ACCT 553 Federal Taxes and Management

ACCT 553 Week 1 Homework

ACCT 553 Week 2 Homework
ACCT 553 Week 3 Homework
ACCT 553 Week 4 Assignment; YouDecide
ACCT 553 Week 4 Homework
ACCT 553 Week 5 Homework
ACCT 553 Week 6 Assignment: YouDecide
ACCT 553 Week 8 Final Exam

ACCT 553 All Homework Week 1, 2, 3, 4, 5, 6 and Final Exam

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ACCT 553 Week 4 + Week 6 YouDecide
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ACCT 553 All Homework Week 1, 2, 3, 4, 5, 6
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ACCT 553 Week 1 Homework
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.
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
4/25 Billy Dent, as the owner of an apartment building, receives and makes the following
payments during 2012:...............
4/32 Arnold and Barbara Cane were divorced in June 2012. Pursuant to the divorce decree,
Arnold is obliged to perform as follows:.............
5/26 Fluent, an investor in stocks and bonds, wanted to increase his portfolio but wanted to
minimize his tax liability on the income from the bonds. He is presented with the following
alternative investments: U.S. Series EE bonds, bonds for industrial development for mass transit,
and qualified veterans' mortgage bonds. Which should he choose for his investment?
Why?......................
6/29 Which of the following trade or business expenditures of Ajax Inc. are deductible on its
current year tax return? If an expenditure is not deductible, explain why it is not a valid
deduction........................
6/34 For the current month, Jackson Cement Co. incurred payroll expenses as follows:.................
ACCT 553 Week 3 Homework
Chapter 7
1. In your "own" words, please describe what a "Suspended Loss" is, how it is generated and
when it is becomes deductible. (5 pts)
2. Please describe "Active Participation" as it relates to a taxpayer's involvement in an
investment in Real Estate. (5 pts).
Chapter 8
3. Macy had a lot of medical expenses this year that were not covered by her insurance (either
due to a deductible, co-insurance, or co-pay). 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? (5 pts)
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? (5 pts)
7-7 Differentiate between the following: active income, passive income, and portfolio income.
7-13 Briefly, what is "material participation"? Why is the determination of whether a taxpayer
materially participates important?
7-46 Mary Beth is a CPA, devoting 3,000 hours per year to her practice. She also owns an office
building in which she rents out space to tenants. She devotes none of her time to the management
of the office building. She has a property management firm make all management decisions for
her. During 2012, she incurred a loss, for tax purposes, of $30,000 on the office building. How
must Mary Beth treat this loss on her 2012 tax return?
ACCT 553 Week 4 Homework
Page 1
Chapter 14
1. Please describe the concept of "double taxation" and discuss which entity(ies) are subject to
this type of taxation. (5 pts)
2. What type of taxpayers are considered "eligible" taxpayers with regard to special ordinary
loss treatment of IRC Section 1244 stock? (5 pts.)

3. Please describe how the treatment of capital gains(losses) differ for a C Corporation as
compared to an Individual. ( 5 pts.)
4. Please describe the concept of "Depreciation recapture". ( 5 pts.)
Page 2
4. What is the purpose of Code Sec. 351 in regard to transfers to corporations?
20. What tax years are available to corporations? How do the options differ from other forms of
business organizations?
22. What are the differences in the treatment of capital gains and capital losses of corporations
and of individuals?
55. Susan Sweets is a 40 percent shareholder in Acclaim Inc., a theatrical supplies company. She
transfers a fully depreciated car with a value of $2,000 to the corporation, but does not receive
any consideration for it.
a. What are the tax consequences to Susan?
b. What are the tax consequences to the corporation?
c. What, if any, changes if Susan received another 10 percent stock interest for the car?
62. A corporation has income of $62,000 from operations and a net long-term capital loss of
$5,000. What is the corporation's taxable income for the year?
ACCT 553 Week 5 Homework
Chapter 14:
24. What is the purpose of the dividends received deduction? What corporations are entitled to
claim this deduction? What dividends qualify for this deduction?
51. What is the purpose of the reconciliation of taxable income with book income?
52. Sam Rogers forms a corporation. Sam transfers to the corporation property having a basis to
him of $15,000 and a fair market value of $27,000 for 900 shares of the $10 par stock of the
corporation. A year later, Bill Morrison, who is not related to Sam, transfers property having a
basis to him of $1,000 and a fair market value of $3,000 for 100 shares of the corporate stock.
The corporation issued no other stock.
a. How much gain does Sam recognize on his exchange? What is the basis to Sam of his
900 shares?
b. How much gain does Bill recognize on his exchange? What is the basis to Bill of his 100
shares?
c. What gain or loss is recognized by the corporation when it issues its shares to Sam? What
is the basis to the corporation of the property it received from Sam?
d. What is the gain or loss recognized by the corporation when it issues its shares to Bill?
What is the basis to the corporation of the property it received from Bill?
Chapter 17:
1. Identify and briefly describe the seven types of corporate reorganization.
ACCT 553 Week 6 Homework
Tax Memo #2-Executive Compensation
Issue One and Applicable Case Law, Code & Regulations
Issue Two and Applicable Case Law, Code & Regulations
Issue Three and Applicable Case Law, Code & Regulations
Penelope, Mark, and John Entity Selection
After 20+ years of working for other firms, Penelope (Enrolled Agent, age 41), Mark (CPA, age
43) and John (CVA, age 65) 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 8 Final Exam

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Page: 1 Multiple Choice
1. (TCO E) For federal tax purposes, income attributable to the direct efforts of the tax payer,
such as salary, is classified as: (Points : 5)
2. (TCO D) Which of the following is an example of a nontaxable like-kind exchange? (Points :
5)
3. (TCO H) Alex and Amy file a joint return for the 2012 tax year. Their adjusted gross income
is $90,000. They had net investment income of $8,000. In 2012, they had the following interest
expenses:
Personal credit card interest: $5,000
Home mortgage interest: $10,000
Interest paid on qualified education loans: $2,000
Investment interest (on loans used to buy stocks): $10,000
What is the interest deduction for Alex and Amy for the 2012 tax year? (Points : 5)
4. (TCO B) Unreimbursed expenses of employees are considered to be deductions: (Points : 5)
5. (TCO A) Which of the following expenditures is always an itemized deduction for individual
taxpayers? (Points : 5)
6. (TCO E) Adam sold a piece of business equipment that had an adjusted basis to him of
$50,000. In return for the equipment, Adam received $80,000 cash and a painting with a fair
market value of $20,000 from the buyer. The buyer also assumed Adam's $25,000 loan on the
equipment. Adam paid $5,000 in selling expenses. What is the amount of Adam's gain on the
sale? (Points : 5)
7. (TCO I) Gary and Gerdy Gray purchased a home for $125,000 on September 15, 2010. On
October 7, 2011 they were divorced, and as part of the divorce agreement, the home was
transferred to Gerda, who sold the home on October 18, 2012 for $350,000. How much can
Gerda exclude? (Points : 5)
8. (TCO I) Under the accrual method of accounting, expenses are generally accrued when:
(Points : 5)
9. (TCO D) Sean, a calendar year taxpayer, purchased stock on June 18, 2011 for $8,000. The
stock became worthless on June 4, 2012. What is Sean's loss in 2012? (Points : 5)
$8,000 short-term capital loss
10. (TCO A) Which of the following is a primary source of tax authority? (Points : 5)
11. (TCO F) A nonbusiness bad debt is deductible for tax purposes as a(n): (Points : 5)
12. (TCO A) The art of using existing tax laws to pay the least amount of tax legally possible is
known as: (Points : 5)

13. (TCO C) Which of the following items is not taxable? (Points : 5)

14. (TCO B) Under the terms of their divorce agreement executed in October 2011, Keith
transferred Corporation M stock to his former wife, Karen, as a property settlement. At the time
of the transfer, the stock had a basis to Keith of $20,000 and a fair market value of $50,000.
What is the tax consequence of this transaction to Keith, and what is Karen's basis in the
Corporation M stock? (Points : 5)
15. (TCO G) During 2012, Edward East had wages of $10,000 and received unemployment
compensation of $6,200 from the state. Edward is single and 45 years old. What is the amount of
unemployment compensation to be included in his gross income? (Points : 5)
16. (TCO F) Hobby expenditures are deductible to the extent of: (Points : 5)
Page: 1 - Essays
1. (TCO E) In 2012, Uriah Stone received the following payments:
Interest on refund of federal income tax for 2011: $400
Interest on award for personal injuries in 2009 automobile accident: $300
Interest on municipal bonds: $1,500
United States savings bonds interest (Series H): $1,000
What amount, if any, should Mr. Stone report as interest income on his 2012 tax return?
2. (TCO G) Would any of the following items be deductible on an individual's income tax
return? If so, would the item be deductible for or from AGI? Explain each item.
(a) Hobby expenditures of $2,000 in excess of hobby gross income
(b) $3,000 loss on the sale of a personal sailboat
(c) Interest of $8,000 on money borrowed to purchase tax-exempt securities (Points : 17)
3. (TCO F) Michael and Mary Mason sold for $380,000 in November of 2012 their residence
that they had purchased in 2002 for $75,000. They made major capital improvements during
their 10-year ownership totaling $25,000.
(a) What is their excluded gain? How much must they recognize?
(b) Suppose, instead, that the Masons sold their home for $720,000. They moved into a smaller
house costing $220,000. What is their excluded gain? How much must they recognize? (Points :
17)
4. (TCO G) John Baron, a professional baseball player, raises Black Angus cattle under
circumstances that would indicate that the activity is a hobby. His adjusted gross income for the
year is $50,000, and he has $500 of other miscellaneous itemized deductions, all of which are
subject to the two-percent floor. During the taxable year, the feed for the cattle cost $1,500. The
income from the sale of cattle was $1,400.
(a) Under the hobby loss rule, to what extent is the expense of $1,500 deductible?
(b) Under the two-percent-of-adjusted-gross-income limitation, how much is the overall
deductible amount of his itemized deductions?
5. (TCO I) Rick, a single individual with a salary of $45,000, incurred and paid the following
expenses during the year:
Student loan interest: $800
Medical expenses: $5,000
Alimony: $11,000
Mortgage interest on personal residence: $3,000
State income taxes: $4,000
Moving expenses: $1,500
Contribution to a traditional IRA: $2,000
Analyze the above expenses, and determine which ones are deductible for AGI. Please support
your position.
6. (TCO I) Kim had the following transactions for 2012:
Salary: $48,000
Damage award (compensatory) for city bus accident: $18,000
Loss on sale of stock investment: $5,600
Loan from father to purchase auto: $14,000
Alimony paid to ex-wife: $8,000
What is Kim's AGI for 2012?
7. (TCO F) Sara owns a sole proprietorship, and Phil is the sole shareholder of a C (regular)
corporation. Each business sustained a $9,000 operating loss and a $2,000 capital loss for the
year. Evaluate how these losses will affect the taxable income of the two owners? (Points : 17)
8. (TCO B) Dave forms a corporation and transfers property having a basis to him of $22,000
and a fair market value of $29,000 to the corporation for 1,000 shares of $11 par stock. One year
later, Hank transfers property having a basis to him of $3,500 and a fair market value of $4,500
for 100 shares of the stock. Hank is not related to Dave. The corporation issued no other stock.
(a) How much gain does Dave recognize on his exchange? What is the basis to Dave of his 1,000
shares?
(b) What gain or loss is recognized by the corporation when it issues its shares to Dave? What is
the basis to the corporation of the property it received from Dave?
(c) What is the gain or loss that Hank recognizes on this transaction, and what is his basis in his
100 shares?
9. (TCO F) In 2012, OK Company had a net loss of $82,000 from operations. Jane owns OK
Company and works 20 hours a week in the business. She has a large amount of income from
other sources and is in the 35% marginal tax bracket. Would Jane's tax situation be better if OK
Company were a proprietorship or a C corporation? Explain why.
10. (TCO H) On May 18, 2012, Sara purchased 30 shares of ABC stock for $210, and on
October 29, 2012, she purchased 90 additional shares for $900. On November 28, 2012, she sold
48 shares, which could not be specifically identified, for $576, and on December 8, 2012, she
sold another 25 shares for $150. What is her recognized gain or loss?