REG Mini SIMs

Interesting Inc. placed the following assets into service in the current year 2017.

[table1 colalign=”left|right|right|right”]

; ; ; ;

Description; Date; Asset life; Cost

Computer; February 12; 5 years; $140,000

Office furniture; August 21; 7 years; $165,000

Truck; November 15; 5 years; $ 210,000

[/table1]

Interesting Inc. qualifies and is planning to opt for deduction under section 179. Interesting did not purchase or lease any other asset during the year. Taxable income of Interesting Inc. for the year 2017 was $ 620,000.

Calculate the maximum amount of deduction that Interesting Inc. can claim under section 179.

Interesting Inc. placed the following assets into service in the current year 2017.

[table1 colalign=”left|right|right|right”]

; ; ; ;

Description; Date; Asset life; Cost

Computer; February 12; 5 years; $140,000

Office furniture; August 21; 7 years; $165,000

Truck; November 15; 5 years; $ 210,000

[/table1]

Interesting Inc. qualifies and is planning to opt for deduction under section 179. Interesting did not purchase or lease any other asset during the year. Taxable income of Interesting Inc. for the year 2017 was $ 620,000.

Calculate the depreciation basis for the year 2017.

Intersting Inc. placed the following assets into service in the current year 2017.

[table1 colalign=”left|right|right|right”]

; ; ; ;

Description; Date; Asset life; Cost

Computer; February 12; 5 years; $140,000

Office furniture; August 21; 7 years; $165,000

Truck; November 15; 5 years; $ 210,000

[/table1]

Intersting Inc. qualifies and is planning to opt for deduction under section 179. Intersting did not purchase or lease any other asset during the year. Taxable income of Intersting Inc. for the year 2017 was $ 620,000.

Intersting Inc. calculates depreciation under MACRS. Which depreciation convention is applicable to Intersting Inc.?

Intersting Inc. placed the following assets into service in the current year 2017.

[table1 colalign=”left|right|right|right”]

; ; ; ;

Description; Date; Asset life; Cost

Computer; February 12; 5 years; $140,000

Office furniture; August 21; 7 years; $165,000

Truck; November 15; 5 years; $ 210,000

[/table1]

Intersting Inc. qualifies and is planning to opt for deduction under section 179. Intersting did not purchase or lease any other asset during the year. Taxable income of Intersting Inc. for the year 2017 was $ 620,000.

Intersting Inc. calculates depreciation under MACRS and chose to fully deduct the cost of Office furniture and Truck for the purpose of Section 179. Which Mid-Quarter factor should it use in the calculation of depreciation?

Intersting Inc. placed the following assets into service in the current year 2017.

[table1 colalign=”left|right|right|right”]

; ; ; ;

Description; Date; Asset life; Cost

Computer; February 12; 5 years; $140,000

Office furniture; August 21; 7 years; $165,000

Truck; November 15; 5 years; $ 210,000

[/table1]

Intersting Inc. qualifies and is planning to opt for deduction under section 179. Intersting did not purchase or lease any other asset during the year. Taxable income of Intersting Inc. for the year 2017 was $ 620,000.

Intersting Inc. calculates depreciation under MACRS and chose to fully deduct the cost of Office furniture and Truck for the purpose of Section 179. Calculate the depreciation for 2017.

Mr. and Mrs. R, are cash basis taxpayers. Mrs. R earned $60,000 as an accountant and $2,000 as a part-time insurance appraiser during year 1. Mrs. R who was permanently disabled on her job, collected state disability benefits until her death on August 9th Year 1. Mrs R until her death and Mr. R along with their 13- year old son RJ and Mr. R’s unmarried cousin DJ lived in their principal residence during Year 1 and year 2. RJ received $250 a month in survivor social security benefits that began on September 1, Year 1 and will continue to receive until he turns 18. DJ had no income in year 1 or year 2. The R’s provided over one-half the support of RJ and DJ for both Year 1 and Year 2. RJ and DJ are both US citizens. Mr. R did not remarry. The following were the receipts for year 1 by the R’s.

[table1 colalign=”left|right”]

; ;

Description; Amount

Earned Income;62,000

State disability benefits; 1,800

Interest on Municipal bonds; 75

Interest on Refund from amended tax return; 65

Interest from savings account; 175

Gift; 2,000

Pension benefits; 800

Jury duty pay; 250

Gambling winnings; 300

Life insurance proceeds; 4,000

[/table1]

• Mr. R had $120 in gambling losses.
• Mr. R received the pension distributions from a qualified pension plan, paid for in all by Mrs. R’s employers
• Mr. R’s aunt gave him a gift of $2,000 for his 48th birthday.
• Mr. R was the beneficiary of the life insurance policy on his wife’s life. He received a lump sum distribution. Mrs. R had paid $400 in premiums.

What is the filing status on the Year 1 Federal income tax return?

Mr. and Mrs. R, are cash basis taxpayers. Mrs. R earned $60,000 as an accountant and $2,000 as a part-time insurance appraiser during year 1. Mrs. R who was permanently disabled on her job, collected state disability benefits until her death on August 9th Year 1. Mrs R until her death and Mr. R along with their 13- year old son RJ and Mr. R’s unmarried cousin DJ lived in their principal residence during Year 1 and year 2. RJ received $250 a month in survivor social security benefits that began on September 1, Year 1 and will continue to receive until he turns 18. DJ had no income in year 1 or year 2. The R’s provided over one-half the support of RJ and DJ for both Year 1 and Year 2. RJ and DJ are both US citizens. Mr. R did not remarry. The following were the receipts for year 1 by the R’s.

[table1 colalign=”left|right”]

; ;

Description; Amount

Earned Income;62,000

State disability benefits; 1,800

Interest on Municipal bonds; 75

Interest on Refund from amended tax return; 65

Interest from savings account; 175

Gift; 2,000

Pension benefits; 800

Jury duty pay; 250

Gambling winnings; 300

Life insurance proceeds; 4,000

[/table1]

• Mr. R had $120 in gambling losses.
• Mr. R received the pension distributions from a qualified pension plan, paid for in all by Mrs. R’s employers
• Mr. R’s aunt gave him a gift of $2,000 for his 48th birthday.
• Mr. R was the beneficiary of the life insurance policy on his wife’s life. He received a lump sum distribution. Mrs. R had paid $400 in premiums.

What is the filing status on the Year 2 Federal income tax return?

Mr. and Mrs. R, are cash basis taxpayers. Mrs. R earned $60,000 as an accountant and $2,000 as a part-time insurance appraiser during year 1. Mrs. R who was permanently disabled on her job, collected state disability benefits until her death on August 9th Year 1. Mrs R until her death and Mr. R along with their 13- year old son RJ and Mr. R’s unmarried cousin DJ lived in their principal residence during Year 1 and year 2. RJ received $250 a month in survivor social security benefits that began on September 1, Year 1 and will continue to receive until he turns 18. DJ had no income in year 1 or year 2. The R’s provided over one-half the support of RJ and DJ for both Year 1 and Year 2. RJ and DJ are both US citizens. Mr. R did not remarry. The following were the receipts for year 1 by the R’s.

[table1 colalign=”left|right”]

; ;

Description; Amount

Earned Income;62,000

State disability benefits; 1,800

Interest on Municipal bonds; 75

Interest on Refund from amended tax return; 65

Interest from savings account; 175

Gift; 2,000

Pension benefits; 800

Jury duty pay; 250

Gambling winnings; 300

Life insurance proceeds; 4,000

[/table1]

• Mr. R had $120 in gambling losses.
• Mr. R received the pension distributions from a qualified pension plan, paid for in all by Mrs. R’s employers
• Mr. R’s aunt gave him a gift of $2,000 for his 48th birthday.
• Mr. R was the beneficiary of the life insurance policy on his wife’s life. He received a lump sum distribution. Mrs. R had paid $400 in premiums.

From the income sources above calculate the total to be included in calculating the gross income of Mr. R in his Year 1 Federal income tax return?

Mr. and Mrs. R, are cash basis taxpayers. Mrs. R earned $60,000 as an accountant and $2,000 as a part-time insurance appraiser during year 1. Mrs. R who was permanently disabled on her job, collected state disability benefits until her death on August 9th Year 1. Mrs R until her death and Mr. R along with their 13- year old son RJ and Mr. R’s unmarried cousin DJ lived in their principal residence during Year 1 and year 2. RJ received $250 a month in survivor social security benefits that began on September 1, Year 1 and will continue to receive until he turns 18. DJ had no income in year 1 or year 2. The R’s provided over one-half the support of RJ and DJ for both Year 1 and Year 2. RJ and DJ are both US citizens. Mr. R did not remarry. The following were the receipts for year 1 by the R’s.

[table1 colalign=”left|right”]

; ;

Description; Amount

Earned Income;62,000

State disability benefits; 1,800

Interest on Municipal bonds; 75

Interest on Refund from amended tax return; 65

Interest from savings account; 175

Gift; 2,000

Pension benefits; 800

Jury duty pay; 250

Gambling winnings; 300

Life insurance proceeds; 4,000

[/table1]

• Mr. R had $120 in gambling losses.
• Mr. R received the pension distributions from a qualified pension plan, paid for in all by Mrs. R’s employers
• Mr. R’s aunt gave him a gift of $2,000 for his 48th birthday.
• Mr. R was the beneficiary of the life insurance policy on his wife’s life. He received a lump sum distribution. Mrs. R had paid $400 in premiums.

Advice Mr. R if he can claim the $400 paid as premium on the life insurance policy of Mrs. R is deductible expense for Adjusted gross income.

Mr. and Mrs. R, are cash basis taxpayers. Mrs. R earned $60,000 as an accountant and $2,000 as a part-time insurance appraiser during year 1. Mrs. R who was permanently disabled on her job, collected state disability benefits until her death on August 9th Year 1. Mrs R until her death and Mr. R along with their 13- year old son RJ and Mr. R’s unmarried cousin DJ lived in their principal residence during Year 1 and year 2. RJ received $250 a month in survivor social security benefits that began on September 1, Year 1 and will continue to receive until he turns 18. DJ had no income in year 1 or year 2. The R’s provided over one-half the support of RJ and DJ for both Year 1 and Year 2. RJ and DJ are both US citizens. Mr. R did not remarry. The following were the receipts for year 1 by the R’s.

[table1 colalign=”left|right”]

; ;

Description; Amount

Earned Income;62,000

State disability benefits; 1,800

Interest on Municipal bonds; 75

Interest on Refund from amended tax return; 65

Interest from savings account; 175

Gift; 2,000

Pension benefits; 800

Jury duty pay; 250

Gambling winnings; 300

Life insurance proceeds; 4,000

[/table1]

• Mr. R had $120 in gambling losses.
• Mr. R received the pension distributions from a qualified pension plan, paid for in all by Mrs. R’s employers
• Mr. R’s aunt gave him a gift of $2,000 for his 48th birthday.
• Mr. R was the beneficiary of the life insurance policy on his wife’s life. He received a lump sum distribution. Mrs. R had paid $400 in premiums.

Advice Mr. R if he can claim the $120 gambling loss as a deduction for Adjusted gross income.

Mr. P, a self-employed maintains a log of his expenses and incomes. Following are few of the transaction from Mr. P’s logbook.

• Share of ordinary income of $2,000 from an investment in a limited partnership reported in Form 1065, Schedule K-1
• Royalties of $6,000 received
• Retainer fee of $20,000 received from clients
• Prize money of $1000 was received from participating in a TV contest
• Mr. P paid $1,250 of qualifying medical expenses which was not reimbursed by insurance.

Mr. P is working on his tax return and needs help in completing the Form 1040 and its schedules. Advice Mr. P, where should he report the income reported in Form 1065, Sch K-1.

Mr. P, a self-employed maintains a log of his expenses and incomes. Following are few of the transaction from Mr. P’s logbook.

• Share of ordinary income of $2,000 from an investment in a limited partnership reported in Form 1065, Schedule K-1
• Royalties of $6,000 received
• Retainer fee of $20,000 received from clients
• Paid $300 for a business lunch meeting with clients.
• Lodging expenses of $250 incurred on a business trip out of town.
• Prize money of $1000 was received from participating in a TV contest
• Paid $1,250 of qualifying medical expenses which was not reimbursed by insurance.

Mr. P is working on his tax return and needs help in completing the Form 1040 and its schedules.

Calculate the amounts to be reported in Schedule C.

Mr. P, a self-employed maintains a log of his expenses and incomes. Following are few of the transaction from Mr. P’s logbook.

• Share of ordinary income of $2,000 from an investment in a limited partnership reported in Form 1065, Schedule K-1
• Royalties of $6,000 received
• Retainer fee of $20,000 received from clients
• Paid $300 for a business lunch meeting with clients.
• Lodging expenses of $250 incurred on a business trip out of town.
• Prize money of $1000 was received from participating in a TV contest
• Paid $1,250 of qualifying medical expenses which was not reimbursed by insurance.

Mr. P is working on his tax return and needs help in completing the Form 1040 and its schedules.

Advice Mr. P, where should he report the prize money.

Mr. P, a self-employed maintains a log of his expenses and incomes. Following are few of the transaction from Mr. P’s logbook.

• Share of ordinary income of $2,000 from an investment in a limited partnership reported in Form 1065, Schedule K-1
• Royalties of $6,000 received
• Retainer fee of $20,000 received from clients
• Paid $300 for a business lunch meeting with clients.
• Lodging expenses of $250 incurred on a business trip out of town.
• Prize money of $1000 was received from participating in a TV contest
• Paid $1,250 of qualifying medical expenses which was not reimbursed by insurance.

Mr. P is working on his tax return and needs help in completing the Form 1040 and its schedules.

Advice Mr. P, where should he report the medical expense not reimbursed by insurance.

Mr. P, a self-employed maintains a log of his expenses and incomes. Following are few of the transaction from Mr. P’s logbook.

• Share of ordinary income of $2,000 from an investment in a limited partnership reported in Form 1065, Schedule K-1
• Royalties of $6,000 received
• Retainer fee of $20,000 received from clients
• Paid $300 for a business lunch meeting with clients.
• Lodging expenses of $250 incurred on a business trip out of town.
• Prize money of $1000 was received from participating in a TV contest
• Paid $1,250 of qualifying medical expenses which was not reimbursed by insurance.

Mr. P is working on his tax return and needs help in completing the Form 1040 and its schedules.

Advice Mr. P, where should he report the dividends received from mutual funds.

T corp., a C corporation maintains its books on accrual basis and closes its books on 31st December. T Corp., began operations on January 1, year 3. It filed its Year 3 federal income tax return on March 15, Year 4. The following are the transactions from the books of T corp.

• T reimbursed its employees for expenses they incurred for travel and business meals of $ 75,000 and $40,000 respectively. The reimbursements qualified the conditions for deductibility and it did not treat the expenses as employee contribution.
• T also made premium payments of $9,000 towards term life insurance of its key employees and was both the policy owner and beneficiary.
• T placed in service computers costing $40,000 on January 2, year 3. T depreciated its assets on a straight-line basis for book’s but is eligible to apply MACRS for tax purpose.
• T paid $25,000 towards advertising expenses to promote its product line. 7% of the products were still in the ending inventory.
• T received $14,000 as proceeds on the term life insurance policy on the life of a customer, who owed T $12,000 for a special order. The policy was assigned to T as a collateral security for the debt.

Advice the finance manager on the treatment of reimbursement expenses to its employees for tax purposes.

T corp., a C corporation maintains its books on accrual basis and closes its books on 31st December. T Corp., began operations on January 1, year 3. It filed its Year 3 federal income tax return on March 15, Year 4. The following are the transactions from the books of T corp.

• T reimbursed its employees for expenses they incurred for travel and business meals of $ 75,000 and $40,000 respectively. The reimbursements qualified the conditions for deductibility and it did not treat the expenses as employee contribution.
• T also made premium payments of $9,000 towards term life insurance of its key employees and was both the policy owner and beneficiary.
• T placed in service computers costing $40,000 on January 2, year 3. T depreciated its assets on a straight-line basis for book’s but is eligible to apply MACRS for tax purpose.
• T paid $25,000 towards advertising expenses to promote its product line. 7% of the products were still in the ending inventory.
• T received $14,000 as proceeds on the term life insurance policy on the life of a customer, who owed T $12,000 for a special order. The policy was assigned to T as a collateral security for the debt.

Advice the finance manager on the treatment of Insurance premium expenses on its key employees in adjusting the book income for Schedule M-1 purpose.

T corp., a C corporation maintains its books on accrual basis and closes its books on 31st December. T Corp., began operations on January 1, year 3. It filed its Year 3 federal income tax return on March 15, Year 4. The following are the transactions from the books of T corp.

• T reimbursed its employees for expenses they incurred for travel and business meals of $ 75,000 and $40,000 respectively. The reimbursements qualified the conditions for deductibility and it did not treat the expenses as employee contribution.
• T also made premium payments of $9,000 towards term life insurance of its key employees and was both the policy owner and beneficiary.
• T placed in service computers costing $40,000 on January 2, year 3. T depreciated its assets on a straight-line basis for book’s but is eligible to apply MACRS for tax purpose.
• T paid $25,000 towards advertising expenses to promote its product line. 7% of the products were still in the ending inventory.
• T received $14,000 as proceeds on the term life insurance policy on the life of a customer, who owed T $12,000 for a special order. The policy was assigned to T as a collateral security for the debt.

Calculate the MACRS depreciation for Year 3.

T corp., a C corporation maintains its books on accrual basis and closes its books on 31st December. T Corp., began operations on January 1, year 3. It filed its Year 3 federal income tax return on March 15, Year 4. The following are the transactions from the books of T corp.

• T reimbursed its employees for expenses they incurred for travel and business meals of $ 75,000 and $40,000 respectively. The reimbursements qualified the conditions for deductibility and it did not treat the expenses as employee contribution.
• T also made premium payments of $9,000 towards term life insurance of its key employees and was both the policy owner and beneficiary.
• T placed in service computers costing $40,000 on January 2, year 3. T depreciated its assets on a straight-line basis for book’s but is eligible to apply MACRS for tax purpose.
• T paid $25,000 towards advertising expenses to promote its product line. 7% of the products were still in the ending inventory.
• T received $14,000 as proceeds on the term life insurance policy on the life of a customer, who owed T $12,000 for a special order. The policy was assigned to T as a collateral security for the debt.

Advice the finance manager on the treatment of advertising expenses for calculation of deduction for tax purpose on T’s federal income tax return.

T corp., a C corporation maintains its books on accrual basis and closes its books on 31st December. T Corp., began operations on January 1, year 3. It filed its Year 3 federal income tax return on March 15, Year 4. The following are the transactions from the books of T corp.

• T reimbursed its employees for expenses they incurred for travel and business meals of $ 75,000 and $40,000 respectively. The reimbursements qualified the conditions for deductibility and it did not treat the expenses as employee contribution.
• T also made premium payments of $9,000 towards term life insurance of its key employees and was both the policy owner and beneficiary.
• T placed in service computers costing $40,000 on January 2, year 3. T depreciated its assets on a straight-line basis for book’s but is eligible to apply MACRS for tax purpose.
• T paid $25,000 towards advertising expenses to promote its product line. 7% of the products were still in the ending inventory.
• T received $14,000 as proceeds on the term life insurance policy on the life of a customer, who owed T $12,000 for a special order. The policy was assigned to T as a collateral security for the debt.

Advice the finance manager on the treatment of Insurance proceeds received as settlement for debt to be included in calculating the income for tax purposes

On January 1, year 1, Chen plans to form a new, calendar-year C corporation, ABC Corp., with an initial cash contribution of $800,000. The nature of this initial contribution will depend on whether Chen implements Plan 1 or Plan 2.

Plan 1: $800,000 cash is contributed in return for capital stock.

Plan 2: $320,000 cash is contributed in return for capital stock, and $480,000 is loaned to ABC Corp. at an annual rate of interest of 5%. An annual combined principal and interest payments of $70,000 will be made each year on December 31. 

Chen will own 100% of the outstanding stock of ABC Corp. Chen will earn a reasonable salary as an officer-employee under both plans. In addition, Chen will receive a total of $100,000 at the end of each year as either a dividend (plan 1) or as a loan repayment, including interest, with the remainder as a dividend (plan 2).

Assume that the individual ordinary federal tax rate is 30% and that the tax rate on dividends is 15%. The corporate federal tax rate is 35%, and there is no state income tax. Assume further that the terms of the loan provide adequate support so that the IRS could not recharacterize the loan as equity.

ABC Corp. projects taxable income of $200,000 for the year ended December 31, year 1, before federal income tax and a $100,000 shareholder distribution. 

Calculate the Dividend income (after tax cash flow)under each plan.

On January 1, year 1, Chen plans to form a new, calendar-year C corporation, ABC Corp., with an initial cash contribution of $800,000. The nature of this initial contribution will depend on whether Chen implements Plan 1 or Plan 2.

Plan 1: $800,000 cash is contributed in return for capital stock.

Plan 2: $320,000 cash is contributed in return for capital stock, and $480,000 is loaned to ABC Corp. at an annual rate of interest of 5%. An annual combined principal and interest payments of $70,000 will be made each year on December 31. 

Chen will own 100% of the outstanding stock of ABC Corp. Chen will earn a reasonable salary as an officer-employee under both plans. In addition, Chen will receive a total of $100,000 at the end of each year as either a dividend (plan 1) or as a loan repayment, including interest, with the remainder as a dividend (plan 2).

Assume that the individual ordinary federal tax rate is 30% and that the tax rate on dividends is 15%. The corporate federal tax rate is 35%, and there is no state income tax. Assume further that the terms of the loan provide adequate support so that the IRS could not recharacterize the loan as equity.

ABC Corp. projects taxable income of $200,000 for the year ended December 31, year 1, before federal income tax and a $100,000 shareholder distribution. 

Calculate the Interest income and Loan principal repayment (after tax cash flow)under each plan 2.

On January 1, year 1, Chen plans to form a new, calendar-year C corporation, ABC Corp., with an initial cash contribution of $800,000. The nature of this initial contribution will depend on whether Chen implements Plan 1 or Plan 2.

Plan 1: $800,000 cash is contributed in return for capital stock.

Plan 2: $320,000 cash is contributed in return for capital stock, and $480,000 is loaned to ABC Corp. at an annual rate of interest of 5%. An annual combined principal and interest payments of $70,000 will be made each year on December 31. 

Chen will own 100% of the outstanding stock of ABC Corp. Chen will earn a reasonable salary as an officer-employee under both plans. In addition, Chen will receive a total of $100,000 at the end of each year as either a dividend (plan 1) or as a loan repayment, including interest, with the remainder as a dividend (plan 2).

Assume that the individual ordinary federal tax rate is 30% and that the tax rate on dividends is 15%. The corporate federal tax rate is 35%, and there is no state income tax. Assume further that the terms of the loan provide adequate support so that the IRS could not recharacterize the loan as equity.

ABC Corp. projects taxable income of $200,000 for the year ended December 31, year 1, before federal income tax and a $100,000 shareholder distribution. 

Calculate the anticipated taxable income of ABC Corp. under Plan 1 and Plan 2 for year 1. 

On January 1, year 1, Chen plans to form a new, calendar-year C corporation, ABC Corp., with an initial cash contribution of $800,000. The nature of this initial contribution will depend on whether Chen implements Plan 1 or Plan 2.

Plan 1: $800,000 cash is contributed in return for capital stock.

Plan 2: $320,000 cash is contributed in return for capital stock, and $480,000 is loaned to ABC Corp. at an annual rate of interest of 5%. An annual combined principal and interest payments of $70,000 will be made each year on December 31. 

Chen will own 100% of the outstanding stock of ABC Corp. Chen will earn a reasonable salary as an officer-employee under both plans. In addition, Chen will receive a total of $100,000 at the end of each year as either a dividend (plan 1) or as a loan repayment, including interest, with the remainder as a dividend (plan 2).

Assume that the individual ordinary federal tax rate is 30% and that the tax rate on dividends is 15%. The corporate federal tax rate is 35%, and there is no state income tax. Assume further that the terms of the loan provide adequate support so that the IRS could not recharacterize the loan as equity.

ABC Corp. projects taxable income of $200,000 for the year ended December 31, year 1, before federal income tax and a $100,000 shareholder distribution. 

Calculate the anticipated federal income tax liability of ABC Corp. under Plan 1 and Plan 2 for year 1. 

On January 10, year 2, Joe gave his wife, Dale a diamond necklace with a fair market value of $11,000 Joe received the necklace in year 1 as part of an inheritance when the basis was $5,000 and the fair market value was $8,500. No gift tax was paid.

Dale sold the necklace on December 10, year 2, for $14,200. Calculate the Year 2 gift amount subject to tax and year 2 gain or loss recognised on the transaction. 

On March 15, year 2, Todd gave Sara property with a fair market value of $200,000 when the adjusted basis was $160,000. Upon transfer, Todd paid $66,600 of gift tax related to the gift. 

Sara later sold the property on November 11, Year 2, for $250,000. Calculate the Year 2 gift amount subject to tax and year 2 gain or loss recognised on the transaction. 

On February 15, year 2, Ruby gave Mark, land valued at $90,000. Ruby’s adjusted basis in the property was $80,000. No gift tax was paid.

On December 22, year 2, Mark sold the property for $115,000. Calculate the Year 2 gift amount subject to tax and year 2 gain or loss recognised on the transaction. 

On May 1, year 2, Johann gave Jeff 1,000 shares of stock when the shares were valued at $15 per share. Johann’s basis was $22,000. No gift tax was paid. 

On May 15, year 2, Jeff sold 400 shares for $13 per share. Calculate the Year 2 gift amount subject to tax and year 2 gain or loss recognised on the transaction. 

Eventt Corp. is a calendar-year C corporation that has 2,000 shares of common stock of equal value outstanding. The stock ownership is being reviewed for personal holding company (PHC) purposes to determine whether five or fewer shareholders own more than 50% of Eventt directly or constructively.

Stock ownership in Eventt is shown in the Shareholder group column of the table below. Shareholders Abbie, Bertha, Clyde, Demetrius and Elgrid are not related. None of the 40 remaining shareholders, each of whom own 10 shares of stock, are related. 

Calculate the total amount of shares owned directly and constructively by Abbie and her group of shareholders. 

Eventt Corp. is a calendar-year C corporation that has 2,000 shares of common stock of equal value outstanding. The stock ownership is being reviewed for personal holding company (PHC) purposes to determine whether five or fewer shareholders own more than 50% of Eventt directly or constructively.

Stock ownership in Eventt is shown in the Shareholder group column of the table below. Shareholders Abbie, Bertha, Clyde, Demetrius and Elgrid are not related. None of the 40 remaining shareholders, each of whom own 10 shares of stock, are related. 

Calculate the total amount of shares owned directly and constructively by Bertha and her group of shareholders. 

Eventt Corp. is a calendar-year C corporation that has 2,000 shares of common stock of equal value outstanding. The stock ownership is being reviewed for personal holding company (PHC) purposes to determine whether five or fewer shareholders own more than 50% of Eventt directly or constructively.

Stock ownership in Eventt is shown in the Shareholder group column of the table below. Shareholders Abbie, Bertha, Clyde, Demetrius and Elgrid are not related. None of the 40 remaining shareholders, each of whom own 10 shares of stock, are related. 

Calculate the total amount of shares owned directly and constructively by Clyde and her group of shareholders. 

Eventt Corp. is a calendar-year C corporation that has 2,000 shares of common stock of equal value outstanding. The stock ownership is being reviewed for personal holding company (PHC) purposes to determine whether five or fewer shareholders own more than 50% of Eventt directly or constructively.

Stock ownership in Eventt is shown in the Shareholder group column of the table below. Shareholders Abbie, Bertha, Clyde, Demetrius and Elgrid are not related. None of the 40 remaining shareholders, each of whom own 10 shares of stock, are related. 

Calculate the total amount of shares owned directly and constructively by Demetrius and his group of shareholders. 

Eventt Corp. is a calendar-year C corporation that has 2,000 shares of common stock of equal value outstanding. The stock ownership is being reviewed for personal holding company (PHC) purposes to determine whether five or fewer shareholders own more than 50% of Eventt directly or constructively.

Stock ownership in Eventt is shown in the Shareholder group column of the table below. Shareholders Abbie, Bertha, Clyde, Demetrius and Elgrid are not related. None of the 40 remaining shareholders, each of whom own 10 shares of stock, are related. 

Calculate the total amount of shares owned directly and constructively by Elgrid and his group of shareholders. 

Eventt Corp. is a calendar-year C corporation that has 2,000 shares of common stock of equal value outstanding. The stock ownership is being reviewed for personal holding company (PHC) purposes to determine whether five or fewer shareholders own more than 50% of Eventt directly or constructively.

Stock ownership in Eventt is shown in the Shareholder group column of the table below. Shareholders Abbie, Bertha, Clyde, Demetrius and Elgrid are not related. None of the 40 remaining shareholders, each of whom own 10 shares of stock, are related. 

Calculate the total amount of shares owned directly and constructively by the 40 unrelated shareholders for the purpose of Personal Holding Company evaluation. 

John Lake is a single, individual taxpayer. Lake is the sole owner of Kale Inc., an S corporation with a November 30 year end. Lake had a $500 overpayment in year 2 that was applied to the year 3 tax liability. 

Lake pays estimated taxes. Lake’s year 3 estimated tax based on year 2 income was $1600. 

Kale files Form 1120S, U.S. Income Tax Return for an S Corporation. 

What is the due date for Kale’s year 2 Form 1120S?

John Lake is a single, individual taxpayer. Lake is the sole owner of Kale Inc., an S corporation with a November 30 year end. Lake had a $500 overpayment in year 2 that was applied to the year 3 tax liability. 

Lake pays estimated taxes. Lake’s year 3 estimated tax based on year 2 income was $1600. 

Kale files Form 1120S, U.S. Income Tax Return for an S Corporation. 

When is the final date Lake can contribute to his IRA for year 2?

John Lake is a single, individual taxpayer. Lake is the sole owner of Kale Inc., an S corporation with a November 30 year end. Lake had a $500 overpayment in year 2 that was applied to the year 3 tax liability. 

Lake pays estimated taxes. Lake’s year 3 estimated tax based on year 2 income was $1600. 

Kale files Form 1120S, U.S. Income Tax Return for an S Corporation. 

What is the latest date Lake can pay any year 2 income tax due without interest?

John Lake is a single, individual taxpayer. Lake is the sole owner of Kale Inc., an S corporation with a November 30 year end. Lake had a $500 overpayment in year 2 that was applied to the year 3 tax liability. 

Lake pays estimated taxes. Lake’s year 3 estimated tax based on year 2 income was $1600. 

Kale files Form 1120S, U.S. Income Tax Return for an S Corporation. 

When is the earliest date Lake is required to make an estimated tax payment for year 3, after the year 2 overpayment is applied?

John Lake is a single, individual taxpayer. Lake is the sole owner of Kale Inc., an S corporation with a November 30 year end. Lake had a $500 overpayment in year 2 that was applied to the year 3 tax liability. 

Lake pays estimated taxes. Lake’s year 3 estimated tax based on year 2 income was $1600. 

Kale files Form 1120S, U.S. Income Tax Return for an S Corporation. 

What is the amount of Lake’s first estimated tax payment after the year 2 overpayment is applied?

John Lake is a single, individual taxpayer. Lake is the sole owner of Kale Inc., an S corporation with a November 30 year end. Lake had a $500 overpayment in year 2 that was applied to the year 3 tax liability. 

Lake pays estimated taxes. Lake’s year 3 estimated tax based on year 2 income was $1600. 

Kale files Form 1120S, U.S. Income Tax Return for an S Corporation. 

If Lake elects to file an extension on the individual year 2 return, what would be the due date?

John Lake is a single, individual taxpayer. Lake is the sole owner of Kale Inc., an S corporation with a November 30 year end. Lake had a $500 overpayment in year 2 that was applied to the year 3 tax liability. 

Lake pays estimated taxes. Lake’s year 3 estimated tax based on year 2 income was $1600. 

Kale files Form 1120S, U.S. Income Tax Return for an S Corporation. 

During year 4, Lake presented new information about his year 1 Form 1040, which would result in a refund. Assuming the return was filed by the original due date, what is the latest date Lake can file an amended year 1 return and still receive the refund?

What is the due date for filing of a federal income tax return for a C corporation with a fiscal year of 6/30/year 2 that has not filed a request for an extension? 

What is the due date for filing of a federal income tax return for a calendar year C corporation for year 1 that has filed a timely request for an extension?

A calendar year C corporation discovers an error resulting in overpayment of tax on the return for year 1 filed on 2/17/year 2. When does the statute of limitations for filing an amended return expire?

An individual hand delivers his original tax returns for the calendar years 1,2, and 3 on 4/15/year 5. When does the statute of limitations for assessment of tax on the earliest year expire?

A partnership with a fiscal year end of 9/30/year 1 files a timely federal income tax return (without extension). What is the due date of this return?

An individual files a tax return for calendar year 1 on 4/15/year 2 showing taxes due of $57,000. The individual made no payment with the return. When would the statute of limitations for collection after assessment of this tax expire?

An individual files for an automatic extension before April 15, year 2. The individual files the income tax return on July 31, year 2 and pays the tax due. When does the statute of limitations expire on this return?  

Clay, Finch, Lark and Token formed Amber Co., a C Corporation. The shareholders made the following contributions to the corporation in exchange for stock on January 2, year 1. 

Calculate the amount of Clay’s tax basis in Amber Co. stock.

Clay, Finch, Lark and Token formed Amber Co., a C Corporation. The shareholders made the following contributions to the corporation in exchange for stock on January 2, year 1. 

Calculate the gain recognised by Clay in this exchange transaction. 

Clay, Finch, Lark and Token formed Amber Co., a C Corporation. The shareholders made the following contributions to the corporation in exchange for stock on January 2, year 1. 

Calculate the amount of Finch’s tax basis in Amber Co. stock.

Clay, Finch, Lark and Token formed Amber Co., a C Corporation. The shareholders made the following contributions to the corporation in exchange for stock on January 2, year 1. 

Calculate Amber Co.’s tax basis in non-cash property received from Finch. 

Clay, Finch, Lark and Token formed Amber Co., a C Corporation. The shareholders made the following contributions to the corporation in exchange for stock on January 2, year 1. 

Calculate the gain realised by Lark in this transaction. 

Clay, Finch, Lark and Token formed Amber Co., a C Corporation. The shareholders made the following contributions to the corporation in exchange for stock on January 2, year 1. 

Calculate Amber Co.’s tax basis in non-cash property received from Lark

Clay, Finch, Lark and Token formed Amber Co., a C Corporation. The shareholders made the following contributions to the corporation in exchange for stock on January 2, year 1. 

Calculate the gain realized by Token in this transaction. 

Clay, Finch, Lark and Token formed Amber Co., a C Corporation. The shareholders made the following contributions to the corporation in exchange for stock on January 2, year 1. 

Calculate the gain recognized by Token in this transaction. 

The executor of Munson’s estate made the election to adopt the alternative valuation date for the estate’s assets. 

The executor provided the following information relating to the administration of the estate:

• Interest accrued on the Zenon bonds from February 1 to April 1, year 1, was deposited by the Executor on May 1, year 2.
• Interest accrued on the Vision bonds from January 1 to April 1, year 2, was deposited by the Executor on May 1, year 2. 
• A cash dividend of $2 per share was declared by Barlet on March 10 was paid on April 10, year 1 to holders of record on March 31, year 2, and was deposited by the executor on April 15, year 2.
• On July 1, year 2, 2,000 shares of Barlet were distributed to a beneficiary when the fair market value was $96 per share. 
• On July 31, year 2, 1,000 shares of Barlet were sold for $97 per share. 
• On August 15, year 2, the Zenon bonds were distributed to a beneficiary with a value of $194,000 on the date of distribution. 
• The Vision bonds and the remaining 3,000 shares of Barlet were not sold or disposed of within six months following death and remained in the estate. 

What is the value of 2,000 shares of Barlet Corp. stock (distributed 7/1) that would be reported on the federal estate tax return using the alternative valuation date?

The executor of Munson’s estate made the election to adopt the alternative valuation date for the estate’s assets. 

The executor provided the following information relating to the administration of the estate:

• Interest accrued on the Zenon bonds from February 1 to April 1, year 1, was deposited by the Executor on May 1, year 2.
• Interest accrued on the Vision bonds from January 1 to April 1, year 2, was deposited by the Executor on May 1, year 2. 
• A cash dividend of $2 per share was declared by Barlet on March 10 was paid on April 10, year 1 to holders of record on March 31, year 2, and was deposited by the executor on April 15, year 2.
• On July 1, year 2, 2,000 shares of Barlet were distributed to a beneficiary when the fair market value was $96 per share. 
• On July 31, year 2, 1,000 shares of Barlet were sold for $97 per share. 
• On August 15, year 2, the Zenon bonds were distributed to a beneficiary with a value of $194,000 on the date of distribution. 
• The Vision bonds and the remaining 3,000 shares of Barlet were not sold or disposed of within six months following death and remained in the estate. 

What is the value of 1,000 shares of Barlet Corp. stock (Sold on 7/31) that would be reported on the federal estate tax return using the alternative valuation date?

The executor of Munson’s estate made the election to adopt the alternative valuation date for the estate’s assets. 

The executor provided the following information relating to the administration of the estate:

• Interest accrued on the Zenon bonds from February 1 to April 1, year 1, was deposited by the Executor on May 1, year 2.
• Interest accrued on the Vision bonds from January 1 to April 1, year 2, was deposited by the Executor on May 1, year 2. 
• A cash dividend of $2 per share was declared by Barlet on March 10 was paid on April 10, year 1 to holders of record on March 31, year 2, and was deposited by the executor on April 15, year 2.
• On July 1, year 2, 2,000 shares of Barlet were distributed to a beneficiary when the fair market value was $96 per share. 
• On July 31, year 2, 1,000 shares of Barlet were sold for $97 per share. 
• On August 15, year 2, the Zenon bonds were distributed to a beneficiary with a value of $194,000 on the date of distribution. 
• The Vision bonds and the remaining 3,000 shares of Barlet were not sold or disposed of within six months following death and remained in the estate. 

What is the value of 3,000 shares of Barlet Corp. stock (not distributed) that would be reported on the federal estate tax return using the alternative valuation date?

The executor of Munson’s estate made the election to adopt the alternative valuation date for the estate’s assets. 

The executor provided the following information relating to the administration of the estate:

• Interest accrued on the Zenon bonds from February 1 to April 1, year 1, was deposited by the Executor on May 1, year 2.
• Interest accrued on the Vision bonds from January 1 to April 1, year 2, was deposited by the Executor on May 1, year 2. 
• A cash dividend of $2 per share was declared by Barlet on March 10 was paid on April 10, year 1 to holders of record on March 31, year 2, and was deposited by the executor on April 15, year 2.
• On July 1, year 2, 2,000 shares of Barlet were distributed to a beneficiary when the fair market value was $96 per share. 
• On July 31, year 2, 1,000 shares of Barlet were sold for $97 per share. 
• On August 15, year 2, the Zenon bonds were distributed to a beneficiary with a value of $194,000 on the date of distribution. 
• The Vision bonds and the remaining 3,000 shares of Barlet were not sold or disposed of within six months following death and remained in the estate. 

What is the value of dividend paid on Barlet Corp. stock on April 10th that would be reported on the federal estate tax return using the alternative valuation date?

The executor of Munson’s estate made the election to adopt the alternative valuation date for the estate’s assets. 

The executor provided the following information relating to the administration of the estate:

• Interest accrued on the Zenon bonds from February 1 to April 1, year 1, was deposited by the Executor on May 1, year 2.
• Interest accrued on the Vision bonds from January 1 to April 1, year 2, was deposited by the Executor on May 1, year 2. 
• A cash dividend of $2 per share was declared by Barlet on March 10 was paid on April 10, year 1 to holders of record on March 31, year 2, and was deposited by the executor on April 15, year 2.
• On July 1, year 2, 2,000 shares of Barlet were distributed to a beneficiary when the fair market value was $96 per share. 
• On July 31, year 2, 1,000 shares of Barlet were sold for $97 per share. 
• On August 15, year 2, the Zenon bonds were distributed to a beneficiary with a value of $194,000 on the date of distribution. 
• The Vision bonds and the remaining 3,000 shares of Barlet were not sold or disposed of within six months following death and remained in the estate. 

What is the value of Zenon Corp. 3% bond that would be reported on the federal estate tax return using the alternative valuation date?

The executor of Munson’s estate made the election to adopt the alternative valuation date for the estate’s assets. 

The executor provided the following information relating to the administration of the estate:

• Interest accrued on the Zenon bonds from February 1 to April 1, year 1, was deposited by the Executor on May 1, year 2.
• Interest accrued on the Vision bonds from January 1 to April 1, year 2, was deposited by the Executor on May 1, year 2. 
• A cash dividend of $2 per share was declared by Barlet on March 10 was paid on April 10, year 1 to holders of record on March 31, year 2, and was deposited by the executor on April 15, year 2.
• On July 1, year 2, 2,000 shares of Barlet were distributed to a beneficiary when the fair market value was $96 per share. 
• On July 31, year 2, 1,000 shares of Barlet were sold for $97 per share. 
• On August 15, year 2, the Zenon bonds were distributed to a beneficiary with a value of $194,000 on the date of distribution. 
• The Vision bonds and the remaining 3,000 shares of Barlet were not sold or disposed of within six months following death and remained in the estate. 

What is the value of Vison Corp. 5% bond that would be reported on the federal estate tax return using the alternative valuation date?

The executor of Munson’s estate made the election to adopt the alternative valuation date for the estate’s assets. 

The executor provided the following information relating to the administration of the estate:

• Interest accrued on the Zenon bonds from February 1 to April 1, year 1, was deposited by the Executor on May 1, year 2.
• Interest accrued on the Vision bonds from January 1 to April 1, year 2, was deposited by the Executor on May 1, year 2. 
• A cash dividend of $2 per share was declared by Barlet on March 10 was paid on April 10, year 1 to holders of record on March 31, year 2, and was deposited by the executor on April 15, year 2.
• On July 1, year 2, 2,000 shares of Barlet were distributed to a beneficiary when the fair market value was $96 per share. 
• On July 31, year 2, 1,000 shares of Barlet were sold for $97 per share. 
• On August 15, year 2, the Zenon bonds were distributed to a beneficiary with a value of $194,000 on the date of distribution. 
• The Vision bonds and the remaining 3,000 shares of Barlet were not sold or disposed of within six months following death and remained in the estate. 

What is the value of accrued interest on Zenon Corp. 3% that would be reported on the federal estate tax return using the alternative valuation date?

The executor of Munson’s estate made the election to adopt the alternative valuation date for the estate’s assets. 

The executor provided the following information relating to the administration of the estate:

• Interest accrued on the Zenon bonds from February 1 to April 1, year 1, was deposited by the Executor on May 1, year 2.
• Interest accrued on the Vision bonds from January 1 to April 1, year 2, was deposited by the Executor on May 1, year 2. 
• A cash dividend of $2 per share was declared by Barlet on March 10 was paid on April 10, year 1 to holders of record on March 31, year 2, and was deposited by the executor on April 15, year 2.
• On July 1, year 2, 2,000 shares of Barlet were distributed to a beneficiary when the fair market value was $96 per share. 
• On July 31, year 2, 1,000 shares of Barlet were sold for $97 per share. 
• On August 15, year 2, the Zenon bonds were distributed to a beneficiary with a value of $194,000 on the date of distribution. 
• The Vision bonds and the remaining 3,000 shares of Barlet were not sold or disposed of within six months following death and remained in the estate. 

What is the value of accrued interest on Vison Corp. 5% that would be reported on the federal estate tax return using the alternative valuation date?

ABC Advisors, LLP, is a partnership that provides computer consulting services on a calendar-year, accrual basis. A,B, and C are equal partners and are calendar-year, cash-basis, individual partners. Each partner has sufficient basis in the partnership to cover all distributions and withdrawals made during the year. 

Partner A is partner B’s father. Partner C is not related to either partner. What is the appropriate tax treatment if the Partnership received municipal bond interest income?

ABC Advisors, LLP, is a partnership that provides computer consulting services on a calendar-year, accrual basis. A,B, and C are equal partners and are calendar-year, cash-basis, individual partners. Each partner has sufficient basis in the partnership to cover all distributions and withdrawals made during the year. 

Partner A is partner B’s father. Partner C is not related to either partner. What is the appropriate tax treatment if the Partnership sold an investment held for more than one year at a gain?

ABC Advisors, LLP, is a partnership that provides computer consulting services on a calendar-year, accrual basis. A,B, and C are equal partners and are calendar-year, cash-basis, individual partners. Each partner has sufficient basis in the partnership to cover all distributions and withdrawals made during the year. 

Partner A is partner B’s father. Partner C is not related to either partner. What is the appropriate tax treatment if the Partnership sold equipment to partner A at a $6,000 loss?

ABC Advisors, LLP, is a partnership that provides computer consulting services on a calendar-year, accrual basis. A,B, and C are equal partners and are calendar-year, cash-basis, individual partners. Each partner has sufficient basis in the partnership to cover all distributions and withdrawals made during the year. 

Partner A is partner B’s father. Partner C is not related to either partner. What is the appropriate tax treatment if the Partnership received dividends from domestic corporations?