Questions and Answers of Fundamentals Taxation 2019

Jahleel won a lawsuit against someone who slandered him.He received a $$50,000$ damage award and a $$100,000$ payment for punitive damages. What must be included in Jahleel’s taxable income?
Karen’s mom passed away this year and Karen received life insurance proceeds of $1,000,000. Is this income taxable to Karen? Why or why not?
Morgan, a cash basis taxpayer, owes Spartan Credit Union $$2,200$ for a loan that Morgan took out several years ago. If Spartan forgives the debt, is this income to Morgan?
What is income in respect of a decedent?
Describe a parsonage allowance.
Which of the following is taxable income?a. Prize of $1,000 won at the VFW Bingo gameb. $15,000 awarded due to winning an Olympic bronze medal in 2022c. Scholarship of $12,000 for tuition and feesd.
Which of the following is not taxable income?a. $500 won at the racetrackb. Gift basket worth $125 won on a raffle ticketc. Nobel Peace Prize award of $1.1 million received by the taxpayerd. All of
Tucker is a highly recruited football player from Alabama who received a scholarship of $$26,500$ to play for the Crimson Tide football team. His tuition and fees are $$12,000,$ books are
Which of the following is taxable income?a. Child support received before January 1, 2019b. Child support received after January 1, 2019c. Alimony received before January 1, 2019d. Alimony received
Desiree received the following payments: I. Gift from her employer of $$500$ II. Gift from her friend of $$100$ for styling her hair III. Gift from her mom of $$20,000$ Which of the above are
Jamal received stock as a gift from his aunt earlier this year. His aunt paid $$1,500$ for the stock several years ago. The fair market value of the stock on the date of the gift was $$4,000.$
Suzanne gave corporate bonds to her child, Benjamin. At the date of gift, Suzanne’s basis in the bonds was $$17,000$ and the bonds’ fair market value was $$12,000.$ No gift taxes were paid on
Carlos Anderson died on March 13, Year 9 and bequeathed his entire $$4,000,000$ estate to his daughter, Derna. His estate included investment real estate that had a tax basis to Carlos of
Sonny has tools that he has been using for personal use that cost him $4,500. Sonny has decided to start a handyman business and will use the tools 100% for business beginning May 1.As of May 1, the
Which of the following is taxable income?a. Damage award received for punitive damages from physical injuryb. Damage award received for punitive damages from a non-physical injuryc. Damage award
Bernice died in the current year. Her daughter, Beth, received Bernice’s home worth $$400,000,$ cash of $$25,000,$ and life insurance proceeds of $$100,000.$ Also, Bernice’s will designated
Which of the following is not taxable regarding forgiveness of debt?a. Debt forgiven by a bank who loaned you money to buy a carb. Debt forgiven by a vendor from which your business purchased
Which of the following is considered income in respect of a decedent?a. Salary earned but not paid until after decedent’s deathb. Accrued interest earned on bonds but not paid until after the
Wisconsin Tool Company Wisconsin Tool Company (WTC) is a business located in Madison, WI that manufacturers tool and die equipment. WTC executed three sales in Year 23.See Sale Agreements in the
Saenz-Qualified Business Income Javier and Maria Saenz, married filing jointly, have several investments. Their adjusted gross income and taxable income for 2023 is $ \$ $ 300,000 and $ \$ $
(L01) Do realized income and recognized income mean the same thing in the tax law?(L01) Nadia owns a bakery as a sole proprietor. One of her regular customers is unemployed from his regular full-time
(LO1) Suzanne prepares tax returns and Bill is a professional tennis instructor. If Suzanne prepares Bill's tax return in exchange for Bill providing her daughter tennis lessons, does either Suzanne
(LO2) Mark is a successful attorney specializing in mergers and acquisitions. He hires his 16-year-old son, Eric, to perform general office work and pays Eric $\( \$ $ 100,000\). Will this income
(L02) Drew is self-employed as a mobile pet groomer and received a check from his customer on December 28, Year11.He did not deposit the income until January 2, Year12. In which year is the income
(LO2) Describe the claim of right doctrine.
(LO2) Is a state tax refund includible in income if the taxpayer did not itemize her deductions last year?
(LO3) If a business has an average of $\( \$ $ 29\) million or less of gross receipts over the last 3 years, may the business use the cash method of accounting?
(LO3) Describe the difference in the cash method of accounting and the accrual method of accounting.
(L03) Provide two examples of gains that are ineligible for installment sale treatment.
(LO3) Which states are community property states?
(LO3) Which form is used to file a voluntary request to change an accounting method?
(L04) Will a single member LLC (SMLLC) report its revenue and expenses on Form 1065 or Schedule C?
(LO4) What form is used to report an individual's rental property activity?
(LO5) What is a specified service business activity?
(L01) Which items are considered forms of payment that must be included in income?a. Check received for tax return preparationb. Cash received for illegal drug businessc. Services exchanged for hair
(LO2) In which of the following situations is income taxable to Belinda in Year 1? Belinda owns an architectural firm and reports on the cash basis.I. Belinda received $\( \$ $ 6,000\) from a
(LO2) In the current tax year, Carlos received a state income tax refund related to taxes he had paid for the previous tax year. The refund was $\( \$ $ 400\), and Carlos also received interest
(L03) Juan sold an apartment building for $\( \$ $ 750,000\) in Year 22 that he had purchased in Year 12 for $\( \$ $ 500,000\). The adjusted basis in the building as of the date of sale is \(\(
(LO3) Which of the following statements is correct with regard to changes in accounting methods for federal income tax purposes?a. A taxpayer can never change a method of accounting except when
(LO4) Which of the following is not considered a flow-through entity? a. C corporation c. Partnership b. $\mathrm{S}$ corporation d. Sole proprietorship
(L04) On which Schedule of Form 1040 does an individual limited partner in a partnership report ordinary business income from Schedule K-1? a. Schedule A c. Schedule D b. Schedule C d. Schedule E
(L05) Which of the following is not a specified service activity for the purpose of calculating the qualified business income deduction? a. Accounting c. Athletics b. Financial services d.
In 2023, Cal, who is single, earns sole proprietor income of $245,000 generated from his law practice. He does not have any employees or qualified assets. Calʼs modified taxable income is $285,000.
Explain whether each of the following are considered taxable income. a. $10,000 payment for illegal services b. $500 Chicago Blackhawks tickets received in exchange for maintenance performed on your
(L05) Where does the QBI deduction appear on Form 1040?a. It is an itemized deduction taken on Schedule A of Form 1040.b. It is a deduction from AGI on Form 1040 taken after the deduction for the
Explain whether each of the following are considered taxable income. a. $10,000 payment for illegal services b. $500 Chicago Blackhawks tickets received in exchange for maintenance performed on your
(LO2) Sheldon lives in California, but he traveled to Florida between December 22-29 to celebrate Christmas with his mom. While he was in Florida, he purchased a lottery ticket on December 28. The
(LO2) Amir owns a 10-unit apartment building that generates monthly income of $\( \$ $ 18,000\). He asks his 16 -year-old brother, Varun, to collect the rent for October. In return, Amir will pay
(LO3) Declan owns stock (basis $ \$ $4,300), land (basis $ \$ $2,200), and a partnership interest (basis $\( \$ $ 15,000\) ). In the current year, Declan decides to sell the land for $\( \$ $
(LO3) Annabelle sells vacant land that was held for investment in her business for $\( \$ $ 281,250\). The land had an adjusted basis of $\( \$ $ 56,250\). The buyer has offered to pay for the
(LO4) Casper owns an apartment building that he actively manages which generates net rental income of $\( \$ $ 57,000\). He is also a $75 %$ general partner in the NotNow Partnership which
Enid operates an animal shelter as a sole proprietor which generates net revenue of $88,000. Enid has also made a self-employed health insurance payment of $6,000. What is Enidʼs qualified business
(LO5) Theo, single, is the sole shareholder of Theo's Tool and Dye, Inc., a tool and dye manufacturing company operating as an $S$ corporation. Theo reports qualified business income of $\( \$ $
Explain why each of the following receipts is reportable income or not.a. Check received for shoveling snow from neighborb. Gift card received for photography sessionc. $\($ 500 found in jewelry box
(LO2) Sasha owns eight profitable rental properties and would like to shift some of this income to her children, Darius, age 17, and Delilah, age 11. Darius would be responsible for yard maintenance,
(LO2) a. Damian owns several stock investments that typically pay out dividend income quarterly. He uses direct deposit and receives a $\( \$ $ 1,000\) payment in his account on December 31, Year
(L02) Juliette received $\( \$ $ 12,000\) in income in Year 4 under a contract with a customer who paid her. In Year 5, a contractual dispute arose between Juliette and her customer. The dispute
(LO2) Jana was able to itemize her deductions in the previous year. Her medical expenses after the $7.5 %$ AGI floor were $\( \$ $ 1,850\) that year. In the current year, Jana received a
(L03) Jensen loaned his brother Jackson $\( \$ $ 60,000\) for college and charged him an annual interest rate of $4 %$, or $\( \$ $ 200\) per month. Jackson paid Jensen $\( \$ $ 800\) on
(LO3) In late November, Year 4, Javi received $\( \$ $ 4,050\) in advance from a customer for monthly painting lessons that were to begin in December, Year 4 and run through May, Year 6.When must
(LO3) Janessa sold a rental apartment building for $\( \$ $ 1.2\) million that had an adjusted basis of $\( \$ $ 600,000\). The purchaser agreed to pay her $\( \$ $ 300,000\) cash now and make
(L03) In Year 1, Noah sells a collector automobile he purchased several years ago with a basis of $\( \$ $ 65,000\) to a buyer for $\( \$ $ 100,000\). As part of the purchase price, the buyer
(L03) In Year 1, Noah sells a collector automobile he purchased several years ago with a basis of $\( \$ $ 20,000\) to a buyer for $\( \$ $ 100,000\). As part of the purchase price, the buyer
(L03) Nate owns a repair shop and is selling some of his machinery for $\( \$ $ 100,000\) for two equal payments of $\( \$ $ 50,000\) each, plus adequate interest. His original basis was \(\( \$
(LO3) Lily and Peter live in California and file as married filing separately. Lily earns wages of $\( \$ $ 125,000\) working as a travel planner. Peter owns a surf shop and earns Schedule C income
(L04) Draymond owns a two-flat apartment building, where he resides in one apartment with 650 square feet and rents out the other apartment that has 1050 square feet. Draymond had the following
(L04) On December 10, Year 2, a calendar-year farmer purchased a 9-month supply of feed for $\( \$ $ 9,000\) and purchased $\( \$ $ 3,000\) of seed that she will use in the subsequent spring
(L05) Susan owns a floral shop as a sole proprietorship and has net earnings of $\( \$ $ 100,000\) on Schedule C. Susan is allowed a selfemployment tax deduction for AGI of $ \$ $7,065 \((\( \$
(L05) Roger, a single taxpayer, owns and operates a video game store. He does not have any employees and reported qualified business income of $\( \$ $ 125,000\) through a sole proprietorship in
(LO5) Kate, a single taxpayer, owns and operates an ice cream shop. She does not have any employees and reported qualified business income of $\( \$ $ 125,000\) through a sole proprietorship in
(LO5) Jaewoo is a CPA and operates his own CPA firm as a single-member LLC. His qualified business income from his accounting firm is $\( \$ $ 555,000\) for 2023 . Jaewoo paid wages of $\( \$ $
(LO5) Lexi, a single taxpayer, owns and operates a computer repair shop. She pays one employee $\( \$ $ 15,000\) in wages and has no qualified property. Lexi reported qualified business income
(L05 Advanced) Alexander, a single taxpayer, owns and operates a fishing supply store. He pays one employee $\( \$ $ 15,000\) in wages and has qualified property with an unadjusted basis of \(\( \$
(L05) Grant, a single taxpayer, has qualified business income and the following qualified business deductions after considering the wage limitation and the specified services limitation, generated
(L04) Pamela is an animal lover and would like to start her own dog grooming/daycare business. Pamela currently works from home for an advertising agency and earns $\( \$ $ 65,000\) per year. She
(LO5) Candy Cane, single, owns and operates the following businesses in 2023. None of these are specified service businesses:BusinessQBIW-2 wagesPropertyTreetop Decorations$\$ 100,000 $$\( \$ $
(L03) Installment Sale Zian Davis owns several apartment buildings in Los Angeles and has an offer from a business associate, Ace Arnold, to purchase one of the buildings on October 31, 2023. Ace
(L01) Underreported Income Anthony Johnson, who owns a local bar and works as its bartender, is a new client of yours and would like to meet to discuss his financial statements and tax return for the
(LO3) Installment Sale Maria sold land she had held for investment on November 3, Year 23 for $\( \$ $ 535,000\). Her basis in the land was $\( \$ $ 395,000\), and she incurred selling expenses
Elijah, Ben, and Amy help take care of their mother, Hazel, who moved into a nursing home this year. They come to you for help in determining who can claim Hazel as a dependent on their tax return.
Finn and Stella have been married since 2015 and have filed a joint tax return in the past. Both spouses have earned bachelorʼs degrees from a university. Finn works for the local library and earns
Shantel is not married and has a five-year-old son, Xander. Both Shantel and Xander live with Shantelʼs parents in her parents’ home. Xanderʼs father is not a part of his life and has not
Using Table 1.3 of the IRS Statistics on Income Individual Income Tax Returns Publication (Complete Report 2020)
Using Table 1.6 of the IRS Statistics on Income Individual Income Tax Returns Publication (Complete Report 2020)
For each of scenarios a-j, you will list the names of the individuals who qualify as a dependent, and also indicate whether the dependent is a qualifying child (QC), a qualifying relative (QR), or
Miranda is a 13-year-old student who lives with her parents. Her 2023 income is given below for three different scenarios. You will compute Mirandaʼs taxable income for each scenario, and the amount
Greg and Jan are married and file a joint tax return. They have two children: Ben and Kelly. Ben, age 20, was a full-time student during the current year and had scholarships of $$12,000.$ Greg and
Osrie’s support for the current tax year came from the following sources:Did Osrie provide more than 50% of his own support? Osrie's wages $9,000 (Osrie spent $6,000 of these funds.) Osrie's mother
Davante maintains a home for his son, Shay (age 17), and his brother, Sterling (age 26). Shay attends high school and works at the hardware store. He earns $$5,400.$ Sterling works as a manager at
Derrick is single and maintains a home for his son, Kyle, age 5.Derrick also maintains a home for his cousin, Francis, age 12, and a foster child, Jason, age 3.Derrick provides all the support for
Cal and Carolina have been married for 55 years. Unfortunately, Cal died in 2023. What is the proper filing status for Carolina to use in 2023?
Terry works for Fly by Night CPAs. He was under pressure to complete as many returns as possible and did not complete Form 8867 to determine whether head of household is the correct filing status for
Yu earns $14,250 during the tax year 2023 and is claimed as a dependent on his parentsʼ tax return. What is Yuʼs standard deduction?
Tieganʼs son, Archer (age 16), has earned income of $$5,000$ and unearned income of $$1,300$ for 2023. How much income is taxed at Archerʼs tax rate, and how much income is taxed at Tieganʼs
LaToya, age 33, is married and files married filing separately. She earns $3,900 in 2023. Is she required to file a tax return?
Wendy is a full-time college student who is claimed as a dependent by her parents. During Year 8, she had wages of $$2,000$ and interest income of $$1,200.$ What is the personal exemption amount
Rob and Jody file a joint return and have three children, Alyssa, age 21, Enrique, age 18, and Jenny, age 16.Alyssa is a fulltime college student and earned $8,800 as a part-time grocery
Roland and Meg were married ten years ago and have two children under the age of eight. In the current year, the couple divorces and Meg receives custody of the children.a. Who can claim the children
Arabel is 21 years old and attends college full-time. She earns $$3,500$ at a part-time job and lives with her spouse, Colton, in her parentsʼ home. Colton, age 25, earns $$5,600$ at a part-time
Abraham and Sarah file a joint return and have two children, Esau, age 6, and Ruby, age 4.Their nephew Joshua, age 14, also lives with them. He earns $$9,900$ at McDonald’s and attends high

Showing 200 - 300 of 809