Questions from Taxation

Q: Art likes to invest his spare cash in the stock market.

Art likes to invest his spare cash in the stock market. In the past, he has focused on growth stocks and long-term value to take advantage of the preferential tax rate on long-term capital gains. He r...

Q: Parmco, a calendar year corporation, made the following accruals for

Parmco, a calendar year corporation, made the following accruals for 2018 financial statement purposes. In each case, determine how much of the accrued expense is deductible on Parmco’s 2018 federal t...

Q: Lance Strong arm, a recently retired professional athlete, is writing

Lance Strong arm, a recently retired professional athlete, is writing his memoirs. He intends to direct any royalties received on the book to his favorite charitable organization. He has not yet signe...

Q: Lucille is an avid boater living near Gotham City. Gotham has

Lucille is an avid boater living near Gotham City. Gotham has recently created a harbor improvement special assessment district to oversee renovations to the public boat docks and boardwalk area surro...

Q: Company Y began business in February 2018. By the end of

Company Y began business in February 2018. By the end of the calendar year, it had billed its clients for $3.5 million of services and had incurred $800,000 of operating expenses. As of December 31, i...

Q: Corporation VB was formed in 2018. Immediately prior to year-

Corporation VB was formed in 2018. Immediately prior to year-end, VB is considering a $500,000 deductible expenditure. It can either make the expenditure before the end of 2018, or wait until 2019. Ho...

Q: MRT, a calendar year corporation, placed the following assets in

MRT, a calendar year corporation, placed the following assets in service this year. a. Compute MRT’s MACRS depreciation with respect to the assets placed in service this year. Assu...

Q: Company C has a 21 percent marginal tax rate and uses an

Company C has a 21 percent marginal tax rate and uses an 8 percent discount rate to compute NPV. The company must decide whether to lease or purchase equipment to use for years 0 through 7. It could l...

Q: MG, a corporation in the 21 percent marginal tax bracket,

MG, a corporation in the 21 percent marginal tax bracket, owns equipment that is fully depreciated. This old equipment is still operating and should continue to do so for four years (years 0, 1, 2, an...

Q: KP Inc. is negotiating a 10-year lease for three

KP Inc. is negotiating a 10-year lease for three floors of space in a commercial office building. KP can’t use the space unless a security system is installed. The cost of the system is $50,000, and i...