Questions and Answers of Federal Taxation 2023 Comprehensive

I:5-67 Short Tax Form. 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
I:7-1 Why is it important to distinguish whether an individual is an employee or an independent contractor(self-employed)?
I:7-2 Deductions for individual taxpayers are classified as either for AGI or from AGI. Discuss the two categories of for AGI deductions.
I:7-6 Latoya is an independent contractor and operates her own successful consulting business in Milwaukee. She has just signed a large contract with a new client that will require her to spend nine
I:7-9 If a self-employed individual uses the standard mileage rate method for the year in which an automobile is acquired, may the actual expense method be used in a subsequent year? If so, what
I:7-10 If a self-employed individual uses the actual method of deducting automobile expenses and claims depreciation for the first two years of business use, can the individual switch to the standard
I:7-13 What taxpayers are eligible to deduct qualified moving expenses in years 2018–2025?
I:7-14 What are the two methods of computing automobile expenses of self-employed taxpayers?
I:7-15 Are deductions allowed for entertainment expenses of customers or clients in 2022?
I:7-16 If an individual belongs to a country club and uses the facility primarily for business entertainment of customers, what portion of the club dues is deductible?
I:7-19 Discuss whether either of the following individuals are entitled to an office-in-home deduction:a. Maggie is a self-employed management consultant who maintains an office in her home
I:7-21 What is the difference between a defined benefit pension plan and a defined contribution pension plan?
I:7-24 Explain how retirement distributions from a qualified pension plan, which are made in the form of annuity payments, are reported by an employee under the following circumstances:a. No employee
I:7-25 Discuss the limitations and restrictions on amounts that the Internal Revenue Code places on employer contributions to qualified pension and profit-sharing plans.
I:7-26 Why are nonqualified deferred compensation plans particularly well-suited for use in executive compensation arrangements?
I:7-28 List and discuss the qualification requirements for an incentive stock option plan (ISO). Describe the advantages and disadvantages of ISOs compared to nonqualified stock option plans.
I:7-29 What difference does it make if a nonqualified stock option has a readily ascertainable FMV on the grant date?
I:7-30 Is a self-employed individual, who is also employed and covered by an employer’s qualified pension plan, eligible to establish an H.R. 10 or a SEP plan on his or her self-employment income?
I:7-31 What limitations are placed on self-employed individuals for amounts of contributions made to defined contribution H.R. 10 plans? Must self-employed individuals cover their full-time employees
I:7-32 Discuss the essential differences between a traditional IRA and a Roth IRA.
I:7-36 Discuss the major features of a Coverdell Education Savings Account (CESA).
I:7-38 Georgia is self-employed and recently completed a consulting assignment at an away-fromhome location. It was realistically expected that the assignment would be completed in 15 months but the
I:7-40 David is an independent contractor who has been in the consulting business for several years. David has applied and been accepted into a prestigious MBA program. The program is two years in
I:7-41 Business-Related Expenses. Mike, a self-employed consultant, incurs the following business-related expenses in 2022:Actual automobile expenses $ 2,500 Moving expenses 4,000 Entertainment
I:7-42 Travel and Entertainment. Monique is a self-employed manufacturer’s representative(i.e., an independent contractor) who solicits business for numerous clients and receives a commission based
I:7-43 Business-Related Expenses. Mary is self-employed and incurs $3,600 of business-related travel and entertainment expenses during 2022 in which she was away from home overnight.These business
I:7-44 Travel Expenses. Marilyn, an independent contractor who lives and works in Cleveland, obtains a large contract that will require her to live and work in Atlanta for a period of ten months.
I:7-45 Business/Personal Travel Expenses. Mike is an independent contractor in 2022. Mike attends a professional trade association convention in Los Angeles. He spends three days at the meeting and
I:7-46 Auto Expenses. Michelle is self-employed and uses her personal automobile for business trips. During 2022, Michelle drives her car 60% for business use and incurs the following total expenses
I:7-48 Meal and Entertainment Expenses. Milt, a self-employed attorney, incurs the following expenses in 2022:Business lunches for clients and prospective clients $4,000 Entertainment of professional
I:7-49 Entertainment Expenses. Beach Corporation purchases tickets to sporting events and uses them to entertain customers. In 2022 Beach Corporation purchases the following tickets:100 tickets to
I:7-50 Education Expenses. For each of the following independent situations, determine whether any of the expenditures qualify as deductible education expenses in connection with a trade or business
I:7-51 Office in Home. Nancy is a self-employed consultant who uses 10% of her residence as an office. The office is used exclusively for business and is frequented by customers on a regular basis.
I:7-52 Deferred Compensation Plan Requirements. Identify whether each of the following plan features is associated with a qualified pension plan, a qualified profit-sharing plan, an employee stock
I:7-53 Taxability of Pension Payments. Pat is a participant in a qualified pension plan. She retires on January 1, 2022, at age 63, and receives pension payments beginning in January 2022. Her
I:7-58 Coverdell Education Savings Accounts. Jack and Katie have five grandchildren, ages 19, 16, 15, 12, and 10. They have established Coverdell Education Savings Accounts (CESA)for each of the
I:7-59 H.R. 10 Plans. Paula is a self-employed doctor and is considering whether to establish a defined contribution H.R. 10 plan. Paula’s only employee is a full-time nurse who has been employed
I:7-60 Stock Options. Bell Corporation grants an incentive stock option to Peggy, an employee, on January 1, 2022, when the option price and FMV of the Bell stock is $80. The option entitles Peggy to
I:7-61 Stock Options. Bender Corporation grants a nonqualified stock option to Penny, an employee, on January 1, 2022, that entitled Penny to acquire 1,000 shares of Bender stock at $80 per share. On
I:7-62 Dan M. and Cheryl A. Peters are married, file a joint return, and have no children in 2022.Dan, age 45, is an independent contractor working in pharmaceutical sales and Cheryl, age 42, is a
I:7-63 Paul Price is self-employed and operates Lightmore Communications as a sole proprietorship.Lightmore has been extremely successful over the past 20 years. Paul travels extensively in
I:7-66 Steve is part owner and manager of a small manufacturing company that makes keypads for alarm systems. The keypads are sold to several different alarm companies throughout the country. Steve
I:7-67 Charley Long is a truck driver, the 18-wheeler variety. He lives in Mobile, Alabama, owns his own truck, and operates as an independent contractor. Charley’s route entails leaving Mobile at
I:3-1 What phrase is found in both the Sixteenth Amendment to the Constitution and Sec. 61(a)?Why does the phrase appear in both locations?
I:3-2 Contrast the accounting and economic concepts of income.
I:3-3 Why does the tax concept of income more closely resemble the accounting concept of income than the economic concept?
I:3-4 Explain the meaning of the term wherewithal to pay as it applies to taxation.
I:3-8 Does the fact that an item of income is paid in a form other than cash mean it is nontaxable?Explain.
I:3-9 Explain the significance of Lucas v. Earl and Helvering v. Horst.
I:3-10 Under present-day tax law, community property rules are followed in allocating income between husband and wife. Is this consistent with Lucas v.Earl? Explain.
I:3-11 Ricardo owns a small unincorporated business.His 15-year-old daughter Jane works in the business on a part-time basis and was paid wages of$3,000 during the current year. Who is taxed on the
I:3-12a. Define the term constructive receipt. Explain its importance.b. Explain three restrictions on the concept of constructive receipt.
I:3-13 What change did the Tax Cuts and Jobs Act make to the tax treatment of dividends received by U. S.corporations from foreign subsidiaries?
I:3-14 When is income considered to be earned by an accrual-basis taxpayer?
I:3-15a. Explain the difference between the treatment of prepaid income under the tax law and under financial accounting.b. Why are the two treatments so different?c. What problem does this treatment
I:3-16 Under what conditions is an accrual-basis taxpayer allowed to defer reporting amounts received in the advance of the delivery of goods?
I:3-17 Under what conditions is an accrual-basis taxpayer allowed to defer reporting advance payments received for services?
I:3-18a. Is the interest received from government obligations taxable? Explain.b. What impact does the fact that some bond interest is tax exempt have on interest rates?c. Is an investor always
I:3-19 Corporations are taxed on the income they earn, and shareholders are taxed on the dividends they receive. What provisions in the tax law reduce this “double tax” burden?
I:3-20 Explain the relationship between dividends and earnings and profits.
I:3-21 On what basis did the Supreme Court in Eisner v. Macomber decide that stock dividends are nontaxable?
I:3-22 What is the significance of a constructive dividend?
I:3-23 What recent change has been made to the tax treatment of alimony?
I:3-24a. Are items of income not listed in Sec. 61 taxable?Explain.b. Because there is no specific exclusion for unrealized income, why is it not taxable?c. Can income be realized even when a
I:3-25a. Briefly explain the tax benefit rule.b. Is a taxpayer required to report the reimbursement of a medical expense by insurance as income if the reimbursement is received in the year following
I:3-26 What opportunities are available for a taxpayer to defer the recognition of certain types of prepaid income? That is, what advice could you give someone who wishes to defer the reporting of
I:3-28 George, a wealthy investor, is uncertain whether he should invest in taxable or tax-exempt bonds.What tax and nontax factors should he consider?
I:3-29 Do you agree or disagree with the following statement: A taxpayer should not have to report income when debt is forgiven because the taxpayer receives nothing. Explain.
I:3-34 Noncash Compensation. For each of the following items, indicate whether the individual taxpayer must include any amount in gross income.a. Employees of Eastside Bookstore are given their
I:3-35 Constructive Receipt. Which of the following constitutes constructive receipt in the current year ended December 31?a. A salary check received at 6:00 p.m. on December 31, after all the banks
I:3-36 Cash and Accrual Methods. Carmen opens a retail store. Her sales during the first year are $600,000, of which $30,000 has not been collected at year-end. Her purchases are$400,000. She still
I:3-37 Series EE Bond Interest. In 2017, Harry and Mary purchased Series EE bonds, and in 2022 redeemed the bonds, receiving $500 of interest and $1,500 of principal. Their income from other sources
I:3-38 Alimony. As a result of their divorce, Fred agreed to pay alimony to Tammy of $20,000 per year. The payments are to cease in the event of Fred’s or Tammy’s death or in the event of
I:3-39 Constructive Dividend. Brad owns a successful corporation that has substantial earnings and profits. During the year, the following payments were made by the corporation:a. Salary of $250,000
I:3-40 Constructive Dividend. Which of the following would likely be a constructive dividend?a. An unreasonable salary paid to a shareholder.b. An unreasonable salary paid to the daughter of a
I:3-41 Prepaid Rent. Stan rented an office building to Clay for $3,000 per month. On December 29, 2021, Stan received a deposit of $4,000 in addition to the first and last months’rent. Occupancy
I:3-42 Rental Income. 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
I:3-43 Gross Income. Susan’s salary is $44,000 and she received dividends of $600. She received a statement from SJ partnership indicating that her share of the partnership’s income was$4,000.
I:3-44 Interest Income. Holly inherited $10,000 of City of Atlanta bonds in February. In March, she received interest of $500, and in April she sold the bonds at a $200 gain. Holly redeemed Series EE
I:3-45 Annuity Income. Tim retired during the current year at age 58. He purchased an annuity from American National Life Company for $40,000. The annuity pays Tim $500 per month for life.a. Compute
I:3-46 Pension Income. Beth retires when she turns 65. She begins receiving a monthly pension of $300 from her employer’s qualified retirement plan. While employed, Beth contributed$13,000 to the
I:3-47 Social Security Benefits. Dan and Diana file a joint return. Dan earned $31,000 during the year before losing his job. Diana received Social Security benefits of $5,000.a. Determine the
I:3-48 Social Security Benefits. Lucia is a 69-year-old single individual who receives a taxable pension of $10,000 per year and Social Security benefits of $7,000. Lucia is considering the
I:3-49 Social Security Benefits. Bob is a single individual and received a salary of $27,000 before he retired in October of this year. After he retired, he received Social Security benefits of$3,000
I:3-50 Adjusted Gross Income. Amir, who is single, retired from his job this year. He received a salary of $25,000 for the portion of the year that he worked, tax-exempt interest of$3,000, and
I:3-51 Court Awards and Insurance Settlements. What amount, if any, must be included in gross income by the following taxpayers?a. Ann received $2,000 from her insurance company when her automobile
I:3-52 Claim of Right. USA Corporation hired Jesse to install a computer system for the company and paid him $8,000 for the work. USA soon realized that there were problems with the system and asked
I:3-53 Tax Planning. Bart and Kesha, who are in the 37% tax bracket, are interested in reducing their taxes. They are currently considering several alternatives. For each, indicate how much tax, if
I:3-54 Series EE Bond Interest and Kiddie Tax. Ken and Lynn paid $5,000 to purchase Series EE bonds in the name of their 11-year-old son. The son has no other income, and they are in the 24% tax
I:3-57 Kamal owns a restaurant that operates as an S corporation. The business earns $100,000 per year after paying Kamal a salary of $50,000. Kamal and his wife Padma report the income from the
I:3-58 Assume that it is December 31, and that Jake is considering making a $1,000 charitable contribution. Jake currently is in the 37% tax bracket, but expects that his tax bracket will be 24% next
I:3-60 Short Tax Form. Anne Banks is a single, 60-year old retired teacher who does not itemize.Her only income is reported to her on the Form 1099-R provided by her retirement plan and the Form
I:2-2 Explain the distinction between income and gross income.
I:2-4 List the conditions that must be met in order to claim qualifying children and qualifying relatives as dependents. Briefly explain each one.
I:2-5a. Briefly explain the concept of support.b. If a taxpayer provides 50% or less of another person’s support, is it possible for the taxpayer to claim that person as a dependent? Explain.c.
I:2-6 Under what circumstances must a taxpayer use a tax rate schedule instead of a tax table?
I:2-7a. What determines if an individual must file a tax return?b. Is an individual required to file a tax return if he or she owes no tax?
I:2-8 Many homeowners itemize deductions while many renters claim the standard deduction.Explain.
I:2-9 Tax rules are often very precise. For example, a taxpayer must ordinarily provide “over 50%”of another person’s support in order to claim that person as a qualifying relative. Why is the
I:2-10 What is the normal due date for the tax return of calendar year taxpayers? What happens to the due date if it falls on a Saturday, Sunday, or holiday?

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