investment interest expense is deductible for tax purposes in 2018?
Frank Freshman mailed a check for $200 on December 30, 2018, in part payment of a $350 pledge he made to State University on November 1. The University did not deposit the check until January 3,
Mark Moody has adjusted gross income of \(\$ 50,000\) for 2018 . During the year, he gave his church \(\$ 3,000\) cash and land having a fair market value of \(\$ 40,000\) and a basis of \(\$
Jackson Jumper has owned a beach house for the last 20 years. In 2018, a hurricane destroyed his beach house and the beach was determined to be a federally declared disaster area. His adjusted basis
Comprehensive Problem. Andy and Marcia Tufts, both age 35 , are married with two dependent children and file a joint return. Assume the children do not qualify for the child tax credit (Ch. 9). From
Larry Johnson, 45 and single, has the following income and deductions in 2018. Using the tax rate schedules rather than the tax tables, compute Larry's tax owed or refund due for 2018. Assume
What is the amount of the child tax credit for 2018?
What is the maximum child tax credit a taxpayer may receive for an 18 -year-old fulltime college student in 2018?
A married couple with two children has earned income. What is the amount of their child and family tax credit?
Fannie, a widow, lives in an apartment with her two minor children (ages 4 and 6) whom she supports. Fannie earns \(\$ 35,000\) during 2018. She uses the standard deduction. Calculate the amount, if
A married couple with two children has earned income of \(\$ 30,000\) with no withholding. Assume they have a taxable income of \(\$ 100\), they paid \$2,295 in FICA taxes, and they will receive an
A married couple with three children has earned income of \(\$ 15,000\) and adjusted gross income of \(\$ 50,000\) with no withholding. Assume a standard deduction of \(\$ 24,000\). Their tax on \(\$
Walt is single, age 67 , and retired. His taxable income for 2018 is \(\$ 1,320\), and the tax on this amount is \(\$ 132\). Walt's tax credit for the elderly is \(\$ 225\). What is the amount of the
Philip and Susan Moyer have two children who are both in the first four years of college. They incur \(\$ 4,500\) in tuition expenses for each of the two children. What is the maximum amount of
Cathy Thomas, a single mother, has modified AGI of \(\$ 82,000\). In 2018 , her daughter begins work on her bachelors degree at an accredited institution. Cathy pays \(\$ 6,000\) in qualified tuition
Michael is divorced and the exemption for his daughter is claimed by his ex-wife. What is the amount of American Opportunity Tax Credit allowed Michael when he pays \(\$ 2,500\) in tuition for his
What is the amount of Lifetime Learning Credit allowed a taxpayer assuming that he or she incurred \(\$ 3,000\) in tuition and fees and \(\$ 8,000\) in room and board for an eligible college student?
In 2018, Lenny Traveler had adjusted gross income of \(\$ 32,000\) from investments in the U.S., while earning \(\$ 40,000\) from foreign sources. Lenny's potential U.S. tax liability is \(\$
\(\mathrm{ABC}\) Corporation has international earnings of \(\$ 500,000\) and a U.S. tax liability of \(\$ 170,000\). From foreign operations \(A B C\) generated \(\$ 120,000\) of income on which a
Mark has a tentative general business credit of \(\$ 120,000\) for the current year. His net regular tax liability before the general business credit is \(\$ 135,000\), and his tentative minimum tax
Zap Industries had a tentative general business credit in 2018 of \(\$ 60,000\). Its tax liability in 2017 was \(\$ 20,000\). Its tax liability before the general business credit in 2018 is \(\$
Yoyo Corporation bought \(\$ 42,000\) worth of energy equipment in November 2013, taking an investment credit of \(\$ 4,200\). In March 2018, the firm sells the equipment for \(\$ 30,000\). What is
Martha and Marty Mertens are married and file a joint return. Marty started his own business at the beginning of the current tax year and reported net income of \(\$ 14,000\) for the year. Martha
What is the adjustment that must be made to taxable income in computing alternative minimum taxable income for 2018 , assuming that an individual purchased an office building on January 8 for \(\$
What is the amount of tax preference for alternative minimum tax purposes assuming that an individual sells some qualified small business stock held more than five years at a \(\$ 20,000\) gain.
What is the allowable exemption for the alternative minimum tax assuming that a married couple has alternative minimum taxable income of \(\$ 1,200,000\) ?
Calculate the exemption amount for the following cases for 2018 for a single taxpayer, married taxpayer filing jointly, and a married taxpayer filing separately when AMTI is \(\$ 800,000\).
Tamara and Tony Mapp, a married couple, report the following items for the year:What is their alternative minimum tax for the year? Taxable income AMT adjustments Tax preferences Regular tax
Donna, an unmarried individual who is age 66 , has taxable income of \(\$ 300,000\). She has AMT positive adjustment of \(\$ 68,000\) and tax preferences of \(\$ 40,000\).a. What is Donna's AMT?b.
Alex and Alicia Andrews file a joint tax return. On the return they show Alex's salary of \(\$ 110,000\), interest income from corporate bonds of \(\$ 3,000\), dividends from domestic corporations of
What is the amount of AMT credit carryforward for 2018, assuming that an individual had an alternative minimum tax of \(\$ 20,000\) and an alternative minimum tax for AMT credit of \(\$ 12,000\) ?
Which of the following are tax adjustments or preference items for purposes of the alternative minimum tax?a. \(\$ 20,000\) net long-term capital gain over net short-term capital lossesb. \(\$
Which of the following qualify as "employment-related" expenses for the credit for child care?a. Nursery school feesb. Transportation to nursery schoolc. Housekeeper's salaryd. Housekeeper's mealse.
What is the amount of dependent care credit before any income tax limitation for a couple with two children where they spend \(\$ 6,500\) for dependent care and the husband earns \(\$ 25,000\) for
Which of the following items is not an adjustment for the alternative minimum tax?a. Taxesb. Wagering lossesc. Standard deduction
Comprehensive Problem. Determine the tax due, including the alternative minimum tax, for Patty Perkins, assuming she is single using the following tax information: Adjusted Gross Income Itemized
From the following information determine the total 2018 tax due for Charlene and Dick Storm, assuming they file a joint return, have three dependents, and are not members of a qualified retirement
An asset is purchased on May 15, 2014, for \(\$ 100,000\). The full 10 percent investment credit of \(\$ 10,000\) is taken on the asset. On June 23, 2018, a Code Sec. 108 election is made to exclude
What is the basis of a personal use asset that is converted to business or incomeproducing use?
What are the special rules for gains or losses on sales to related parties?
What are the benefits of installment reporting?
Frank Fleming recently purchased some new equipment that he plans to use in his business. He paid \(\$ 43,000\) for the equipment. He also paid \(\$ 2,500\) in delivery and installation costs, \(\$
Martha McDonald purchased an office building in 1998 for \(\$ 630,000\). In 2018 , she sells the building for \(\$ 950,000\). Over the years, she had replaced the windows and doors at a cost of \(\$
Rex Redd purchased a business building on January 1, 2004, for \(\$ 975,000\) and used the straight-line depreciation over 39 years. He took \(\$ 25,000\) depreciation for 2004 through 2015 and none

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