U.S Taxation!

Catherine Carlson is a self-employed consultant. During 2016, her net profit from her sole proprietorship is $190,000. Catherine is single and has no other source of income.

a. What amount of self-employment tax must Catherine pay in 2016? Please show your work and explain your calculations.

b. What amount of self-employment tax can Catherine deduct on her 2016 federal individual income tax return? Please show your work and explain your calculations.

1

Question 2

During 2016, Benjamin Bennett, age 43, was employed as a business executive by Baker Corporation. In addition to his annual salary of $200,000, Baker provided employee fringe benefits to all employees on a nondiscriminatory basis. Benjamins benefits included the following items:

Medical insurance (The cost of Benjamins single policy was $15,000).

Group term life insurance (Each employee is provided with life insurance at twice the employees annual salary. The cost to Baker Corporation was $2,000.)

Qualified 401(k) plan (Bakers plan allows each employee to contribute up to 10% of the employees annual salary. Baker provides a dollar for dollar match up to 5% of the employees salary. Benjamin contributed 7% of his annual salary to the qualified 401(k) plan.)

Baker paid $4,000 for Benjamins professional memberships during 2016.

Baker paid $3,000 for Benjamin to attend professional conferences to maintain his job skills.

Baker reimbursed Benjamin for 100% of the business travel expenses he paid during 2016, which included $8,000 in travel and lodging costs, and $2,000 of meals and entertainment expenses. Baker has an accountable employee reimbursement plan.

a. How much gross income is includible on Benjamins 2016 Form W-2 and taxable to him? Please show your work and explain your calculations.

b. What amount is deductible in 2016 by Baker Corporation? (You may ignore payroll taxes for this calculation.) Please show your work and explain your calculations.

Question 3

Cramer Corporation, a calendar year C corporation, purchased and placed in service the following new assets on the following dates:

Date Asset Cost

6/20/2016 Computers 700,000

9/15/2016 Copiers 800,000

10/15/2016 Office Equipment 1,100,000

Cramer Corporation purchased no other assets during 2016 and its net income for 2016 is $2,000,000 before taking cost recovery deductions into account.

a. What is the maximum federal cost recovery deduction Cramer Corporation may take on the assets listed above in 2016? Please show your work and explain your calculations.

b. What is the maximum federal cost recovery deduction Cramer Corporation may take on the assets listed above in 2017? Please show your work and explain your calculations.

b. If Cramer Corporation sold only the copiers on September 30, 2018, what would Cramer Corporations federal cost recovery deduction be on the copiers in 2018? (You do not need to calculate the federal cost recovery deduction on the computers or on the office equipment in 2018.) Please show your work and explain your calculations.

Question 4

Assume that Cramer Corporation (see Question 3 above) also purchased and placed in service a new office building for $2,000,000 on July 31, 2016. The land was allocated $500,000 and the building was allocated $1,500,000 of the purchase price. Cramer Corporation plans to use the office building until October of 2020, when it will move to a larger office building.

a. What is the maximum tax cost recovery deduction Cramer can take on the office building in 2016? Please show your work and explain your calculations.

b. What is the maximum tax cost recovery deduction Cramer Corporation can take on the office building in 2017 through 2019? Please show your work and explain your calculations.

c. What is the maximum tax cost recovery deduction Cramer Corporation can take on the office building in 2020, assuming it sells the office building on October 1, 2020? Please show your work and explain your calculations