# ACCT 553 Federal Taxes Management Decisions

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#### ACCT 553 Federal Taxes Management Decisions Week 1 to 8 Homework, Quiz, Final

ACCT 553 Week 1 Homework Chapters 1, 2, 3 and 13

1. Briefly discuss the purpose of the Sixteenth Amendment

2. Explain the two “safe harbors” available to an Individual taxpayer to avoid a penalty for underpayment of estimated tax.

3. Explain the distinction between an “above the line” deduction and a below the line deduction. Which one is more valuable?

3-31: Tom and Linda are married taxpayers who file a joint return. They have itemized deductions of \$12,250 and four exemptions. Assuming an adjusted gross income of \$40,000, what is their taxable income for 2012?

3-32: Compute Marie’s taxable income for 2012, assuming she is single and claims two dependent children. Her adjusted gross income is \$70,000, and she has itemized deductions of \$9,000.

3-36: Compute Stanley’s taxable income for 2012, assuming he has \$1,000 in wages from working in a grocery store and \$2,000 in interest income from some bonds he owns. Stanley, age 16, is claimed as a dependent on his parents’ return.

4. What is an Installment Sale? Is it a form of income “deferral” ? When can’t you elect this form of reporting?

13-55: Mr. Z, a non-dealer, sold assets on an installment plan. Determine Mr. Z’s gross income for 2012. Relevant data include:

13-69: Comprehensive Problem. Bill is a cash-basis, calendar-year taxpayer. Which of the following December items result in gross income or deductions for the current year?

ACCT 553 Week 2 Homework Chapter 4, 5 and 6

1. Your brother is short on cash and cannot pay his rent this month. You pay his rent for him. Is this taxable income to your brother? Do you get a deduction?

2. Which of the following items would be excluded from income?

(a) \$100 bill found under the sugar caddy at the restaurant

(b) Inheritance of a car from your grandmother valued at \$5,000.

(d) Child Support received totaling \$16,500.

3. Shaun & Kayla earned the following in 2013: Interest on a Savings account of \$36, Interest on a U.S. Series EE Savings Bond of \$25, Interest on a CD that has not matured yet of \$20. How much taxable interest income must they report on their 2013 tax return? (4 pts)

4. Explain what a Cafeteria Plan is (hint: it has nothing to do with what you eat between classes

5. Explain the limitations placed on the deductibility of Business Gifts? What code section dictates this treatment?

ACCT 553 Week 3 Homework Chapters 7 and 8

1. Describe what a “Suspended Loss” is, how it is generated and when it is becomes deductible.

2. Please describe “Active Participation” as it relates to a taxpayer’s involvement in an investment in Real Estate.

3. Macy had a lot of medical expenses this year that were not covered by her insurance. Her un-reimbursed qualifying medical expenses total \$8,356 and her AGI for 2013 is \$45,000. Assuming she will itemize on her 2013 tax return, how much of her medical expenses will she be able to deduct?

4. Heather & Terry have a mortgage on their primary residence of \$750,000 and a mortgage on their vacation home of \$410,000. In 2013, they incurred \$46,400 of mortgage interest expense. How much, if any, of that interest is deductible on Schedule A?

ACCT 553 Week 3 Quiz

1. A taxpayer may litigate a tax dispute without first paying the tax in the:
2. A business bad debt is deductible for tax purposes as a(n):
3. Under the cash method of tax accounting, tax deductions are generally taken when:
4. Which of the following constitutes tax evasion?
5. Which of the following items is not subject to federal income tax?
6. Sam owes Bob \$8,000. Bob cancels the debt. The cancellation is not a gift, and Sam is bankrupt. Which of the following statements is correct concerning the impact of this transaction?
7. Johnny, a cash basis taxpayer, owns two rental properties. Based on the following information, compute the amount that he must include in his 2012 gross rental income.
8. Section 197’s intangible assets, such as patents and trademarks, are amortized for tax purposes over:
9. Explain the constructive receipt doctrine.
10. Answer the following questions concerning the sources of tax law.

ACCT 553 Week 4 Homework Chapters 14:

1. Please describe the concept of “double taxation” and discuss which entity(ies) are subject to this type of taxation.

2. What type of taxpayers are considered “eligible” taxpayers with regard to special ordinary loss treatment of IRC Section 1244 stock?

3. Please describe how the treatment of capital gains(losses) differ for a C Corporation as compared to an Individual.

4. Please describe the concept of “Depreciation recapture”.

ACCT 553 Week 4 You Decide

You are a CPA with an office in NearLakes City and clients consisting primarily of professionals, entrepreneurs, and small business owners. John Smith, Esq., a practicing attorney with offices near yours, walks in your office and wants advice from you relating to a recent influx of cash he received as a result of winning a large jury verdict on behalf of his client in a personal injury case. His wife Jane Smith accompanies him during your meeting because she has some additional tax planning advice to ask of you.
John?s Tax Issues
1. (a) How is the \$300,000 treated for purposes of federal tax income?
(b) How is the \$25,000 treated for purposes of federal tax income?
(c) What is your determination regarding reducing the taxable amount of income for both (a) and (b) above?
(d) Is it more beneficial to continue leasing the business space or to buy the building?
Jane?s Tax Issues
2. (a) What are the different tax consequences between paying down the mortgage and assuming a new mortgage for federal income tax purposes?
(b) Can John and Jane Smith utilize a 1031 tax exchange to buy a more expensive house using additional money from John’s case?
What is a 1031 Tax Deferred Exchange?

ACCT 553 Week 5 Homework Chapter 14 and 17

Please explain how Charitable Contributions come into play in determining “Corporate” taxable income.

What happens to a loss on the Corporate Tax Return (Form 1120)? Does it pass through to the shareholders? Is it available for future or past periods? Please explain in detail.

Please describe the purpose of Schedules M-1 and M-3. When is a Schedule M-3 required in lieu of a Schedule M-1.

Please define and differentiate a Spin-off, Split-off, and Split-up.

ACCT 553 Week 5 Quiz

For federal tax purposes, royalty income not derived in the ordinary course of a business is classified as:

When comparing corporate and individual taxation, the following statements are true, except:

Al and Amy file a joint return for the 2012 tax year. Their adjusted gross income is \$80,000. They had a net investment income of \$8,000. In 2012, they had the following interest expenses:

Charitable contribution deductions for capital gains property made by individuals without a reduction for long-term capital gains to public charities are limited to:

The following taxes were paid by Tim:

Real estate taxes on his home: \$2,000

State income taxes: \$900

State gasoline tax (personal use of automobile): \$150

In itemizing his deductions, what is the amount that Tim may claim as a deduction for taxes?

Hoover, Inc. had gross receipts from operations of \$230,000, operating and other expenses of \$310,000, and dividends received from a 45 percent-owned domestic corporation of \$120,000. Hoover’s tax position for the year is:

All of the outstanding stock of a closely held C corporation is owned equally by David Smith and Steve Bufusno. In 2012, the corporation generates taxable income of \$30,000 from its active business activities. In addition, it earns \$20,000 of interest from investments and incurs a \$40,000 loss from a passive activity. How much income does the C corporation report for 2012?

Mike, who is single, has \$100,000 of salary, \$15,000 of income from a limited partnership, and a \$30,000 passive loss from a real estate rental activity in which he actively participates. His modified adjusted gross income is \$100,000. Of the \$30,000 loss, how much is deductible?

Pam owns a sole proprietorship, and Kevin is the sole shareholder of a C (regular) corporation. Each business sustained a \$16,000 operating loss and a \$2,500 capital loss for the year. Evaluate how these losses will affect the taxable income of the two owners?

Briefly (1) define and (2) discuss the purpose and impact of each of the following:

ACCT 553 Week 6 Homework

Exercises 14-24, 14-51, 14-52.

ACCT 553 Week 6 You Decide

After 20+ years of working for other firms, Penelope want to leave the firms they are currently employed by and become their own bosses. Penelope specializes in Taxes, Mark is the Auditor and John is a Business Valuation expert. There are so many options available to how they can structure the new business(s). The appropriate business entity for any individual(s) will depend on their particular facts and circumstances. You are a valued colleague and friend of this three-some and they have come to you seeking advice as to how to structure their new business. They have the knowledge to figure it out themselves, but are looking for the advice of an unbiased 3rd party. Please consider the following tax and non-tax considerations as you recommend an entity choice to Penelope, Mark and John.

ACCT 553 Week 7 Homework

Exercise 21-2, 21-13, 21-38, 21-15, 21-63

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