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federal taxation 2023 comprehensive
Questions and Answers of
Federal Taxation 2023 Comprehensive
I:2-11 Sometimes taxpayers may not be able to file their tax returns by the normal due date. Are extensions available? How long are the extensions? Do extensions enable taxpayers to delay paying the
I:2-12 Can tax-exempt income qualify as support?Explain.
I:2-13 Can a scholarship qualify as support?
I:2-14 Explain the purpose of the multiple support agreement.
I:2-15 Summarize the rules that explain which parent claims their children as dependents in cases of divorce.
I:2-16 What conditions must be met by a married couple before they can file a joint return?
I:2-17 Explain what is meant by the phrase maintain a household.
I:2-18 Under what circumstances, if any, can a married person file as a head of household?
I:2-19a. Explain the principal difference in the tax treatment of an S corporation and a C corporation.b. Why would a C corporation be used if an S corporation is generally exempt from tax?
I:2-20 Income earned by C corporations is taxed twice, once when the income is earned and again when it is distributed. If so, how is it possible that operating a business as a C corporation can
I:2-21a. What assets are excluded from capital asset status?b. Are capital gains given favorable tax treatment?c. What is the significance of an asset being classified as a capital asset?d. Are
I:2-22 Is there any tax advantage for an individual who has held an appreciated capital asset for eleven months to delay the sale of the asset?Explain.
I:2-23a. Explain the difference between income splitting and income shifting.b. Why are taxpayers interested in shifting income from one tax return to another within the same family or economic
I:2-24a. Who is liable for additional taxes on a joint return?b. Why is this so important?
I:2-25 Can couples change from joint returns to separate returns? Separate to joint?
I:2-29 Computation of Tax. The following information relates to two married couples:Smiths Millers Salary (earned by one spouse) $30,000 $95,000 Taxable interest income 20 1,000 Deductible IRA
I:2-30 Computation of Taxable Income. The following information relates to Tom, a single taxpayer, age 18:Wages $7,000 Taxable interest income 425 Itemized deductions 310a. Compute Tom’s taxable
I:2-31 Joint Versus Separate Returns. Carl has $60,000 of salary and $11,000 of itemized deductions. Carol has $90,000 of salary and $16,200 of itemized deductions. They are married and under age
I:2-32 Dependency Requirements. Wes and Tina are a married couple and provide financial assistance to several persons during the current year. For the situations below, determine whether the
I:2-33 Dependency Requirements. 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
I:2-34 Dependency Requirements, Child Tax Credit, and Filing Status. Robert provides more than half of the support for his daughter, Jane, and her two children. Jane earned $20,000.Robert, whose AGI
I:2-35 Dependency Requirements. Juan helps support his mother Maria, his son Jose, and a niece Norma. How many dependents can Juan claim given these additional facts?Maria lives with Juan. She
I:2-36 Multiple Support Agreements. 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
I:2-37 Dependency Requirements and Child Tax Credit: Divorced Parents. Joe and Joan divorce during the current year. Joan receives custody of their three children. Joe agrees to pay $5,000 of child
I:2-38 Form 1040 Schedules. Determine which of Schedules 1 through 3 the taxpayer(s) will file with Form 1040 for each case:a. Abby and Bert are married, file a joint tax return, and have two
I:2-39 Dependency Requirements, Child Tax Credit, and Credit for Other Dependents. How many dependents does the taxpayer have, assuming the people involved are U.S. citizens?What amount of credit may
I:2-40 Dependents, Child Tax Credit, and Divorce. Juan and Maria, who have two young children, are in the process of obtaining a divorce. Juan expects to have $250,000 of income each year while Maria
I:2-41 Marriage and Taxes. Bill and Mary plan to marry in December 2022. Bill’s salary is$112,000 and he owns his residence. His itemized deductions total $21,700. Mary’s salary is$94,000. Her
I:2-42 Filing Requirement. Which of the following taxpayers must file a 2022 return?a. Amy, age 19 and single, has $8,050 of wages, $800 of interest, and $350 of selfemployment income.b. Betty, age
I:2-43 Head of Household. In the following situations, indicate whether the taxpayer qualifies as a head of household (all individuals are U.S. citizens).a. Allen is divorced from his wife. He
I:2-45 Computation of Additional Tax Due or Refund. Jim and Pat are married, file jointly, and have one dependent (12-year-old qualifying child). Jim receives a $92,000 salary. Pat is
I:2-46 Itemized versus Standard Deduction. Jan, a single taxpayer, has adjusted gross income of$250,000, medical expenses of $10,000, home mortgage interest of $3,000, and property taxes of $2,000.
I:2-47 Kiddie Tax. 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
I:2-48 Computation of Additional Tax Due or Refund. John and Georgia are married, file jointly, and have three dependents (qualifying children ages 13, 16, and 18). They have salaries of $130,000, a
I:2-49 Kiddie Tax. Mike and Linda are a married couple who file jointly and have $100,000 of taxable income. They have three dependent children who are full-time students in 2022.Mike and Linda
I:2-50 Income of Business Entities. Georgia owns all of Peach Corporation’s stock. Peach pays her a $70,000 salary, which reduces its before-tax profit to $30,000. Peach distributes all of its
I:2-51 Child Tax Credit. Lana, an unmarried taxpayer with AGI of $204,400, claims three dependent children, all under age 17. What is the amount of her child tax credit?
I:2-52 Capital Gains and Losses. Bob and Anna are in the 37% tax bracket for ordinary income and the 20% bracket for capital gains (ignore the 3.8% additional tax on investment income for
I:2-53 Timing of Deductions. Virginia is a cash-basis, calendar-year taxpayer. Her salary is $90,000, and she is single. She plans to purchase a residence in 2023. She anticipates her property taxes
I:2-54 Computation of Tax. Maria is a single taxpayer. Her salary is $51,000. Maria realized a short-term capital loss of $5,000. Her itemized deductions total $4,000.a. Compute Maria’s adjusted
I:2-55 Income Shifting and Kiddie Tax. Ralph and Tina are married, file jointly, and have $500,000 of taxable income. They transfer ownership of corporate bonds to Pam, their single daughter.There is
I:2-56 Filing Status. Gail and her husband have a son when her husband dies unexpectedly on January 1, 2022. Gail asks you, her tax professional, how her husband’s death affects her taxes.
I:2-60 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
I:2-62 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
I:2-65 Ed provides all the support for his stepdaughter, her husband, and their child since his wife’s death three years ago. Ed promised his late wife that he would support her daughter from a
I:2-66 Bob and Sue were expecting a baby in January, but Sue was rushed to the hospital in December. She delivered the baby but it died the first night. Can Bob and Sue claim the baby as a
I:1-2 Why was pay-as-you-go withholding needed in 1943?
I:1-6 Why are the gift and estate taxes called wealth transfer taxes? What is the tax base for computing each of these taxes?
I:1-9 Most estates are not subject to the federal estate tax.a. Why is this the case?b. Do you believe most estates should be subject to the federal estate tax?
I:1-10 Indicate which of the following taxes are generally progressive, proportional, or regressive:a. State income taxesb. Federal estate taxc. Corporate state franchise taxd. Property taxese. State
I:1-13 A “good” tax structure has five characteristics.a. Briefly discuss the five characteristics.b. Using the five characteristics, evaluate the following tax structures:1. Federal income tax
I:1-15 The primary objective of the federal income tax law is to raise revenue. What are its secondary objectives?
I:1-17 Distinguish between taxpaying entities and flowthrough entities from the standpoint of the federal income tax law.
I:1-20 Discuss what is meant by the term “double taxation”of corporations. Develop an example of double taxation using a corporation and shareholder.
I:1-21 Limited liability companies (LLCs) are very popular today as a form of organization. Assume a client asks you to explain what this type of organization is all about. Prepare a brief
I:1-22 For flow-through entities, such as partnerships, how does the tax law use partner basis adjustments to prevent double taxation of partnership income?
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.What is Schedule K-1, what is its purpose,
I:1-25 Why is a thorough knowledge of sources of tax law so important for a professional person who works in the tax area?
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
I:1-28 What is the primary service function provided by the National Office of the IRS?
I:1-29 What types of taxpayers are more likely to be audited by the IRS?
I:1-30 Anya is concerned that she will be audited by the IRS.a. Under what circumstances is it possible that the IRS will review each line item on her tax return?b. Is it likely that all items on
I:1-31a. What does the term “hazards of litigation”mean in the context of taxation?b. Why would the IRS or a taxpayer settle or compromise a case based on the “hazards of litigation”?
I:1-32 If a taxpayer files his or her tax return and receives a tax refund from the IRS, does this mean that the IRS believes the return is correct and will not be subject to a future audit?
I:1-33 What is the statute of limitations for transactions involving:a. Fraud (e.g., failure to file a tax return)b. Disallowance of tax deduction itemsc. The omission of rental income that is
I:1-34 In reference to tax research, what is meant by the best possible defensibly correct solution?
I:1-35 The profession of tax practice involves four principal areas of activity. Discuss these four areas.
I:1-37 Is the principal goal of tax planning to absolutely minimize the amount of taxes that a taxpayer must pay?
I:1-38 Explain how a computer can assist a tax practitioner in tax planning activities and making complex tax calculations.
I:1-39 Tax Rates. Latesha, a single taxpayer, had the following income and deductions for the tax year 2022:INCOME: Salary $100,000 Business Income 25,000 Interest income from taxable bonds 10,000
I:1-42 Gift Tax. Betty, a married taxpayer, makes the following gifts during the current year(2022): $20,000 to her church, $100,000 to her daughter, and $40,000 to her husband.What is the amount of
I:1-45 Partnership Income. Howard Gartman is a 40% partner in the Horton & Gartman Partnership. During 2022, the partnership reported the total items below (100%) on its Form 1065:Ordinary income
I:1-46 Interest and Penalties. In 2022, 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
I:1-47 IRS Audits. Which of the following individuals is most likely to be audited?a. Connie has a $20,000 net loss from her unincorporated business (a cattle ranch). She also received a $200,000
I:1-48 Statute of Limitations. In April 2022, Dan is audited by the IRS for the year 2020. During the course of the audit, the agent discovers that Dan’s deductions for business travel are
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 stocks
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 consulting
On Form W-4, Virginia decided to request her employer withhold more taxes than she generally would have withheld.a. Is it permissible to request greater withholdings than an individual is entitled
Bart and Jane Lee are married, file a joint return and have one dependent child (age 9). Bart begins a new job and is asked to fill out a Form W-4. What are the important pieces of information that
Dana Dodson died October 31, 2020, with a gross estate of $16.7 million, debts of $200,000, and a taxable estate of $16.5 million. Dana made no taxable gifts. All of her property passed under her
Joan died April 17, 2021. Joan’s executor chose March 31 as the tax year end for the estate. The estate’s only beneficiary, Kathy, reports on a calendar year. The executor of Joan’s estate
Cate Cole died in 2019, and her will left her entire estate in equal shares to her two adult children, Calvin and Corrine. Both children anticipate being in the top income tax bracket for at least
Glorietta Trust is an irrevocable discretionary trust funded by Grant Glorietta. The discretionary income beneficiary for life is Grant’s son, Gordon Glorietta (single). Gordon is a partner in a
The following items are relevant for the first income tax return for the Ken Kimble Estate. Mr. Kimble, a cash method of accounting taxpayer, died on July 1, 2022.The record dates were June 14 for
A simple trust has the following receipts and expenditures for 2022. The trust instrument is silent with respect to capital gains, and state law concerning trust accounting income follows the Uniform
Refer to Problem C:14-45. Explain how your answers would change for each independent situation indicated below:a. At the end of the trust term, the property passes instead to Holly’s nephew
Holly funded the Holly Marx Trust in January 2022. The entire trust income is payable to her adult son Jack for 20 years. At the end of the twentieth year, the trust assets are to pass to Holly’s
A simple trust had a long-term capital loss of $10,000 for 2021 and a long-term capital gain of $15,000 for 2022. Its net accounting income and DNI are equal. Explain the tax treatment for the 2021
A trust has net accounting income of $24,000 and incurs a trustee’s fee of $1,000 in its principal account. What is its distribution deduction under the following situations: a. It distributes
Suellen Symmes died on January 15, 2022. Her estate elected a November 30 year end. The executor projects that the estate will receive interest income of $50,000 by November 30, 2022, and will have
Calculation of the Tax Liability. A complex trust has taxable income of $29,900 in 2022. The $29,900 includes $5,000 of rental income and $25,000 of taxable interest income, reduced by the $100
For the first five months of its existence (August through December 2021), the Estate of Amy Ennis had gross income (net of expenses) of $7,000 per month. For January through July 2022, the executor
Art Rutter sold an apartment building in May 2022 for a small amount of cash and a note payable with payments beginning in 2022. Principal and interest payments are due annually on the note in April
Joy died on November 5, 2022. Soon after Joy’s death, the executor discovered the following insurance policies on Joy’s life.Joy transferred ownership of policies 757 and 848 to her son in 2011.
A trust instrument provides that, for life, Irene is entitled to receive distributions of income only and Beth is to receive the remainder interest. The trust sells property at a gain. Income and
Len and Christy Vole, ages 42 and 39 respectively, are married and file jointly in 2021. Len is a contractor operating as a sole proprietorship (EIN 11-1111111). Christy is employed, earning $24,000
Jackson Corporation prepared the following book income statement for its year ended December 31, 2022:• For tax: Seven-year MACRS property for which the corporation made no Sec. 179 election in the
At the close of business on May 31, 2022, Alaska Corporation exchanges $2 million of its voting common stock for all the noncash assets of Tennessee Corporation. Tennessee uses its cash to pay off
Lean Corporation was incorporated in 2016 by Bruce Smith, who has served as an officer and member of the Board of Directors. Carl Jones has served as the secretary-treasurer of the company as a
In 2022, Ace Corporation reports gross income of $200,000 (including $150,000 of profit from its operations and $50,000 in dividends from less-than-20%-owned domestic corporations) and $230,000 of
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