Questions and Answers of South-Western Federal

Classify each of the following expenditures paid in 2019 as a deduction for AGI, a deduction from AGI, or not deductible:a. Roberto gives cash to his father as a birthday gift.b. Sandra gives cash to
Your client, John Butler, is an avid Houston Astros fan. Last March at the Astros’ home opener, as a result of a random drawing of those in attendance at the game, John won 300 Shipley Do-Nut
Martin S. Albert (Social Security number 111-11-1111) is 39 years old and is married to Michele R. Albert (Social Security number 123-45-6789). The Alberts live at 512 Ferry Road, Newport News, VA
Myrna and Geoffrey filed a joint tax return in 2018. Their AGI was $85,000, and itemized deductions were $24,700, which included $7,000 in state income tax and no other state or local taxes. In 2019,
Ridge is a generous individual. During the year, he made interest-free loans to various family members when the Federal rate was 3%. What are the tax consequences of the following loans by Ridge:a.
Alicia and Rafel are in the process of negotiating a divorce agreement to be finalized in 2019. They both worked during the marriage and contributed an equal amount to the marital assets. They own a
Nell and Kirby are in the process of negotiating their divorce agreement, to be finalized in 2019. What should be the tax consequences to Nell and Kirby if the following, considered individually,
A divorce agreement entered into in 2017 requires Alice to pay her former spouse $50,000 a year for the next ten years. Will the payments qualify as alimony? Why or why not?
Taylor, age 18, is a dependent of her parents. In the current year, she has the following income: $4,000 wages from a summer job, $1,800 interest from a money market account, and $2,000 interest from
During the year, Inez, a single individual, recorded the following transactions involving capital assets.Gain on the sale of unimproved land (held as an investment for 3 years)
Heather, age 12, lives in the same household with her mother, grandmother, and uncle.a. For whom is Heather a dependent?b. Which of Heather’s relatives takes precedence in determining your answer?
List an advantage and a disadvantage of using the U.S. Court of Federal Claims as the trial court for Federal tax litigation.
In May 2019, Hernando, a resident of California, has his 2017 Federal income tax return audited by the IRS. An assessment of additional tax is made because he had inadvertently omitted some rental
Elijah and Anastasia are husband and wife who have five married children and nine minor grandchildren. For 2019, what is the maximum amount they can give to their family (including the sons- and
Elijah and Anastasia are husband and wife who have five married children and nine minor grandchildren. For 2019, what is the maximum amount they can give to their family (including the sons- and
The Tax Cuts and Jobs Act (TCJA) of 2017 made changes in how business entities are taxed. Find an article written by a tax practitioner that discusses how the TCJA of 2017 changes choice of entity
Find a blog posting or discussion thread with comments from Communications tax professionals about Federal income tax consequences that occur when a business converts from an LLC to an S corporation
The foreign tax credit is especially valuable when a U.S. business earns income in a country whose income tax rates exceed those of the United States. List five countries whose tax rates on business
Read the "tax footnote" of five publicly traded U.S. corporations. Find the effective state/local income tax rates of each. Create a PowerPoint presentation (maximum of five slides) for your
Locate data on the size of the international economy, including data on international trade, foreign direct investment of U.S. firms, and investments in the United States by foreign firms. Useful
Make a list of five countries with which the United States does not have in force a bilateral income tax treaty.
Several U.S. states finance their operations without the benefit of a corporate income tax. Prepare five to seven PowerPoint slides, and make a presentation to your school's Accounting Club. In your
Write a paper of no more than two pages discussing the treatment of state and local taxes that is found in the text of U.S. income tax treaties with two other countries.
Prepare a graph of the grotvth in the number of S corporation returns filed. Obtain data for these years: 1980, 1985, 1990, 1995, 2000, 2005, and 2010. In a note to your instructor, explain the
Using no more than five slides, at least two of which include a chart or graphic to illustrate your observations, prepare a presentation for your fellow students at the annual Pay It Forward
Using an online research service, determine whether your state:a. Allows flow-through treatment for Federal S corporations.b. Requires any state-specific form to elect or elect out of S treatment at
Construct a graph that shows the increases in the numbers of LLCs and LLPs filing Federal tax returns for five-year periods beginning with 1970. Explain any trends in the data that you identify. Send
Determine the statutory tax treatment in your state of a one-member LLC. Write an e-mail to your professor comparing this rule with Federal tax law.
Find a blog that concentrates on the taxation of partners and partnerships. Post a message defining the terms inside basis and outside basis and illustrating why the distinction between them is
Find an article posted by a law, firm that comments on pitfalls to avoid in drafting partnership agreements. Ideally, use the home page of a firm that has offices in your state. Summarize the posting
On November 21, 2013, Max Baucus, Chairman of the Senate Finance Committee, released a proposal to change several provisions related to the taxation of business income including, but not
A nonresident alien earns money in the United States that is subject to Federal income tax. What guidance does the IRS provide about what tax form needs to be used and when it should be filed? In
Determine the applicable Federal interest rate as of today for purposes of§ 7872 below-market loans. In an e-mail to your professor, describe how the rate is determined and how you discovered the
Construct a chart for your state and four of its neighboring states. Provide '·Yes/No" entries for each state in the following categories. Send the chart to your classmates by e-mail.• Does the
Various Federal stimulus provisions were designed to assist state and local governments in borrowing funds, leveraging the gross income exclusion for such bond interest so that such jurisdictions
For me same corporation, summarize three key tax accounting applications, and point out how they differ from book income principles. Summarize your findings, and present them to your classmates in no
Find the audited financial statements of a major U.S. corporation.a. Summarize its most important financial accounting policies.b. Describe two elements of the Federal income tax law that
Locate the financial statements of three different companies that report information in the income tax footnote regarding uncertain tax positions under ASC 740-10. Create a schedule that compares
Locate articles or other discussions regarding the key differences between ASC 740 and International Accounting Standard No. 12 (related to income taxes). Summarize these key differences in an e-mail
Go to the U.S. Tax Court website.a. What different types of cases can be found on the site?b. What is a Summary Opinion? Find one.c. What is a Memorandum decision' Find one.d. Find the court's Rules
Locate the most recent financial statements of two companies in the same industry using the companies' websites o r the SEC's website (www.sec.gov). Perform a benchmarking analysis of the two
Find one instance of each of the following using a nonsubscription site on the Web or an online library at your school. In an e-mail to your professor, give a full citation for the document and
Find three blogs related to tax practice. In a one-page document, list the URLs for each blog and the general topical areas addressed at each. Pick one posting from one of the blogs and summarize it.
Develop an outline from which you will deliver a 10-minute talk to the local Chamber of Commerce, with the title "Regulation of the Tax Profession in the 21st Century." Use no more than four
Using the title "The Federal Taxing System Operates Outside the U.S. Constitution," write a two-page paper to submit in your Government Policy course. Do not address "tax protester" issues (e.g.,
President Franklin D. Roosevelt once said, "! am wholly unable to figure out the amount of tax," and w rote to the Federal Commissioner of Revenue, "may I ask that [the agency] let me know the amount
Prepare an outline for a IO-minute speech to give to your government class. The speech is titled "If You Don't Pay Federal Taxes, You Can't Vote."
Prepare a two-page paper titled ''How I Would Apply Federal Income Tax I.aw to Encourage the Availability of Universal Broadband in This Community" to submit to your economics professor.
Discuss with respect to the Federal policy for reducing poverty:a. The individual income tax.b. The Social Security tax.
Investment advisers and tax professionals are continuously striving to create sophisticated transactions and investment vehicles (i.e., tax-advantaged investments) that are designed to provide
Oil and gas ventures operating as publicly traded partnerships typically attract sophisticated investors who purchase limited partnership interests. Investments in these types of publicly traded
Investment interest is incurred when taxpayers borrow money that is used to purchase investment property. Using IRS Tax Statistics for the most recent year available, determine (a) the number of
More than one president and others have called for repeal of the LIFO method for tax purposes. Conduct an internet search to find arguments for and against this proposal. Prepare a summary of these
Scan the materials offered in several newsgroups frequented by tax advisers and consultants. In what context are "tax shelters" discussed by these professionals? Do these advisers and consultants
Samuel, age 32, loses his job in a corporate downsizing. As a result of his termination, he receives a distribution of the balance in his § 401(k) account of $20,000 ($25,000 - $5,000 Federal income
Dan, a professional basketball player, is to receive a bonus of $2 million for signing an employment contract. An NQDC plan is established to postpone the income beyond Dan's peak income years. In
Banana Corporation is a May 31 fiscal year corporation. Calculate Banana's tax liability if taxable income is $900,000 for:a. The fiscal year ended May 31, 2017b. The fiscal year ended May 31, 2018c.
I Gold and Silver are two unrelated calendar year corporations. For the current year, each had the following transactions: What is the dividends received deduction for: a. Gold Corporation? b. Silver
In 2018, Emily receives a distribution of $125,000 from her wholly owned calendar year corporation. As of January 1, 2018, the corporation has accumulated E & P of $15,000 and for 2018 has
Kim is a 40% shareholder in Taupe Corporation, a calendar year S corporation. During 2018, Taupe had an operating loss of $200,000. If Kim has a basis of $50,000 in his stock and has made a loan to
Garnet has the following capital asset transactions during 2018: Long-term capital gain .............. $8,000Short-term capital gain ............... 3,000Further, Garnet has an excess
Citron, a calendar year taxpayer, began business in January 2017. It hai a long-term capital gain of $5,000 in 2017 and a long-term capital loss c $10,000 in 2018. For both years, Citron had an
On December 6, 2018, Kestrel Company (a calendar year taxpayer) authorizes a cash donation of $50,000 to the Memphis Public Library. The pledge is carried out as follows: $15,000 on December 12,
Ida owns 30% of the stock in Mockingbird, a calendar year S corporation. Her basis in the stock as of January 1, 2018, is $130,000. Mockingbird has an operating loss of $500,000 in 2018 and an
Aiden has a 35% capital interest in the Oro Partnership and is entitled to a yearly guaranteed payment of $40,000. As of January 1, 2018, Aiden's basis in the partnership interest is $87,000. During
As of January 1, 2017, Norman has a basis of $85,000 in his 30% capital interest in the Plata Partnership. He and the partnership use the calendar year for tax purposes. The partnership incurs an
Beige Corporation has a fiscal year ending April 30. For the year ending April 30, 2018, Beige generated taxable income of $1.2 million. What is Beige Corporation's tax liability for this period?
Mallard Corporation was formed in December 2018 and plans to use the cash basis of accounting. Mallard incurred one-half of its organizational expenses in December 2018 and one-half in January 2019.
Kite, a calendar year C corporation, incurred a net operating loss in 2017 and a net operating loss in 2018. Explain any differences in the treatment of these NOLs.
In late December 2018, Gray Corporation (a calendar year C corporation) pledges a $ 50,000 donation to a local relief agency formed to fight AIDS in Africa. Although Gray's board of directors
Sylvia and Trang want to enter into business together and are unsure what type of entity to form (if any). They are concerned about the complexity of the paperwork required, the protection of
Louis is a participant in a SIMPLE IRA of his employer Brown, Inc. During 2018, he contributes 8% of his salary of $63,000, and his employer contributes 3%. What is the total amount that will be
Joanna, age 44, defers $23,000 in a qualified Solo § 401(k) plan in 2018.a. What amount must be returned to Joanna and by what date?b. In what year will the amount be taxed?c. What percent of the
Answer the following independent questions with respect to a deductible IRA and § 401(k) contributions for 2018:a. Govind, age 31, earns a salary of $26,000 and is not an active participant in any
On February 1 of year 0, John received a nonqualified stock option to purchase 100 shares of his employer's stock for $10 per share. At the time John received the option, it was selling for $5 per
Penny plans to retire in 2018 at age 70. Identify any issues that Penny faces with respect to distributions from her qualified retirement plan.
Harvey Pehrson, who is age 71, is going to receive a lump-sum distribution from a qualified plan in 2018. He has asked you to provide him with a description of the alternatives available to him for
Ryan is 39 years old and works as a real estate agent. Ryan's marginal tax rate is 24%. Ryan has a traditional (deductible) lRA with a current balance of $80,000. The lRA consists of $60,000 of
Bert Johnson, a sole proprietor with no employees, has a Keogh profit sharing plan to which he may contribute 25% of his annual earned income. For this purpose, "earned income" is defined as net
On November 19, 2016, Rex is granted a nonqualified stock option to purchase 100 shares of Tan Company. On that date, the stock is selling for $8 per share , and the option price is $9 per share. Rex
Rosa exercises ISOs for 100 shares of Copper Corporation common stock at the option price of $100 per share on May 21, 2018, when the fair market value is $120 per share. She sells the 100 shares of
On July 2, 2015, Black Corporation sold 1,000 of its common shares (worth $14 per share) to Earl, an employee, for $5 per share. The sale was subject to Earl's agreement to resell the shares to the
In 2018, Susan's sole proprietorship earns $300,000 of self employment net income (after the deduction for one-half of self employment tax). a. Calculate the maximum amount that Susan can deduct
In 2018, Magenta Corporation paid compensation of $45,300 to the participants in a profit sharing plan. During 2018, Magenta Corporation contributed $13,200 to the plan.a. Calculate Magenta's
Zaire Corporation grated an ISO for 250 shares of its stock to Bruno on July 20, 2017, for service rendered. The option price was $130 and the fair market value was $130 on the date of the grant.
On May 31, 2013, Andro Corporation sold 500 shares of its stock to Nombeko, an employee, for $100 per share. No special election is made. At the time of the sale, the fair market value of the stock
In 2018, Cao's compensation before his employer's contribution to a SEP is $66,000. Up to what amount can Cao's employer contribute and deduct in 2018?
Zack, a sole proprietor, has earned income of $85,000 in 2018 (after the deduction for one-half of self-employment tax). What is the maximum contribution Zack may make to a defined contribution Keogh
At the end of 2019, Magenta Manufacturing Company discovered that construction cost had been capitalized as a cost of the factory building in 2014 when it should have been treated as a cost of
On December 30, 2017, Maud sold land to her son, Charles, for $50,000 cash Decision Making and a 7% installment note for $350,000, payable over 10 years. Maud's cost of the land was $150,000. In
On June 30, 2018, Kelly sold property for $240,000 cash and a $960,000 note due on September 30, 2019. The note will also pay 6% interest, which is slightly higher than the Federal rate. Kelly's cost
Gold, Inc., is an accrual basis player. In 2018, an employee accidentally Communications spilled hazardous chemicals on leased property. The chemicals destroyed trees on neighboring property,
In 2017, Juan entered into a contract to write a book. The publisher advanced Juan $50,000, which was to be repaid out of future royalties. If the book was not completed by the end of 2018, however,
The Cardinal Wholesale Company is an S corporation that began business on March 1, 2018. Robert, a calendar year taxpayer, owns 100% of the Cardinal stock. He has $400,000 taxable income from other
Art Funkel started his incorporated medical practice on June 1, 2018. He immediately made an S election for the corporation. Art would like the corporation to adopt a tax year ending May 31 so that a
Using information from the IRS Tax Stats website (www.irs.gov / statistics), find a statistic for partnerships that indicates how much total noncapital gain there was in the latest year for which
Find a state website that has tax forms and instructions for the state. Call that state "X." Find a discussion in those sources that reveals whether state X taxes gains from the sale of real estate
Theresa has a 2017 Form 1040 Schedule D, line 16 gain of $45,000. There is also a $45,000 gain on the form's line 19. What is the nature of the gain? What alternative tax rate applies to it?
Ego Adrian has a 2017 Form 4797, line 9 gain of $56,000. He also has one trans-action on his 2017 Form 1040 Schedule D, Part I—a loss of $58,000. What is Adrian's AGI from these events?
On August 10, 2016, Jasper purchased business equipment for $40,000. On his 2016 tax return, $40,000 of 9 179 immediate expense was taken on the equipment. On July 14, 2017, Jasper sold the equipment

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