Questions and Answers of Federal Taxation 2023 Comprehensive

I:9-53 Nonbusiness Bad Debt. During 2021, Becky loans her brother Ken $5,000, which he intends to use to establish a small business. Because Ken has no other assets and needs cash to establish the
I:9-54 Bad Debt Deduction. Assume the same facts as in Problem I:9-53, except that Becky and Ken are not related and that under the terms of the loan Ken agrees to repay Becky the$5,000 plus interest
I:9-55 Net Operating Loss Deduction. Michelle and Mark are married and file a joint return.Michelle owns an unincorporated dental practice. Mark works part-time as a high school math teacher, and
I:9-56 Net Operating Loss Deduction. Assume the same facts as in Problem I:9-55, except in addition to the other itemized deductions Michelle and Mark suffer a $4,500 deductible personal casualty
I:9-57 Net Operating Loss Deduction. Assume the same facts as in Problem I:9-55, except that the interest on their personal residence is $15,300 and they also have a $4,500 deductible casualty loss
I:9-65 Heather and Nikolay Laubert are married and file a joint income tax return. Their address is 3847 Jackdaw Path, Madison, WI 58493. Nikolay’s Social Security number is 000-00-1111, and
I:9-67 Short Tax Form. Fiona Starr (social security number 111-22-3333) is single and earns $105,000 as a manager at Costco. Three years ago, she bought a single-family home on 12 Beach St., Bangor,
I:9-69 In preparing the tax return for one of your clients, Jack Johnson, you notice that he has listed a deduction for a large business bad debt. Jack explains that the loan was made to his
I:6-1 Why is the distinction between deductions for AGI and deductions from AGI important for individuals?
I:6-2 Sam owns a small house that he rents out to students attending the local university. Are the expenses associated with the rental unit deductions for or from AGI?
I:6-7 If an activity does not generate a profit in three out of five consecutive years, is it automatically deemed to be a hobby? Why or why not?
I:6-9 In order for a business expense to be deductible it must be ordinary, necessary, and reasonable.Explain what these terms mean.
I:6-10 What are the criteria for distinguishing between a deductible expense and a capital expenditure?
I:6-11 Why are expenses related to tax-exempt income disallowed?
I:6-12 Under what circumstances may a taxpayer deduct an illegal bribe or kickback?
I:6-15 During November and December of last year, Tommy’s, Inc., incurred the following expenses in investigating the feasibility of opening a new restaurant in town:Expenses for a market survey
I:6-16 What documentation is required in order for travel or entertainment expenses to be deductible?
I:6-17 Under what circumstances can prepaid expenses be deducted in the year of payment by a taxpayer using the cash method of accounting?
I:6-18 Under what circumstances would a taxpayer use both the cash method and the accrual method of accounting at the same time?
I:6-20 Why did Congress enact the wash sale provisions?
I:6-21 The wash sale rules disallow a loss in the year of sale when substantially identical stock or securities are acquired by the taxpayer within a 61-day period. What types of stock or securities
I:6-23 Under the related party rules of Sec. 267, why has Congress imposed the concept of constructive ownership?
I:6-24 If property is sold at a loss to a related taxpayer, under what circumstances can at least partial benefit be derived from the disallowed loss?
I:6-25 Assume that Jill is engaged in painting as a hobby. During the current year, she earns $1,000 from sales of her paintings and incurs $1,300 expenses for supplies and lessons. Jill’s salary
I:6-26 Under Sec. 280A, what constitutes personal use of a vacation home by the taxpayer?
I:6-27 Under Sec. 280A, how are expenses allocated to the rental use of a vacation home? In what order must the expenses be deducted against the gross income of the property?
I:6-28 Under Sec. 280A, how will a taxpayer report the income and expenses of a vacation home if it is rented out for only 12 days during the year?
I:6-31 Kathleen pays $3,000 mortgage interest on the home that she and her husband live in.Kathleen and her husband live with Molly, Kathleen’s mother. The title to the home is in Kathleen’s
I:6-32 Katie and Alan are avid boaters and water skiers. They also enjoy parasailing. This year, they started a new parasailing venture to provide rides to patrons. Katie and Alan are both employed
I:6-33 For or From AGI Deductions. Roberta is a self-employed accountant. During the year, Roberta incurs the following unreimbursed expenses:Item Amount Travel to client locations $750 Subscriptions
I:6-34 For vs. From AGI. During 2022, Kent, a 40-year-old single taxpayer, reports the following items of income and expense:Income:Salary $150,000 Dividends from Alta Corporation 800 Interest income
I:6-35 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:Item Amount Replace roof and
I:6-37 Legal and Accounting Expenses. Sam is a sole proprietor who owns, leases, and manages several apartment complexes and office buildings. During the current year, Sam incurs the following
I:6-38 Illegal Payments. Damian Corporation is engaged in the business of purchasing and importing carpets. The carpets are imported from a country which the U.S. has banned as a source of imports.
I:6-39 Illegal Payments. Indicate whether Glenda can deduct the $5,000 payment in each of the following independent situations.a. Glenda is a supplier of medical supplies. In order to secure a large
I:6-40 Business Investigation Expenditures. During January and February of the current year, Big Bang LLP incurs $13,000 in travel, feasibility studies, and legal expenses to investigate the
I:6-41 Business Investigation Expenditures. Assume the same facts as in Problem I:6-40, except that Big Bang LLP incurs $51,000 in expenses, and it does not already own the other entertainment
I:6-42 Timing of Expense Recognition. Solutions Corporation, a computer vendor and consulting company, uses the accrual method of accounting. Its tax year is the calendar year. The following are
I:6-44 Prepaid Interest. During the current year, Richard and Alisha, a married couple who use the cash method of accounting, purchased a principal residence for $320,000. They paid$40,000 down and
I:6-45 Wash Sales. 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, 2021, John sells 750 shares for
I:6-46 Wash Sales. Mr. Cougar owns 1,000 shares of Western Corporation common stock, which it purchased on March 8, 2011, for $12,000. In 2022, Mr. Cougar buys and sells Western Corporation stock as
I:6-47 Constructive Ownership. During the current year, Troy sells land to Berry Corporation for $165,000. Troy purchased the land for investment in 2002 for $170,000. Berry Corporation is owned as
I:6-48 Constructive Ownership. PIB Partnership is owned 20% by Sara, 40% by Steve, and 40% by Thann. Burnham, Inc. is owned 70% by PIB Partnership, 10% by Ralph, 10% by Thann, and 10% by Sara. Ralph
I:6-49 Related Party Transactions. 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
I:6-50 Related Party Transactions. During the current year, CVI Corporation sells a tract of land for $75,000. The sale is made to Sandi, CVI Corporation’s sole shareholder. CVI Corporation
I:6-51 Hobby Loss Presumptive Rule. 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
I:6-52 Hobby Loss Presumptive Rule. 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
I:6-53 Hobby Losses. 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
I:6-54 Rental of Vacation Home. During the current year, Kim incurs the following expenses with respect to her beachfront condominium in Hawaii:Expense Items Amount Insurance $ 500 Repairs and
I:6-55 Rental of Vacation Home. Assume all of the same facts as in Problem I:6-54, except that during the year Kim rents the condominium a total of 14 days and uses it for her vacation for 3 days.
I:6-56 Bryce, a bank official, is 40 years old, unmarried and has no dependents. During 2022 he engages in the following activities and transactions:a. Being an avid fisherman, Bryce develops an
I:6-60 Dave Stevens, age 34, is a self-employed physical therapist. His wife Sarah, age 31, teaches English as a Second Language at a local language school. Dave’s Social Security number is
I:6-61 Lyle and Kaye James are married, have two minor children, Jessica, age 8 and Jerron, age 4, and are filing a joint tax return in the current year. They are both employed. Lyle and Kaye, ages
I:6-62 Scarlet Furniture Corporation, an accrual-method taxpayer, retails custom office furniture.On January 1 of the current year, Peter Marlin and John Tanner incorporated Scarlet Furniture
I:5-10 Andy owns an appliance store where he has merchandise such as refrigerators for sale. Roger, a bachelor, owns a refrigerator, which he uses in his apartment for personal use. For which
I:5-11 Why did the Supreme Court rule in the Corn Products case that a gain due to the sale of futures contracts is ordinary income instead of capital gain?
I:5-12 When is the gain on the sale or exchange of securities by a dealer in securities classified as capital gain?
I:5-14 Amy has LTCGs taxed at different tax rates, 15%, 25% and 28%. She also has NSTCLs that amount to less than her NLTCG. The procedure for offsetting the NSTCL against the LTCGs is favorable to
I:5-15 Four years ago, Susan loaned $7,000 to her friend Joe. During the current year, the $7,000 loan is considered worthless. Explain how Susan should treat the worthless debt for tax purposes.
I:5-16 Why did the Supreme Court rule in Arkansas Best that the stock of a corporation purchased by the taxpayer to protect the taxpayer’s business reputation was a capital asset?
I:5-17 The effective income tax rate on gain of $1 million resulting from the sale of qualified small business stock obtained in 2005 in an initial public offering and held more than five years is
I:5-19 On January 1 of the current year, the Orange Corporation issues $500,000 of 11%, 20-year bonds for $480,000. Determine the amount of original issue discount, if any.
I:5-22 When is the transferor of a franchise unable to treat the transfer as a sale or an exchange of a capital asset?
I:5-23 How does a lessor treat payments received for canceling a lease?
I:5-24 What is the first day that an individual could sell a capital asset purchased on March 31, 2022 and have a holding period of more than one year?
I:5-25 Phil, a cash-basis taxpayer, sells the following marketable securities, which are capital assets during 2022. Determine whether the gains or losses are long-term or short-term. Also determine
I:5-26 How might the current treatment of capital losses discourage an individual investor from purchasing stock of a high-risk, start-up company?
I:5-27 An individual taxpayer has realized a $40,000 loss on the sale of an asset that had a holding period of eight months. Explain why the taxpayer may be indifferent as to whether the asset is a
I:5-28 If Pam transfers an asset to Fred and the asset is subject to a liability that is assumed by Fred, how does Fred’s assumption of the liability affect the amount realized by Pam? How does
I:5-29 Mr. and Mrs. Pickens purchased a used piano in Y1 for their young son who had started taking piano lessons. In Y8 while cleaning the piano, Mrs. Pickens discovered $4,800 of old currency. They
I:5-32 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.
I:5-33 Amount Realized. Tracy owns a nondepreciable capital asset held for investment. The asset was purchased for $250,000 six years earlier and is now subject to a $75,000 liability.During the
I:5-34 Basis of Property Received as a Gift. Doug receives a duplex as a gift from his uncle.The uncle’s basis for the duplex and land is $90,000. At the time of the gift, the land and building
I:5-35 Sale of Property Received as a Gift. During the current year, Stan sells a tract of land for$800,000. The property was received as a gift from Maxine on March 10, 1995, when the property had a
I:5-36 Sale of Asset Received as a Gift. Bud received 200 shares of Georgia Corporation stock from his uncle as a gift on July 20, 2021, when the stock had a $45,000 FMV. His uncle paid $30,000 for
I:5-37 Basis of Property Converted from Personal Use. Irene owns a truck costing $15,000 and used for personal activities. The truck has a $9,600 FMV when it is transferred to her business, which is
I:5-38 Sale of Assets Received as a Gift and Inherited. Daniel receives 400 shares of A&M Corporation stock from his aunt on May 20, 2022, as a gift when the stock has a $60,000 FMV. His aunt
I:5-39 Personal-Use Property Converted to Rental Property. Tally owns a house that she has been living in for eight years. She purchased the house for $245,000 and the FMV today is $200,000. She is
I:5-40 Stock Rights. Kathleen owns 500 shares of Buda Corporation common stock which was purchased on March 20, 2008, for $48,000. On October 10 of the current year, she receives a distribution of
I:5-41 Stock Rights. Martha Lou owns 100 shares of Blain Corporation common stock. She purchased the stock on July 25, 1999, for $4,000. On May 2 of the current year, she receives a nontaxable
I:5-42 Real Property Subdivided for Sale. Beth acquired only one tract of land seven years ago as an investment. In order to sell the land at a higher price, she decides to subdivide it into 20 lots.
I:5-43 Marginal Tax Rates. Mr. and Mrs. Dunbar have taxable income of $260,000 without considering the following sales. Consider the following independent cases where capital gains are recognized and
I:5-44 Netting Gains and Losses. Trisha, who is single and has taxable income of $300,000, sells the following capital assets in 2022 with gains and losses as shown:Asset Gain or (Loss) Holding
I:5-45 Computing the Tax. Donna files as a head of household in 2022 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
I:5-47 Computing the Sales Price. An investor in a 32% tax bracket and a 15% rate on ANCG owns land that is a capital asset with a $50,000 basis and a holding period of three years.The investor who
I:5-48 Capital Gains and Losses. Consider the four independent situations below for an unmarried individual, and analyze the effects of the capital gains and losses on the individual’s AGI. For
I:5-49 Capital Losses. 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
I:5-50 Character of Loss. The Michigan Corporation owns 20% of the Wolverine Corporation. The Wolverine stock was acquired eight years ago to ensure a steady supply of raw materials. Michigan also
I:5-51 Original Issue Discount. On December 31, 2021, Phil purchased $20,000 of newly issued bonds of Texas Corporation for $16,568. The bonds are dated December 31, 2021. The bonds are 9%, 10-year
I:5-53 Capital Gains and Losses. During 2022, Gary, who is single, receives a $90,000 salary and has no deductions for AGI. In 2021, Gary had a $5,000 STCL and no other capital losses or capital
I:5-54 Call Options. On February 10, 2022, 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
I:5-55 Call Writing. Dan owns 500 shares of Rocket Corporation common stock. The stock was acquired two years ago for $30 per share. On October 2, 2022, Dan writes five calls on the stock, which
I:5-56 Corporate Capital Gains and Losses. Determine the taxable income for the Columbia Corporation for the following independent cases:Case Income from Operations STCG (NSTCL)NLTCG(NLTCL)A $110,000
I:5-57 Original Issue Discount. On January 1, 2021, Sean purchased an 8%, $100,000 corporate bond for $92,277. The bond was issued on January 1, 2021, and matures on January 1, 2026. Interest is paid
I:5-58 Capital Gains and Losses. Martha has $40,000 AGI without considering the following information. During the year, she incurs an LTCL of $10,000 and has a gain of $14,000 due to the sale of a
I:5-59 Capital Gains and Losses. Without considering the following capital gains and losses, Charlene, who is single, has taxable income of $660,000 and a marginal tax rate of 37%.During the year,
I:5-60 Corporate Capital Gains and Losses. In 2017, 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
I:5-64 On December 20 of the current year, Winneld has decided to sell all of the stock that she owns and reinvest the proceeds in state of Minnesota bonds. Without considering the sales, her taxable
I:5-65 Dallas, whose tax rate is 35% and 15% for ANCG, has recognized an STCL of $11,000 and an LTCG of $10,200 due to the sale of stock. In late December, he is considering the sale of an antique
I:5-66 It is August 20, 2022, 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

Showing 800 - 900 of 1379