Question: Concept, Inc., has a profit sharing plan

> Gary, who is sing1e, sells his principal residence (owned and occupied by him for seven years) in November 2018 for a realized gain of $148,000. He had purchased a more expensive new residence eight months prior to the sale. He anticipates that he will o

> Guy, Alma, and Kara form the Ivory Partnership. In exchange for a 30% capital interest, Guy transfers property (basis of $200,000; fair market value of $400,000) subject to a liability of $100,000. The liability is assumed by the partnership. Alma transf

> Ida owns 30% of the stock in Mockingbird, a ca1endar year S corporation. Her basis in the stock as of January 1, 2018, is $130,000. Mockingbird has an operating loss of $500,000 in 2018 and an operating profit of $600,000 in 2019. Ida withdraws $70,000 i

> Jim Olsen owns all of the stock in Drake, a ca1endar year S corporation. For ca1endar year 2018, Drake anticipates an operating loss of $160,000 and cou1d, if deemed worthwhile, sell a stock investment that wou1d generate a $10,000 long-term capital loss

> Assume the same facts as in Problem 56. Kirby Turner is a 20% shareholder in Thrasher Corporation. She is aware of the tax consequences of the various items listed on the Schedule K- 1 (Form 1120S) she received but does not understand their effect on bas

> During the current year, Thrasher (a calendar year, accrual basis S corporation) has the following transactions: a. Determine Thrasher Corporation's separately stated items for the current year. b. Determine Thrasher's ordinary business income for the

> The stock of Emerald Corporation is held equally by Barney and Faye The shareholders would like to receive, as a dividend, value of $800,000 each. The corporation has the following asset that it can spare: Both assets are held as investments. Emerald C

> Harold, Marcia, and Richard are equal shareholders in Pelican Corporation, a calendar year C corporation. During the current year, Pelican makes a $150,000 distribution to its three shareho1ders. Of the $50,000 that each shareholder receives, the tax res

> Lily is sole shareholder of Crimson Corporation (a C corporation). At a time when Crimson has a deficit in accumulated E & P of $90,000 and current E & P of $65,000, it distributes a cash dividend of $85,000. If Lily's basis in her stock is $15,000, what

> Elton, Neil, Courtney, and Zelma from Ecro Corporation with the following investments: In addition to its stock, Ecru distributes cash as follows: $10,000 to Neil, $20,000 to Courtney, and $100,000 to Zelma. Assume that each share of Ecru stock is wort

> Doris, Walt, and Pat form Swan Corporation with the following investments: In addition to the 500 shares of stock, Pat receives $100,000 in cash from Swan Corporation. Assume that each share of Swan stock is worth $1,000 a. How much loss does Wa1t real

> On February 24, 2018, Allison’s building, with an adjusted basis of $1.3 million (and used in her trade or business), is destroyed by fire. On March 31, 2018, she receives an insurance reimbursement of $1.65 million for the loss. Allison invests $1.55 mi

> Puce, a calendar year C corporation, had the following Schedule M-1 transactions on its Form 1120 for the current year: What is Puce Corporation's net income per books for the current year? Taxable income $100,000 Federal income tax 21,000 Excess c

> In each of the following independent situations determine the C corporation’s Federal income tax liability for calendar year 2018. Corporation Taxable Income $ 45,000* 68,000** Sparrow Warbler Scaup 80,000

> Puffin Corporation was formed on July 1 of the current tax year and incurred qualifying organizational expenditures. It uses a calendar year and wants to accelerate any deductions that are available. Based on this assumption, what is Puffin Corporation's

> Determine the dividends received deduction for each of the following independent situations. Assume that the percentage of stock owned in the corporation paying the dividend is 30% for Green Corporation and less than 20% for Red Corporation and Blue Corp

> Auburn Company manufactures and sells furnishing for hospitals (e.g., special needs bathroom fixtures). In the current year, it donates some of its inventory to a newly constructed hospice. The hospice is adjacent to a cancer treatment center and is inte

> During 2018, Siskin Corporation (a Corporation) had the following transactions: In June 2018, Siskin made a contribution to a qualified charitable organization of $10,500 in cash (not included in any of the items listed above). a. How much, if any, of

> On December 6, 2018, Kestrel Company (a calendar year taxpayer) authorizes a cash donation of $50,000 to the Memphis Public Library. The pledge is carried out as follows: $15,000 on December 12, 2018; $25,000 on February 13, 2019; and $10,000 on May 10,

> Robin had the following transactions in 2018: Robin also had a net long-term capital loss in 2017 of $2,000, which it could not use, and ordinary income of $13,000. What are the tax consequences in 2018 if: a. Robin is an individual. b. Robin is a C co

> Taupe, a calendar year taxpayer, has a long term capital loss of $4,000 and a short-term capital loss of $4,000. How are these items handled for tax purposes if Taupe is: a. An individual? b. A C corporation?

> Citron, a calendar year taxpayer, began business in January 2017. It had a long-term capital gain of $5,000 in 2017 and a long-term capital loss of $10,000 in 2018. For both years, Citron had an operating profit in excess of $100,000 How are these capita

> On June 5, 2018, Brown, Inc., a calendar year taxpayer, receives cash of $750,000 from the county upon condemnation of its warehouse building (adjusted basis of $500,000 and fair market value of $750,000). a. What must Brown do to qualify for 1033 postpo

> Garnet has the following capital asset transactions during 2018: Further, Garnet has an excess capital loss carryforward of $6,000 from 2017. a. What are the tax consequences of these transactions if the 6,000 loss is long term and Garnet is an individ

> Using the legend provided below, classify each statement under 2018 tax law a. A foreign tax credit is available. b. The deduction of charitable contributions is subject to percentage limitation(s). c. Excess charitable contributions can be carried for

> Zariat has the retirement assets listed below. She plans to retire and start withdrawing amounts on which to live. Rank the accounts in the order from which she should make withdrawals so that tax deferral is maximized. Roth IRA $923,408 Traditional

> Lou’s employer provides a qualified cafeteria plan under which he can choose cash of $9,000 or health and accident insurance premiums worth approximately $7,000. Assuming that Lou is in the 35% tax bracket, advise him of his tax alternatives.

> Sara Reid, age 35, is the owner of a small business. She is trying to decide whether to go with a 401(k) plan or a simplified employee pension plan. She is not interested in a SIMPLE 401(k) plan. Her salary will be approximately $45,000, and she will hav

> On November 19, 2016, Rex is granted a nonqualified stock option to purchase 100 shares of Tan Company. On that date, the stock is selling for $8 per share, and the option price is $9 per share. Rex exercises the option on August 21, 2017, when the stock

> Rosa exercises ISOs for 100 shares of Copper Corporation common stock at the option price of $100 per share on May 21, 2018, when the fair market value is $120 per share. She sells the 100 shares of common stock three and one half years later for $140. a

> On July 2, 2015, Black Corporation sold 1,000 of its common shares (worth $14 per share) to Earl, an employee, for $5 per share. The sale was subject to Earl's agreement to resell the shares to the corporation for $5 per share if his employment is termin

> On February 20, 2013, Tom (an executive of Hawk Corporation; a calendar year corporation) purchased 100 shares of Hawk stock (selling at $20 a share) for $10. A condition of the transaction was that Tom must resell the stock to Hawk at cost if he volunta

> Grace is an officer of a local bank that merges with a national bank, resulting in a change of ownership. She loses her job as a result of the merger, but she receives a cash settlement of $590,000 from her employer under her golden parachute. Her averag

> Mandy and Timothy exchange real property in a like-kind exchange. Mandy receives real property with a fair market value of $78,000 and transfers real property worth $70,000 (adjusted basis of $28,000) and cash of $8,000. What is Mandy's realized and reco

> Dan, a professional basketball player, is to receive a bonus of $2 million for signing an employment contract. An NQDC plan is established to postpone the income beyond Dan's peak income years. In 2018, his employer transfers the bonus to an escrow agent

> Samuel, age 32, loses his job in a corporate downsizing. As a result of his termination, he receives a distribution of the balance in his 401(k) account of $20,000 ($25,000 一 $5,000 Federal income tax withholding) on May 1, 2018. Samuel's marginal tax ra

> Gene, age 34, and Beth, age 32, have been married for nine years. Gene, who is a college student, works part-time and earns $1,500. Beth is a high school teacher and earns a salary of $34,000. Their AGI is $37,000. a. What is the maximum amount Gene can

> Louis is a participant in a SIMPLE IRA of his employer Brown, Inc. During 2018， he contributes 8% of his salary of $63,000, and his employer contributes 3%. What is the total amount that will be vested in his account at the end of 2018?

> Dana, age 54, has a traditional deductible IRA with an account balance of $107,600, of which $77,300 represents contributions and $30,300 represents earnings. In 2018, she converts her traditional IRA into a Roth IRA. What amount must Dana include in her

> Jimmy establishes a Roth IRA at age 47 and contributes a total of $89,600 over 18 years. The account is now worth $112,000. How much of these funds may Jimmy withdraw tax-free?

> Answer the following independent questions with respect to traditional IRA contributions for 2018: a. Juan, age 41, earns a salary of $28,000 and is not an active participant in any other qualified plan. His wife, Agnes, has no earned income. What is the

> Answer the following independent questions with respect to a deductible IRA and S 401(k) contributions for 2018: a. Govind, age 31, earns a salary of $26,000 and is not an active participant in any other qualified plan. His wife has $600 of compensation

> Shyam is a participant in a SIMPLES 401(k) plan. He elects to contribute 4% of his $40,000 compensation to the account, while his employer contributes 3%. What amount will not vest immediately, if any?

> Amber's employer, Lavender, Inc., has a S 401(k) plan that permits salary deferral elections by its employees. Amber's salary is $99,000, her marginal tax rate is 24%, and she is 42 years old. a. What is the maximum amount Amber can elect for salary defe

> In June 2018, Sue exchanges a sport-utility vehicle (adjusted basis of $16,000; fair market value of $19,500) for cash of $2,000 and a pickup truck (fair market va1ue of $17,500). Both vehicles are for business use. Sue believes that her basis for the tr

> In 2018, Magenta Corporation paid compensation of $45,300 to the participants in a profit sharing plan. During 2018, Magenta Corporation contributed $13,200 to the plan. a. Calculate Magenta's deductible amount for 2018. b Calculate the amount of any con

> Determine the maximum annual benefits payable to a participant from a defined benefit plan in the following independent situations: a. Frank, age 66, has been a participant for 17 years, and his highest average compensation for 3 years is $127,300. b. El

> Heather has been an active participant in a defined benefit plan for 19 years. During her last 6 years of employment, Heather earned $42,000, $48,000, $56,000, $80,000, $89,000, and $108,000, respectively (representing her highest-income years). a. Calcu

> Sue has worked for Yellow Corporation for four and one half years, but she has an offer to move to Red Corporation for a moderate increase in salary. Her average salary for Yellow has been $210,000, and she receives a 2% benefit for each year of service

> Mauve, Inc., uses a two- to six-year graded vesting approach in its retirement plan. Calculate the non forfeitable percentage for each of the following participants based upon the years of service completed: Participant Years of Service Caleb 3 Dani

> Sparrow, Inc., uses a three- to seven-year graded vesting approach in its retirement plan. Calcu1ate the non forfeitable percentage for each of the following participants based upon the years of service completed: Participant Years of Service Mary 2

> Ben is a 4% owner of a title company. In the following situations, is he a highly compensated employee? Why or why not? a. Ben receives a total salary of $110,000 and is a member of the top-paid group in the company. b. Ben receives a total salary of $19

> Blonde Corporation has a calendar year retirement plan covering its participants. William, age 21, is hired on January 31, 2017, and he meets the service requirement over the next 12 months (completes at least 1,000 hours by January 31, 2018). a. If the

> Ven Company is a retailer. 1n 2018, its before-tax net income for financial reporting purposes was $600,000. This included a $150,000 gain from the sale of land held for several years as a possible plant site. The cost of the land was $100,000, the contr

> Juan owned 200 shares of Circle Corporation stock (adjusted basis of $30,000). He sold 100 shares for $12,000. Twenty days later he purchased 100 shares of the same stock for $8,500. What is Juan's realized and recognized loss? What is his basis in the n

> Your client, Bob Young, is negotiating a sale of investment real estate for $12 million. Bob believes that the buyer would pay cash of $8 million and a note for $4 million or $3 million cash and a note for $9 million. The notes will pay interest at sligh

> Amber Company has used the dollar-value LIFO technique for the past three years. The company has only one inventory pool. Its beginning inventory for the current year was computed as follows: a. The current-year ending inventory (end of year 3) at curr

> At the end of 2019, Magenta Manufacturing Company discovered that construction cost had been capitalized as a cost of the factory building in 2014 when it should have been treated as a cost of production equipment installation costs. As a result of the m

> In 2018, Gail changed from the lower of cost or market FIFO method to the LIFO inventory method. The ending inventory for 2017 was computed as follows: Item C was damaged goods, and the replacement cost used was actually the estimated selling price of

> Silver Creek Ranch LLC is a small, family-owned cattle ranch that began operations in the current year. The ranch grows hay that will be fed to its purebred cattle. It will take approximately three years to build up the herd and to begin producing a posi

> Lavender Manufacturing Company began business in the current year. The company uses the simplified method to allocate mixed services costs to production. The company's costs and expenses for the year were as follows: a. Determine Lavender's total produ

> Grouse Company is a furniture retailer whose average annual gross receipts for the three preceding years exceeded $25 million. In the current tax year, the company purchased merchandise with an invoice price of $15 million, less a 2% discount for early p

> On March 31, 2016, Big Boats Company entered into a contract with Vacations Unlimited to produce a state-of-the-art cruise ship, to be completed within three years. Big Boats estimated the total cost of building the ship at $300 million. The contract pr

> The Wren Construction Company reports its income by the completed contract method. At the end of 2018, the company completed a contract to construct a building at a total cost of $800,000. The contract price was $1.2 million, and the customer paid Wren $

> George sold land to an unrelated party in 2017. His basis in the land was $45，000， and the selling price was $120,000 $30,000 payable at closing and $30,000 (plus 10% interest) due January 1, 2018, 2019, and 2020. What would be the tax consequences of th

> Ash1ey inherited all of the property of her aunt, who died in 2018. Her aunt's adjusted basis for the property at the date of death was $1,200,000. The property's fair market value was $4,500,000 at the date of death and $4,800,000 six months after the d

> Mary purchased an annuity that pays her $ 500 per month for the rest of her life. She paid $70,000 for the annuity. Based on IRS annuity tables, Mary's life expectancy is 16 years. How much of the first $500 payment will Mary include in her gross income

> On December 30, 2017, Maud sold land to her son, Charles, for $50,000 cash and a 7% installment note for $350,000, payable over 10 years. Maud's cost of the land was $150,000. In October 2019, after Charles had paid $60,000 on the principal of the note,

> On June 30, 2018, Kelly sold property for $240,000 cash and a $960,000 note due on September 30, 2019. The note will also pay 6% interest, which is slightly higher than the Federal rate. Kelly's cost of the property was $400,000. She is concerned that Co

> Kay, who is not a dealer, sold an apartment house to Polly during the current year (2018). The closing statement for the sale is as follows: During 2018, Kay collected $9,000 in principal on the installment note and $2,000 of interest. Kay's basis in t

> Ted purchased equipment and used materials to develop a patent. The development costs were deducted on prior returns. The bases and fair market values of the assets are presented below. Sarah has made an offer to purchase the assets. Under one plan, sh

> Jeffrey Boyd, the president of Eagle Furniture Company (average annual gross receipts of $30 million), has prepared the company's financial statements and income tax returns for the past 15 years. In July 2019, however, he hires you to prepare the 2018 c

> Raven Finance Company experiences bad debts of about 3% of its outstanding loans. At the end of the year, the company had outstanding receivab1es of $18 million. This balance included $2 million of accrued interest receivable Raven's loan 10ss reserve fo

> How do the all events and economic performance requirement apply to the following transactions by an accrual basis taxpayer? a. The company guarantees its product for six months. At the end of 2018, customers had made valid claims for $600,000 that were

> Blue Company, an architectura1 first has a bookkeeper who maintains a cash receipts and disbursements journal. At the end of the year (2018), the company hires you to convert the cash receipts and disbursements into accrual basis revenues and expenses. T

> Compute Mary's income or deductions for 2018 using (1) the cash basis and (2) the accrual basis for each of the following: a. In May 2018, Mary paid a license fee of $1,200 for the period June 1, 2018, through May 31, 2019. b. In December 2018, Mary coll

> Gold, Inc., is an accrual basis taxpayer. In 2018, an employee accidentally spilled hazardous chemicals on leased property. The chemicals destroyed trees on neighboring property, resulting in $30,000 of damages. In 2018, the owner of the property sued Go

> Heather owns 400 shares of Diego Corporation common stock for which she paid $4,000. She receives a nontaxable stock dividend of 20 shares of preferred stock on her common stock. The fair market values on the date of distribution of the preferred stock d

> In 2017, Juan entered into a contract to write a book. The publisher advanced Juan $50,000, which was to be repaid out of future royalties. If the book was not completed by the end of 2018, however, Juan would be required to repay the publisher for the a

> Zorn conducted his professional practice through Zorn, Inc. The corporation uses a fiscal year ending September 30 even though the business purpose test for a fiscal year cannot be satisfied. For the year ending September 30, 2018, the corporation paid Z

> The Cardinal Wholesale Company is an S corporation that began business on March 1, 2018. Robert, a calendar year taxpayer, owns 100% of the Cardinal stock. He has $400,000 taxable income from other sources each year. Robert will work approximately 30 hou

> Theresa has a 2017 Form 1040 Schedule D, line 16 gain of $45,000. There is also a $45,000 gain on the form's line 19. What is the nature of the gain? What a1ternative tax rate applies to it?

> Adrian has a 2017 Form 4797, line 9 gain of $56,000. He also has one transaction on his 2017 Form 1040 Schedule D, Part 1 a loss of $58,000. What is Adrian's AGI from these events?

> On August 10, 2016, Jasper purchased business equipment for $40,000. On his 2016 tax return, $40,000 of 179 immediate expense was taken on the equipment. On July 14, 2017, Jasper sold the equipment for $12,000. What is the nature of disposition gain or l

> Sasha and Tara are married, filing jointly. Their correctly determined 2018 taxable income is $127,000. This taxable income includes a $5,000 1231 gain from the sa1e of business land that was included in their $22,000 of net long term capital gain. None

> Tan Corporation purchased depreciable tangible personal property for $100,000 in 2016 and immediately expensed the entire cost under 179 In 2018, when the property was worth $80,000, Tan distributed it as a dividend to the corporation's sole shareholder.

> Miguel receives tangible personal property as an inheritance in 2016. The property was depreciated by the deceased (Miguel's father), and Miguel will also depreciate it. At the date of the deceased's death, the property was worth $532,000. The deceased h

> Anna received tangible personal property with a fair market value of $65,000 as a gift in 2016. The donor had purchased the property for $77,000 and had taken $77,000 of depreciation. Anna used the property in her business. Anna sells the property for $2

> On July 1, 2018, Katrina purchased tax-exempt bonds (face value of $75,000) for $82,000. The bonds mature in five years, and the annual interest rate is 6%. The market rate of interest is 2% a. How much interest income and/or interest expense must Katrin

> On January 1, 2009, Stephanie Bridges acquired depreciable real property for $50,000. She used straight-line depreciation to compute the asset's cost recovery. The asset was sold for $96,000 on January 3, 2018, when its adjusted basis was $38,000. a. Wha

> On May 2, Hannah Weather (Social Security Number: 111-22-333) acquired residential rental rea1 estate for $450,000. Of the cost, $100,000 was allocated to the land and $350,000 to the building. On August 20, 2017, the building, which then had an adjusted

> On June 1, 2014, Skylark Enterprises (not a corporation) acquired a retail store building for $500,000 (with $100,000 being allocated to the land). The store building was 39-year real property, and the straight-line cost recovery method was used. The pro

> Copper Industries (a sole proprietorship) sold three 9 1231 asset during 2018. Data on these property dispositions are as follows: a. Determine the amount and the character of the recognized gain or 10ss from the disposition of each asset. b. Assuming

> Amber Industries (a sole proprietorship) sold three 1231 asset during 2018. Data on these property dispositions are as follows: a. Determine the amount and the character of the recognized gain or loss from the disposition of each asset. b. Assuming tha

> Siena Industries (a sole proprietorship) sold three 1231 asset during 2018. Data on these property dispositions are as follows: a. Determine the amount and the character of the recognized gain or loss from the disposition of each asset. b. Assuming tha

> Keshara has the following net § 1231 results for each of the years shown. What would be the nature of the net gains in 2017 and 2018? Tax Year Net 5 1231 Loss Net 5 1231 Gain 2013 $18,000 2014 33,000 2015 42,000 2016 $41,000 2017 30,000

> Bob owns a farming sole proprietorship. During the year, Bob sold a milk cow that he had owned for 15 months and a workhorse that he had owned for 66 months. The cow had an adjusted basis of $38,000 and was sold for $55,000. The horse had an adjusted bas

> Jenny purchased timber on a 100-acre tract of 1and in South Dakota in March 2016 for $100,000. On January 1, 2018, the timber had a fair market va1ue of $145,000. Because of care1ess cutting in November 2018, when the fair market va1ue was $158,000, the

> Gray, Inc., a C corporation, has taxable income from operations of $1,452,000 for 2018. It also has a net long-term capital loss of $355,000 from the sale of a subsidiary's stock. The year 2018 is the first year in the last 10 years that Gray has not had

> Sally owns real property for which the annual property taxes are $9,000. She sells the property to Kate on March 9, 2018, for $550,000. Kate pays the real property taxes for the entire year on October 1, 2018. a. How much of the property taxes can be ded