Question: What are the different classifications of capital

> What are the differences between a contributory and a noncontributory pension plan?

> What are the differences between a defined-benefit pension plan and a defined-contribution pension plan?

> On what type of property is depreciation allowed?

> On what form is depreciation reported, and how does it relate to other forms such as Schedules C, E, F, and Form 2106?

> Discuss the three categories of vacation home rentals. Include in your discussion how personal use of the property affects the reporting of income and losses of vacation homes.

> Discuss the concepts of ordinary, necessary, and reasonable in relation to trade or business expenses.

> Discuss the definition of a trade or business. Why does it matter whether a taxpayer is classified as an employee or as self-employed?

> What is meant by an expected return on an annuity contract? How do you calculate expected return for a single person?

> Use the information from problem 62. Would your advice change if the fact(s) changed in each of the following independent instances? Why or why not? a. Jennifer cannot cash the CDs and would need to pay any additional tax liability from the IRA funds

> Jennifer is age 50 and is seeking your advice. She has a traditional IRA with a balance of $100,000 and is considering whether to convert it (roll it over) to a Roth IRA. She has sufficient money in CDs to pay any required tax resulting from the rollov

> Rueben acquires a warehouse on September 1, 2017, for $3 million. On March 1, 2021, he sells the warehouse. Determine Rueben’s cost recovery for 2017 through 2021.

> On February 4, 2017 Jackie purchased and placed in service a car she purchased for $21,500. The car was used exclusively for her business. Compute Jackie’s cost recovery deduction in 2017 assuming no §179 expense but the bonus was taken: ______________

> Janet purchased her personal residence in 2007 for $250,000. In January 2017 she converted it to rental property. The fair market value at the time of conversion was $210,000. a. Determine the amount of cost recovery that can be taken in 2017: ________

> Jake purchased a $235,000 crane for his construction business. He sold the crane for $175,000 after taking $115,000 of depreciation. Assume Jake is in the 33% tax rate bracket. a. On what form would the gain or loss originally be reported? b. What is

> Charles, a self-employed real estate agent, attended a conference on the impact of some new building codes on real estate investments. His unreimbursed expenses were as follows: Airfare…………………………………………………..$480 Lodging……………………………………………………290 Meals……………

> Two methods are used to allocate expenses between personal and rental uses of property. Explain the Tax Court method and the IRS method. Which method is more beneficial to the taxpayer?

> Respond to the following independent situations: a. Jacob is a single taxpayer who has net investment income consisting of $10,000 interest on a certificate of deposit, $5,000 from dividends from a mutual fund, $5,000 from capital gain distributions fr

> In 2017, Jeremy and Celeste who file a joint return, paid the following amounts for their daughter, Alyssa, to attend University of Colorado, during academic year 2017-2018. Alyssa was in her first year of college and attended full-time: Tuition and fe

> Determine the amount of Earned Income Credit in each of the following cases. Assume that the person or persons is/are eligible to take the credit. Calculate the credit using the formulas. a) A single person with earned income of $5,340 and no qualifyi

> Determine the retirement savings contributions credit in each of the following cases. a) A married couple filing jointly with modified AGI of $37,500 and an IRA contribution of $1,600. b) A married couple filing jointly with modified AGI of $58,000 and

> Nicole and Mohammad (married taxpayers filing jointly) are equal owners in an S corporation. The company reported sales revenue of $450,000 and expenses of $310,000. The corporation also earned $20,000 in taxable interest and dividend income and had $1

> Alice rented her personal residence for 13 days to summer vacationers for $4,500. She has AGI of $105,000, before the rental income. Related expenses for the year include the following: Real property taxes……………………………$4,500 Utilities……………………………………………….

> David is a college professor who does some consulting work on the side. He uses 25% of his home exclusively for the consulting practice. He is single and 63 years old. His AGI (without consideration of consulting income) is $45,000. Other information

> In the current year, Sandra rented her vacation home for 75 days, used it for personal use for 22 days, and left it vacant for the remainder of the year. Her income and expenses before allocation are as follows: Rental income …………………………$15,000 Real es

> Kelvin owns and lives in a duplex. He rents the other unit for $750 per month. He incurs the following expenses during the current year for the entire property: Mortgage interest………………...…………………. $7,500 Property taxes ……………………….…………………..2,000 Utilitie

> Shirelle and Newman are each 50% partners of a business that operates as a partnership. The business reports the following results: Revenue…………………………….………………..$95,000 Business expenses………………….……………..48,000 Investment expenses ……………….………………8,000 Short-t

> What is a §1231 asset? How are gains and losses from the sale of §1231 assets treated? On what tax form are gains and losses from the sale of §1231 assets reported?

> Dominique and Terrell are joint owners of a bookstore. The business operates as an S corporation. Dominique owns 65%, and Terrell owns 35%. The business has the following results in the current year: Revenue………………………………………. $1,500,000 Business expens

> Ricardo acquired a warehouse for business purposes on August 30, 1998. The building cost $420,000. He took $227,600 of depreciation on the building, and then sold it for $500,000 on July 1, 2017. What are the amount and nature of Ricardo’s gain or los

> Antoine sold the following stock in 2017. ABC, Inc., is a §1202 qualified small business (QSB). Asset Cost Acquired Sale Price Sale Date  ABC, Inc. 200 shares $148,000 1/10/09 $200,000 4/30/17  DEF, Inc. 100 shares  21,000 11/15/1

> Brantley owns an automobile for personal use. The adjusted basis is $19,500, and the FMV is $16,000. Assume Brantley has owned the automobile for two years. a. Respond to the following if Brantley sells the vehicle for $16,000. (1). What is the amoun

> Respond to the following independent situations: a. Masa and Haiming, husband and wife, filing jointly, earn $275,000 in salaries and do not have any net investment income. (1). How much in surtax will Masa and Haiming be assessed on their Form 1040 for

> Haneen has taxable income of $115,000 without consideration of capital gain or loss transactions. She has a short-term capital gain of $15,000, a long-term capital loss of $7,000, and a short-term capital gain of $4,000. Assume none of the gains or los

> In 2017 Landon has self-employment earnings of $195,000. Compute Landon’s self- employment tax liability and the allowable income tax deduction of the self-employment tax paid.

> Jackie owns a temporary employment agency that hires personnel to perform accounting services for clients. During the year, her entertainment expenses for her clients include the following: Cab fare to and from restaurants…………………………$ 350 Gratuity at

> Alice owns undeveloped land with an adjusted basis of $160,000. She sells the property to George for $205,000. a. What is Alice’s realized and recognized gain? b. To what IRC section does the gain on the property apply? c. If the land is used in a tra

> In 2017, Rosalva sold stock considered short-term for a gain of $925 and stock considered long-term for a loss of $2,165. She also had a $3,000 short-term loss carryover from 2016 and a $1,240 long-term loss carryover from 2015. a. What amount will be

> Can the owner of rental property be treated as conducting a trade or business with respect to the rental property? If so, what must the taxpayer do for it to be considered a trade or business?

> Davidson Industries, a sole proprietorship, sold the following assets in 2017: Asset Cost Acquired Depreciation Sale Price Sale Date  Warehouse $150,000 10/10/10 $25,801 $175,000 3/15/17  Truck  18,000 1/15/16  6,480  16,000 

> Jordan took a business trip from New York to Denver. She spent two days in travel, conducted business for nine days, and visited friends for five days. She incurred the following expenses: Airfare ……………………………………………. $ 550 Lodging……………………………………………. 3

> Using the following independent situations, answer the following questions: Situation # 1 Clara received from her Aunt Sona property with a FMV at the date of the gift of $40,000. Aunt Sona purchased the property five years ago for $35,000. Clara sol

> Suzette inherited property from her father on April 19, 2017. The FMV at the date of death was $40,000. The property was worth $35,000 six months later and had a basis to her father of $25,000. a. What is the basis of the inherited property to Suzett

> Walt purchased a computer for $5,000. He could use the computer exclusively for his business, or he could allow his family to use the computer 60% of the time and 40% would be for business use. Determine the tax deduction for the year of acquisition un

> Brittany purchased a building for $500,000 on January 1, 2009. The purchase price does not include land. Calculate the cost recovery for 2009 and 2017 if the real property is: a. Residential real property. b. A warehouse.

> On June 10, 2017, Huron purchased equipment (7-year class property) for $75,000. Determine Huron’s cost recovery deduction for computing 2017 taxable income. Assume Huron does not make the §179 election or bonus elections.

> Michael is the sole proprietor of a small business. In June 2017 his business income is $12,000 before consideration of any §179 deduction. He spends $245,000 on furniture and equipment in 2017. If Michael elects to take the §179 deduction and no bonu

> Umair sold some equipment he used in his business on August 29, 2017, that was originally purchased for $70,000 on November 21, 2016. The equipment was depreciated using the 7-year MACRS method for a total of $18,574. Assume there is no additional nett

> Discuss the concept of ordinary income property and give some examples.

> What is a capital asset? What factors affect the determination of whether an asset is classified as a capital asset?

> When we determine whether an asset is a §1231 asset, does the length of time the asset is held affect the classification? Explain.

> Can travel expenses to and from rental property be deducted? If so, what are the rules concerning the deductibility of travel, and how is the deduction calculated?

> What determines whether land is a capital asset? How else can land be classified?

> What type of compensation is subject to employer withholding?

> What is a capital gain distribution, and how is it taxed?

> Who completes Form W-4, and what is its purpose? What information does it provide to employers?

> Why are charitable contributions stated separately on the K-1 but not deducted on a partnership return?

> Why are the income and losses (or expenses) separately stated to the partner, shareholder or owner, and on what form(s) are they reported?

> Two kinds of education tax credits are available. Name them and briefly discuss the criteria necessary to claim each of the credits.

> How can the gain from the sale of property be characterized? Why is it important to correctly characterize the gain on the sale of property?

> Explain the two instances in which taxpayers may choose to deduct foreign taxes as an itemized deduction rather than as a credit.

> Would your answer to Question 10 change if Jake also rented his house (at fair market value) to his brother and his family for 7 days? Data from Question 10: Jake has a vacation rental house at the beach. During the tax year, he and his immediate fami

> Does the length of time a capital asset is held affect the gain or loss on the sale of the asset? Explain.

> Jake has a vacation rental house at the beach. During the tax year, he and his immediate family used the house for 12 days for a personal vacation. Jake and his son spent two more weekends (4 days) repairing steps from the property to the beach. The b

> A taxpayer has $2,000 of qualified employment-related expenses paid on behalf of one qualifying child. Determine the maximum and minimum amount of child and dependent care tax credit available to the taxpayer and explain the circumstances in which the m

> When must employers make payroll tax deposits?

> What are the tip reporting requirements for large food and beverage establishments?

> When are employees required to report tips to their employer? Are tips subject to the same withholding requirements as regular salary?

> In addition to federal tax withholding, what other taxes are employers required to withhold from an employee’s paycheck? How are the calculations made?

> If a taxpayer makes $30,000 per year, will the annual withholding differ depending on whether the taxpayer is paid weekly, semimonthly, or monthly? Explain.

> What is meant by the terms realized gain (loss) and recognized gain (loss) as they apply to the sale of assets by a taxpayer?

> How are household payroll taxes reported? When are they due?

> What is the FUTA tax, and at what percentage is it assessed?

> Why are self-employed taxpayers allowed a deduction for self-employment tax in determining adjusted gross income (AGI)?

> The amount of the premium tax credit is the lesser of what two factors?

> How are gains (losses) from the sale of property acquired from a decedent taxed?

> What are supplemental wage payments?

> What is the maximum annual contribution that can be made to a Coverdell Education Savings Account? Can an eligible beneficiary have more than one CESA?

> How often must employers report payroll taxes to the IRS? What form must the employer file?

> Jerome is single and cannot be claimed by anyone as a dependent. He is a student at a local university enrolled full-time in an MBA program. His tuition bill was $5,000. He paid the bill by withdrawing $2,000 from his savings account and borrowing the

> What is the deadline by which contributions must be made to a traditional IRA to obtain a tax deduction in the current year?

> How are the terms basis, adjusted basis, and fair market value defined as they apply to the calculation of gains and losses?

> What are the two components of the self-employment tax? Is either component limited?

> What is the maximum annual contribution that can be made to an SEP, and how is the maximum calculated?

> Briefly discuss the conditions necessary for a taxpayer to be permitted to make tax-deductible contributions to a simplified employee pension (SEP).

> What is the maximum annual contribution that can be made to a Keogh plan, and how is the maximum calculated?

> Distinguish between travel and transportation expenses.

> Discuss the concept of listed property.

> Briefly discuss the conditions necessary for a taxpayer to be permitted to make tax-deductible contributions to a Keogh plan.

> When calculating depreciation for personal property (assuming the half-year convention) using the IRS depreciation tables, does the taxpayer need to multiply the first year table depreciation percentage by one-half? What about in the year of disposal, a

> What is a depreciation convention? What conventions are available under MACRS?

> Discuss the difference between personal property and real property. Give examples of each.

> Discuss the word basis in relation to the financial accounting term book value. What is meant by the term adjusted basis?

> What are the two broad categories of retirement plans? Give some examples of each.

> For purposes of the tax credit for child and dependent care expenses, explain the limitations concerning the amount of qualified expenses that can be used to calculate the credit.

> What is the “rule of thumb” noted in the text pertaining to the taxability of retirement plan distributions?

> What is the purpose of a retirement plan? Why does the government provide tax benefits to retirement plans?

> What are the differences between a traditional IRA and a Roth IRA regarding the deductibility of contributions, taxability of IRA earnings, and taxability of distributions?

> Lance is single and has a traditional IRA into which he has made deductible contributions for several years. This year he changed employers and is now an active participant in his employer’s pension plan. His AGI is $95,000. He wants to make a nondedu

> April, who is under age 50, is considering investing in tax-free state government bonds or making a permitted tax-deductible contribution to a traditional IRA. Assume that the amounts are the same for either alternative and that she can reinvest the int

> Under what circumstances is it advantageous for a taxpayer to make a nondeductible contribution to a traditional IRA rather than a contribution to a Roth IRA?