1.Carl Hansen had the following transactions during 2019:

Salary

$78,000

Interest income on bonds

Issued by Kellogg's Corporation

$3,500

Issued by the city of Midland, MI

4,000

7,500

Alimony received (from a divorce in 2012)

14,000

Child support received

12,000

State income taxes paid

2,800

Bank loan obtained to buy a car

23,000

What is Carl's AGI for 2019?

2.Barry Bad had the following transactions for 2019:

Salary

$ 52,300

Contribution to a traditional IRA

5,500

Gift from dad

14,000

Life insurance proceeds from policy on grandma's life (Barry was

named the beneficiary)

70,000

Gambling winnings

4,240

Donations to GoodWill

250

What is Barry's AGI for 2019?

3.Jim, age 14, is claimed as a dependent by his mother. In 2019, Jim has dividend income of $1,140 and earns $625 from a part-time job.

a.

What is Joe's taxable income for 2019?

b.

Suppose Jim earned $12,100 from the part-time job and has dividend income of $1,140. What is Jim's taxable income for 2019?

c.

If Jim's dividend interest is $6,100 and he earns $1,140 from the part-time job. What must we consider when calculating Jim's taxable income for 2019?

4.Ethel, age 79, is a widow.Her daughter claims her as a dependent. In 2019, she had income as follows: $5,500 interest on municipal's; $8,860 Social Security benefits; $2,300 income from a part-time job; and $1,920 dividends on stock investments. What is Ethel's taxable income for 2019?

5.Stan (age 66) and his wife Betty (age 68) file jointly. Emmitt (Betty's 92-year old father) lives with them. Betty is blind.In 2019, they received $10,000 of Tallahassee bond interest and interest income on corporate bonds of $61,000. Compute Stan and Betty's taxable income for 2019.

6.Susie Q is a cash-basis taxpayer, is a partner in S & P Accounting Services.As part of the partnership agreement, Susie Q is to receive 35% of the partnership's profits or losses. The partners may each make withdrawals of $9,000 each month for living expenses. Susie Q withdrew $99,000 during the year as her monthly draw in 2019. Last year Susie Q received $30,000 as her share of distributed 2019 profits. In October the partnership fell short on cash so Susie Q as her other partners was required to invest an additional $15,000 in the partnership.The partnership earnings before partners' withdrawals for 2019 totaled $900,000. Compute Susie Q's gross income from the partnership for 2019.

7.Ashley made a $60,000 interest-free loan to her daughter, Chloe, who used the money to pay off her credit card debt and to buy a CD. Chloe earns a $29,000 salary and $2,100 interest income on the certificate of deposit. The relevant Federal interest rate is 7% compounded semiannually. The loan is outstanding for the entire year.

a.

Based on the above information, what is the effect of the loan on Ashley's gross income for the year?

b.

The facts are the same as above, except you discovered that Ashley had made an additional loan of $42,000 to Chloe. Chloe used the funds to buy a new Honda. What are the effects of the loans on Ashley's gross income?

8.Pat purchased a CD due in 36 months. The cost of the CD is $840 and its maturity value is $1,000. No interest is paid each year, but the interest rate on the CD is 7.5% compounded semiannually. Pat also purchased a Series EE United States Government bond for $558, with a maturity value in 10 years of $1,000. This is the only Series EE bond he has ever owned. The Series EE bond's yield is 6% interest. Pat is 11 years old, has no other income and is claimed as a dependent on his parent's return. What is Pat's gross income from the CD and Series EE bond for 2019?

9.Louise died during the current year. At the time of her death, her accrued salary and commissions totaled $9,000 and were paid to her husband, Don. The employer also paid Don $45,000, which represented a gift to the deceased family. The employer had a written policy of making the salary payments to "help out the family in the time of its greatest need." Don collected Louise's interest in the employer's qualified profit sharing plan that amounted to $60,000. As beneficiary of his wife's life insurance policy, Don elected to collect the proceeds in installments rather than a lump sum. In the year of her death, he collected $10,000 which included $ 980 interest income. Which of these items are subject to income tax for Don?

10.Barbara was injured in an automobile accident. She has threatened to file a suit against the other party involved in the accident and has proposed the following settlement:

Damages for 25% loss of the use of her right arm

$200,000

Medical expenses

30,000

Loss of wages

10,000

Punitive damages

100,000

$340,000

The defendant's insurance company is reluctant to pay punitive damages. Also, the company disputes the amount of her loss of wages amount. Instead, the company offers to pay her $300,000 for damages to her arm and $30,000 medical expenses. Assuming Barbara is in the 35% marginal tax bracket, will her after-tax proceeds from accepting the offer be equal to what

she considers to be her actual damages (listed above)?

11.Jacob is employed by the Whirltub Company. All the full time employees are allowed to purchase appliances at the company's cost plus 10%. The employee also is given, at no cost, a 1-year service contract on all the goods purchased from the company. Jacob H. purchased a refrigerator for $1075.The company's normal selling price for the refrigerator is $1500; gross profit rate is 33%.Jacob also received a service contract, at no charge, that had a value of $200. During the year, Jacob was required to have his refrigerator serviced once. The cost of the call would have been $90 if he had not had the service contract. Is Jacob required to recognize any income from the purchase of the refrigerator, the receipt of the service contract, and the service call?

12.Paul, was considering purchasing an interest in a tax-exempt bond fund for $100,000, when he discovered that the interest must be included on his state income tax return. The interest rate of the fund is 6%. His marginal Federal tax rate is 35%, and his marginal state income tax rate is 9%. Paul itemizes his deductions on his Federal income tax return. As an alternative, Paul can purchase a state bond (a "double-exempt bond") yielding 5.8% interest that is exempt from both Federal and state income tax or a corporate bond which yields 7%.Which investment would yield the greater after-tax return?

13.Ashley incurs and pays the following expenses during the year:

Alimony of $10,000 to her former spouse, John. Divorce was final in 2017.

Child support of $13,000 to John for the care of their children.

Medical expenses of $8,000 for herself.

Charitable contributions of $7,100 to her church.

Contribution to her traditional IRA of $5,500.

Student loan interest of $1,800

Mortgage interest on her residence of $9,500.

Property taxes on her residence of $8,300.

State general sales tax of $836.

State and local income taxes for herself of $3,500.

Ashley's only income is a $90,000 salary. Calculate Ashley's deductionsforAGI andfromAGI.

14.Mr. Tipper owns the Tipper agency. The following selected data are taken from the business' balance sheet and income statement prepared using theaccrualmethod.

Revenue

$300,000

Salaries and commissions

150,000

Rent

8,000

Insurance

7,000

Utilities

5,000

Accounts receivable, 1/1/2019

42,000

Accounts receivable, 12/31/2019

35,000

Accounts payable, 1/1/2019

15,000

Accounts payable, 12/31/2019

13,000

Calculate Mr Tipper's net profit using the cash method for 2019.

15.Juan paid $36,000 in advance for a 36 month contract for IT services in order to protect against any rate increases on the service over the next three years.The service commences on September 1, 2019.How much of the $36,000 payment can he deduct in 2019 and 2020?

a.If Juan is an accrual basis taxpayer?

b.If Juan is a cash basis taxpayer?

16.Madame Thoroughbred runs a bookie shop (illegal under state law) and has the following items of income and expense.a. What is the amount that she must include in taxable income from her operation?

Income

$350,000

Expenses:

Rent

12,000

Utilities

2,500

Bribes to police

10,000

Medical expense

8,000

Qualified legal fees

20,500

Depreciation

14,000

Illegal kickbacks

17,000

b. What if the Madame ran a drug trafficking operation and her cost of goods sold was $45,000?

17. Joanne is married and owns a sole proprietorship.She employees three employees and pays $100,000 in wages during 2019.The business has no significant business assets.During 2019 Joanne reports a net business income of $260,000 and her taxable income before the QBI deduction is $275,000.What is her QBI deduction?

Assume instead that her net business income is $430,000 and her modified taxable income is $490,000.What is Joanne's QBI?

18.Larry owns a sporting goods store in Jackson. He is considering opening a business in RestWell, a community located 25 miles away. He incurs expenses of $52,000 in 2019 in investigating the feasibility and desirability of doing so. What amount can Larry deduct in 2019 if the business is:

a.

Another sports store which he opens in November 2019?

b.

Another sports store which he decides against opening?

c.

A hardware store which he opens in November 2019?

d.

A hardware store which he decides against opening?

19.During the year, Honey rented her vacation home for 180 days and lived in it for 17 days.During the remaining days, the vacation home was available for rental use. All expenses have been allocated for the rental portion. Is the vacation home subject to the limitation on the deductions of a personal/rental vacation home? What is Honey's gross income?

Rental Income$24,000

Allocated Mortgage Interest8,500

Maintenance & repairs1,750

Utilities1,800

Depreciation5,000

Property Tax allocation6,900

Management fees2,500

20.Joe's son, Ian, is $6,000 in arrears on his residential mortgage payments. Of the $6,000, $4,200 represents interest and $1,800 represents principal.

a.

If Joe pays the $6,000 to the lender, how much can he deduct? How much can Ian deduct?

b.

If Joe pays the $4,200 of interest to the lender and loans or gives $1,800 to Ian, who pays the $1,800 of principal, how much can Joe deduct? How much can Ian deduct?

c.

If Joe gives or lends the $6,000 to Ian who pays the lender, how much can he deduct? How much can Ian deduct?

d.

Advise Joe and Ian on how the payment should be made.

21.During 2019, Lucy has the following gains and losses:

StockGain/Loss on sale

Jack Rabbit stock held 28 mos.( 8,500)

GroFast stock held 7 mos(10,500)

Holstein stock held since 200413,000

Cromp Hotel stock held 3 mos7,000

a.

What is Lucy's tax liability if she is in the 12% tax bracket?

b.

What is Lucy's tax liability if her MTR = 35%?

22.Derek sells land with an adjusted basis of $170,000 and a fair market value of $155,000 to his kid-sister, Aimee, for $155,000. Derek reinvests the proceeds in the stock market. Aimee holds the land for one year and a day and sells it in the marketplace for $164,000.(optional -know the principles behind the question)

a.

Determine the tax consequences to Derek.

b.

Determine the tax consequences to Aimee.

23.During 2019, Scott received the following dividends on his stock:

StockDividend

Hopscotch Corp50,000

Four Square Ltd14,000

Hidenseek*20,000

Goatsgruff, a German company17,000

All traded on the US securities mkt

Note:The dividend paid byHidenseekis not a qualified dividend because the holding period requirement is not satisfied (i.e., must be held more than 60 days during the 121-day period beginning 60 days before the ex-dividend date). All others are qualified dividends.

a.What is Scott's total tax on his dividends if he is in the 32% MTR?

b.Scott has a friend Paul who is single and earns about $24,000 a year and received $4,500 in qualified dividends from Hopscotch.What is Paul's tax on his 2019 dividend income?

c.Scott wants your advice on whether he should invest $10,000 in a corporate bond which pays a before tax 6% interest rate or buy stock that yields a 5% dividend before tax. He is in the 32% marginal tax bracket.Paul would like the same analysis as well but only has $1,000 to invest.

24. Marlena is 60 years old and just retired from her company after 35 years of service.She contributed $68,200 in her company's qualified retirement plan and would now like to receive her retirement benefits as an annuity.The monthly

Annuity payment is $3,500 for the remainder of her life.

a.What is her gross income from her annuity payments in the first year if she retires March 31, 2019?

b.What is her gross income from the annuity if she still living 28 years after retiring (the 27^thyear)?

c.What is her gross income and deductions from the annuity contract in the year of her death if she dies after receiving 254 payments and died on May 31^stof that tax year?