Question: Based on the facts and results of

> J\1ario, a single taxpayer with two dependent children, has the following items of income and expense during 2018: a. Determine Mario's taxable income for 2018. b. Determine Mario's NOL for 2018. Gross receipts from business $144,000 Business expe

> Locate the following Code citations, and list the subchapter, part, and subpart in which it is located. Then give a brief topical description of each. a. § 708(a). b. § 137l(a). c. § 2503(a)

> Dan bought a hotel for $2,600,000 in January 2014. In May 2018, he died and left the hotel to Ed. While Dan owned the hotel, he deducted $289,000 of cost recovery. The fair market value in May 2018 was $2,800,000. The fair market value six months later w

> Simon owns stock that has declined in value since acquired. He has decided either to give the stock to his nephew, Fred, or to sell it and give Fred the proceeds. If Fred receives the stock, he will sell it to obtain the proceeds. Simon is in the 12% tax

> Roberto has received various gift5 over the years. He has decided to dispose of several of these assets. What is the recognized gain or loss from each of the following transactions, assuming that no gift tax was paid when the gifts were made? a. In 1981

> Thomas believes that he has an NOL for the current year and plans to carry it Critical Thinking forward, offsetting it against future incon1e. In determining his NOL, Thomas offset his business income by alin1ony payn1ents he made to his ex-spouse and co

> Lori, who is single, purchased 5-year class property for $200,000 and 7-year Decision Making class property for $420,000 on May 20, 2018. Lori expects the taxable income derived from her business (without regard to the amount expensed under§ 179) to be a

> Jiu has $105,000 of losses from a real estate rental activity in which she actively participates. She has other rent income of $25,000 and other passive activity income of $32,000. Her AG! before considering these items of income and loss is $95,000. How

> On May 5, 2018, Christy purchased and placed in service a hotel. The hotel cost $10.8 million. Calculate Christy's cost recovery deductions for 2018 and for 2028.

> Debra acquired the following new asset5 during 2018: Determine Debra's cost recovery deductions for the current year. Debra does nor elect immediate expensing under § 179. She does not claim any available additional first-year depreciation.

> Bonnie and Jake (ages 35 and 36, respectively) are married with no dependents and live in Montana (not a community property state). Because Jake has large medical expenses, they seek your advice about filing separately to save taxes. Their income and exp

> Aquamarine Corporation, a calendar year C corporation, makes the following donations to qualified charitable organizations during the current year: Adjusted Basis Fair Market Value Painting held four years as an investment, to a church, which sold i

> Locate the following Tax Court case: Thomas J Green, Jr., 59 T.C. 456 (1972). Briefly describe the issue in the case, and explain what the Tax Court said about using IRS publications to support a research conclusion.

> On December 23, 2018, the directors of Partridge Corporation, an accrual basis calendar year taxpayer, authorized a cash contribution of $10,000 to the American Cancer Association. The payment is made on April 14, 2019. Can Partridge deduct the charitabl

> A number of years ago, Lee acquired a 200/o interest in the Blue Sky Partnership for $60,000. The partnership was profitable through 2017, and Lee's amount at risk in the partnership interest was $120,000 at the beginning of 2018. Blue Sky incurred a los

> In 2018, UNA Corporation has $500,000 of adjusted taxable incon1e, $22,000 of business interest income, and $120,000 of business interest expense. It has average annual gross receipts of more than $25 million over the prior three taxable years. a. What

> An1ber, a publicly held corporation, had been paying its chief executive officer (CEO) an annual salary of $900,000. An1ber instituted a performance-based compensation plan, effective January 1, 2017, that increased the CEO's 2017 compensation by $300,00

> Henrietta, the owner of a very successful hotel chain in the Southeast, is exploring the possibility of expanding the chain into a city in the Northeast. She incurs $35,000 of expenses associated with this investigation. Based on the regulatory environme

> Liz and Doug were divorced on July 1, 2018, after 10 years of marriage. Their current year's income received before the divorce included: Allocate the income to Liz and Doug, applying the community property rules of: a. California. b. Texas. Doug's

> Jorge owns two passive investments, Activity A and Activity B. He plans to dispose of Activity A in the current year or next year. Juanita has offered to buy Activity A this year for an amount that would produce a taxable passive activity gain to Jorge o

> A number of years ago, Kay acquired an interest in a partnership in which she is nor a material participant. Kay's basis in her partnership interest at the beginning of 2017 is $40,000. Kay's share of the partnership loss is $35,000 in 2017, while her sh

> Dr. Randolph, a cash basis taxpayer, knows that she \Viii be in a lower marginal tax bracket next year. To take advantage of the expected decrease in the marginal tax rate, Randolph instructs her off ice n1anager to delay filing the medical insurance cla

> In 2017, Fred invested $50,000 in a general partnership. Fred's interest is not considered to be a passive activity. If his share of the partnership losses is $35,000 in 2017 and $25,000 in 2018, how, much can he deduct in each year?

> What purpose is served by Form 8857? Read the directions to the form, and see IRS Publication 971 for additional information.

> In 2015, John opened an investment account with Randy Hansen, who held Critical Thinking himself out to the public as an investment adviser and securities broker. John contributed $200,000 to the account in 2015. John provided Randy with a power of attor

> Olaf lives in the state of Minnesota. A tornado hit the area and damaged his home and automobile. Applicable information is as follows: Because of the extensive damage caused by the tornado, the President designated the area a disaster area. Olaf and h

> Abby, a single taxpayer, purchased 10,000 shares of§ 1244 stock several years ago at a cost of $20 per share. In November of the current year, Abby receives an offer to sell the stock for $12 per share. She has the option of either selling all of the sto

> Jake and Mary Snow, are residents of the state of New York. They are cash basis taxpayers and file a joint return for the calendar year. Jake is a licensed master plumber. Two years ago, Jake entered into a contract with New York City to perform plumbing

> Robin Corporation is owned as follows: Robin is on the accrual basis, and Isabelle and Peter are on the cash basis. Isabelle and Peter each loaned Robin Corporation $40,000 out of their separate funds. On December 31, 2018, Robin accrued interest at 7%

> Which of the following are related parties under§ 267' Father Brother Niece Uncle Cousin Grandson Corporation and a 45% shareholder Corporation and a 55% shareholder

> Duck, an accrual basis corporation, sponsored a rock concert on December 29, 2018. Gross receipts were $300,000. The following expenses were incurred and paid as indicated: Because the coliseum was not scheduled to be used again until January 15, the c

> Olga is the proprietor of a small business. In 2018, the business's income, before consideration of any cost recovery or§ 179 deduction, is $250,000. Olga spend5 $620,000 on new 7-year class assets and elects to take the § 179 deduction on them. She does

> Janice acquired an apartment building on June 4, 2018, for $1.6 million. The value of the land is $300,000. Janice sold the apartment building on November 29, 2024. a. Determine Janice's cost recovery deduction for 2018. b. Determine Janice's cost recove

> Juan, a sole proprietor, acquires a new 5-year class asset on March 14, 2018, for $200,000. This is the only asset Juan acquired during the year. He does not elect immediate expensing under § 179. Juan does nor claim any available additional first-year d

> Find a website, other than the IRS website, that discusses the taxation of short sales of securities.

> Joseph Thompson is president and sole shareholder of Jay Corporation. In December 2018, Joe asks your advice regarding a charitable contribution he plans to have the corporation make to the University of Maine, a qualified public charity. Joe is consider

> Dan Simms is the president and sole shareholder of Simms Corporation, 1121 Madison Street, Seattle, WA 98121. Dan plans for the corporation to make a charitable contribution to the University of Washington, a qualified public charity. He will have the co

> Alva received dividends on her stocks as follows. a. Alva purchased the Grape stock three years ago, and she purchased the Amur stock two years ago. She purchased the Blaze stock 18 days before it was ex dividend and sold it 20 days later at a $5,000 l

> Phillips, Inc., a cash basis C corporation, completes $100,000 in sales for year 1, but only $75,000 of this amount is collected during year 1. The remaining $25,000 from these sales is collected promptly during the first quarter of year 2. The applicabl

> Drake Appliance Company, an accrual basis taxpayer, sells home appliances and service contracts. Determine the effects of each of the following transactions on the company's 2018 gross income assuming that the company uses any available options to defer

> LawnCo and TreeCo operate in the same industry, and both report a 300% Communications effective tax rate (Federal, state, and global). Their book income and current, deferred, and total tax expense are reported below. ShrubCo is a competitor of both of

> Angelo, an agent for Waxwing Corporation, which is an airline manufacturer, is negotiating a sale with a representative of the U.S. government and with a representative of a developing country. Waxwing has sufficient capacity to handle only one of the or

> Broadbill Corporation, a calendar year C corporation, has two unrelated cash method shareholders: Marcia owns 51% of the stock, and Zack owns the ren1aining 49"A. Each shareholder is employed by the corporation at an annual salary of $240,000. During 201

> Lupe, a cash basis taxpayer, owns 55% of the stock of Jasper Corporation, a calendar year accrual basis C corporation. On December 31, 2018,Jasper accrues a performance bonus of $100,000 to Lupe that it pays to him on January 15, 2019. In which year can

> Determine the taxpayer's gross income for tax purposes in each of the following situations. a. Deb, a cash basis taxpayer, traded a corporate bond with accrued interest of $300 for corporate stock with a fair market value of $12,000 at the time of the ex

> Ted and Marvin Brown purchased an apartment building in 2007 as equal tenants in common. After a hectic decade of co-ownership, the brothers decided that their business association should be terminated. This led to the sale of the apartment building and

> KellerCo reports $5 million of U.S. taxable income, the same as its book income, as there are no temporary book-tax differences this year. KellerCo is subject to a 21% Federal income tax rate. Its book-tax differences include the following. Construct K

> Identify whether each of the following items typically constitutes positive or negative evidence when a manufacturing entity assesses whether a valuation allowance is required or should be adjusted for its net operating losses. a. Product orders are inc

> Does the taxpayer's effective tax rate increase or decrease when: a. It creates a valuation allowance against the deferred tax asset for a net operating loss. b. It releases a valuation allowance against the deferred tax asset for a net operating loss?

> Based on the facts and results of Problems 38-43, calculate Kantner's total provision for income tax expense reported on its financial staten1ent and its book net income after tax. Data from Problem 38: Kantner, Inc., is a domestic corporation with the

> Provide the journal entry to record Kantner's current tax expense as determined in Problem 42. Data from Problem 42: In addition to the temporary differences identified in Problems 38-41, Kantner reported two permanent book-tax differences. It earned $

> In addition to the temporary differences identified in Problems 38-41, Kantner reported two permanent book-tax differences. It earned $7,800 in tax-exempt municipal bond interest, and it reported $850 in nondeductible business meals expense. Kantner's bo

> Based on the facts and results of Problems 38-40, determine Kantner's change in net deferred tax asset or net deferred tax liability for the current year. Provide the journal entry to record this amount. Data from Problem 38: Kantner, Inc., is a domest

> Based on the facts and results of Problem 38 and the beginning-of the-year book-tax basis differences listed below, determine the change in Kantner's deferred tax liabilities for the current year. Data from Problem 38: Kantner, Inc., is a domestic cor

> Based on the facts and results of Problem 38 and the beginning-of-the-year book-tax basis difference listed below, determine the change in Kantner's deferred tax assets for the current year. Data from Problem 38: Kantner, Inc., is a domestic corporati

> Ali owns 100 shares of Brown Corporation stock. He purchased the stock at five different times and at five different prices per share as indicated. On April 28, 2018, Ali will sell 40 shares of Brown stock for $40 per share. All of Ali's shares are hel

> Kantner, Inc., is a domestic corporation with the following balance sheet for book and tax purposes at the end of the year. Based on this information, determine Kantner's net deferred tax asset or net deferred tax liability at year-end. Assume a 21% Fede

> Based on the facts and results of Problems 30-36, provide the income tax footnote rate reconciliation for Relix. Data from Problem 30: Relix, Inc., is a domestic corporation with the following balance sheet for book and tax purposes at the end of the y

> Based on the facts and results of Problems 30-35, calculate Relix's total provision for income tax reported in its financial statements, and determine its book net income after tax. Data from Problem 30: Relix, Inc., is a domestic corporation with the

> Provide the journal entry to record Relix's current tax expense as determined in Problem 34. Data from Problem 34: In addition to the temporary differences identified in Problems 30-33, Relix reported two permanent differences between book and taxable

> In addition to the temporary differences identified in Problems 30-33, Relix reported two permanent differences between book and taxable income. It earned $2,375 in tax-exempt municipal bond interest, and it incurred $780 in nondeductible business meals

> Apply the imputed interest rules in the following situations. a. Mike loaned his sister Shonda $90,000 to buy a new home. Mike did not charge interest on the loan. The Federal rate was 4%. Shonda earned $900 of investn1ent incon1e for the year. b. Sande

> Ridge is a generous individual. During the year, she made interest-free loans to various family members when the Federal interest rate was 3%. What are the Federal tax consequences of the following loans by Ridge? a. On June 30, Ridge loaned $12,000 to a

> How does the tax benefit rule apply in the following cases? a. In 2016, the Orange Furniture Store, an accrual method taxpayer, sold furniture on credit for $1,000 to Sammy. Orange's cost of the furniture was $600. In 2017, Orange took a bad debt deducti

> Vic, who was experiencing financial difficulties, adjusted his debts as follows. Determine the Federal income tax consequences from these events. a. Vic is an attorney. Vic owned his uncle $25,000. The uncle told Vic that if he serves as the executor of

> Laura recently was diagnosed with cancer and has begun chemotherapy treat. A cancer specialist has given Laura less than one year to live. She has incurred sizable medical bills and other general living expenses and is in need of cash. Therefore, Laura i

> Clyde had worked for many years as the chief executive of Red Industries, Inc., and had been a major shareholder. Clyde and the company had a falling out, and Clyde was terminated. Clyde and Red executed a document under which Clyde's stock in Red would

> Willingham, Inc., an accn1al basis C corporation, reports pretax book income of $1.6 million. At the beginning of the tax year, Willingham reported no deferred tax accounts on iL5 balance sheet. It is subject to a 21% U.S. income tax rate in the current

> Continue with the results of Problem 26. a. Determine Rubio's income tax expense and GAAP income for the year. b. Express your computations as Microsoft Excel commands. Data from Problem 26: Rubio, Inc., an accrual basis C corporation, reports tl1e fo

> Determine Hazel's Federal gross income from the following receipts for the year. Gain on sale of Augusta County bonds $800 Interest on U.S. government savings bonds 400 Interest on state income tax refund 200 Interest on Augusta County bonds 700

> Roy decides to buy a personal residence, and he goes to the bank for a Decision Making $150,000 loan. The bank tells Roy that he can borrow the funds at 4% if his father will guarantee the debt. Roy's father, Hal, owns a $150,000 CD currently yielding 3.

> RoofCo reports total book income before taxes of $20 million and a total tax expense of $8 million. FloorCo reports book income before taxes of $30 million and a total tax expense of $12 million. The companies' breakdown between current and deferred tax

> Trip Garage, Inc. (459 Ellis Avenue, Harrisburg, PA 17111), is an accrual basis Communications taxpayer that repairs automobiles. In late December 2018, the company repaired Samuel Mosley's car and charged him $1,000. Samuel did not think the problem had

> Selma operates a contractor's supply store. She maintains her books using the cash method. Selma wants to know whether the accrual basis of accounting would be preferable for her business. At the end of the year, Selma's accountant con1putes her accrual

> Using the facts of Problem 12, determine the 2018 end-of-year balance in Mini's deferred tax asset and deferred tax liability balance sheet accounts. Data from Problem 12: Mini, Inc., earns pretax book net income of $750,000 in 2018. Mini deducted $20,

> Mini, Inc., earns pretax book net income of $750,000 in 2018. Mini deducted $20,000 in bad debt expense for book purposes. This expense is not yet deductible for tax purposes. Mini records no other temporary or permanent differences. Assuming that the pe

> Determine Amos's gross income in each of the following cases. a. In the current year, Amos purchased an automobile for $25,000. As part of the transaction, An1os received a $1,500 rebate from the manufacturer. b. Amos sold his business. In addition to th

> Your friend Hui is an investor in blue coin, a virtual currency. Indicate whether and how she is subject to Federal income taxation in the following circumstances. a. Earns S 1,000 in blue coin from mining. b. Purchases $1,000 in blue coin from another f

> Clint, your client, owns a life insurance policy on his own life. He has paid $6,800 in premiums, and the cash surrender value of the policy is $30,000. Clint borrowed $30,000 from the insurance company, using the cash surrender value as collateral. He i

> Describe the purchase method in accounting for acquisitions.

> Describe the empirical evidence on the actual gains or losses resulting from mergers.

> Describe the financing synergies of M&A.

> In what ways is DCF capex analysis similar to valuing common shares, and in what ways is it different?

> What is the difference between a tangible asset and an intangible asset?

> Describe the economies of scale of M&A.

> Describe horizontal M&A, vertical M&A, and conglomerate.

> Describe the possible market price change after a tender offer and the possible reasons.

> Briefly describe three common defensive tactics against a takeover and the difference between U.S. and Canadian practice on poison pills.

> Describe the process of a friendly acquisition.

> Sharon McKee has been appointed finance minister and is convinced that the leasing business is just a way to avoid paying taxes. She asked her department officials to evaluate the cash flow effects for both the lessee and the lessor in financial leases.

> The Bynum Private Equity group has just made a tender offer for, at most, 60 percent of Vendall Company. Vendall has 1,000 shares outstanding. Mr. VanDuun is a shareholder of Vendall and has tendered his shares. For each situation below, indicate the num

> List and briefly describe the two types of takeovers.

> What mistakes can occur if firms do not make the appropriate adjustments?

> How and why do we adjust the discount rate for multi-divisional firms?

> Briefly explain “the Greeks” (delta, theta, Vega, and rho) in option pricing.

> Charles Zhang, the owner of a small moving company, has decided that economic conditions are perfect for him to expand his business. Such an expansion will require him to buy five new moving trucks at a total cost of $275,000. Mr. Zhang’s company has $8,

> What are the cash flow from operations and the free cash flow implications of an operating versus a financial lease?

> Briefly describe operating LCs, revolving LCs, and term loans.

> What are risk-neutral probabilities?

> Explain how to create a risk-free portfolio from the stock and the option’s payoff.