uestion 1:

Andrew is the sole owner of a small LLC, specializing in manufacturing ready-to-eat ramen noodle packages. Andrew sends you the following income/expenses items a week ago:

Income from the business: $800 k

Expenses:

Warehouse: $200k purchased on 12/31/2023

New production machinery: $100k purchased on 12/31/2023.

Employee salary: 200k (1 full-time manager = 50k, 15 part-time contractors, 10k each)

Andrew needs to meet with a few bosses from HEB and Walmart to advertise his products. Below are the expenses associated with those client meetings that Andrew documented.

Diamond Club and Bar tickets for both Andrew and clients = 20k

Food and Drinks = 10k

Utilities: 30k

a) Assuming Andrew cannot take any depreciation (no 179, no bonus, and no MACRS) in 2023, calculate Andrews AGI. Show details calculation and explanation.

b) How would your answer in a) change if Andrew now can take asset depreciation expenses? Show details calculation and explanation.

Question 2:

Andrea, a cash method taxpayer, starts her company (an LLC) in 2023. Since her company is new, she has to purchase many items for the business. Below are the list of items Andrea purchased in 2023:

Date Purchase	Item	Cost	Note
2/05/2023	Computers	$50,000
4/13/2023	Furniture	$10,000
7/7/2023	Equipment	$120,000
11/29/2023	Car	$35,000	To use as the delivery vehicle

a) What is Andreas total depreciation expenses in 2023? Show details calculation and explanation.

b) What is Andreas total depreciation expenses in the next year (2024)? Show details calculation and explanation.

Question 3:

Anderson started his lawn mowing business in 2023. As he does not know much about tax, Anderson often watches Tiktok and follows many tax/financial advisors there. Below are a few tax saving tips that Anderson has implemented in 2023 after following those Tiktok tax experts:

1. One of Andersons clients was a big car dealership in San Antonio. Anderson advises his clients that instead of paying him cash, they should pay him in car discount. Specifically, instead of Anderson receiving $5000 cash for his provided lawn service in 2023, he would receive a $5000 discount when purchasing his truck at the dealership in 2023. In that way, Anderson will not have to recognize the $5000 as gross income.

2. Anderson learned that one way to reduce tax liability is by accelerating expenses deduction. For that reason, in 2023, he tried his best to generate as much expenses as possible to lower his tax. One of the actions he took to generate business expenses is to intentionally run the red light with his business truck multiple times in 2023. Anderson then paid $3000 traffic tickets from those violations. And because he violated the traffic law using the company vehicle and during business hours, all of the expenses will be paid by his business, thus generating business deduction, lowering his business taxable income.

Would the above 2 tax saving strategies work? Address each of them separately and explain in detail why they would or would not work.

Question 4:

Amelias business goes bankrupt this year. To close her business, Amelia starts by selling off her business assets. Below are the asset disposition transactions:

Assets	Purchased Date	Cost	Sold date	Sold price
Delivery car	5/1/23	30k	12/31/23	25k
Furniture	3/20/20	40k	12/31/23	20k
Equipment	4/1/20	110k	12/31/23	100k
Land	1/1/22	150k	12/31/23	180k

Assume there is no Section 179 and bonus depreciation. Use MACRS only for depreciation.

Show detailed calculation and explanation

a) Calculate total accumulated depreciation of each asset until the sold date (12/31/23). Hint: Review textbook chapter on this. In the year of disposition, under half-year convention, only of MACRS normal rate is allowed.

b) Calculate the adjusted basis for each asset

c) Calculate the gain/loss for each asset

d) Point out the exact character of gain/loss for each asset gain/loss (ex: Ordinary, pure 1231, 1245, 1250, etc.)

e) Calculate the Net 1231 Gain/Loss

Hint: Be aware of 1245 Depreciation recapture and 1231 lookback rules

Question 5:

a) Describe in detail the All-event test to determine Income recognition for Accrual method taxpayer. When does an accrual taxpayer have to recognize an income in the scenario that the transaction take place across a period of time?

b) How do the IRS decide if a business is a small business? Describe in detail the test for small business.