What factors affect the taxability of capital gains and losses?
> Jerry and Ellen are married filing jointly with AGI of $45,000. They made a $1,500 contribution to a qualified retirement plan. How much is their retirement savings contributions credit? a. $0. b. $150. c. $300. d. $750.
> Julian is a single father with a son, Alex, who is 8 years old. If Julian’s AGI is $87,000, what is his child tax credit for Alex? a. $0. b. $400. c. $600. d. $1,000.
> Justin and Janet, whose AGI is $156,000, have twin boys, Jake and Jaime, age 5. How much child tax credit can they take? a. $0. b. $1,000. c. $2,000. d. $2,300.
> Who pays FICA? What are the percentages and limits on the payments?
> If a taxpayer works more than one job, will the withholding from the various jobs necessarily cover his or her tax liability? Explain.
> Explain the purpose of Form 1040-ES. Under what conditions are taxpayers required to file 1040-ES? When is Form 1040-ES filed?
> What is a Form W-9? Why must this form be filed?
> Explain the provisions of backup withholding and the conditions under which an employer must comply with these provisions.
> Explain the two methods for income tax withholding on supplemental wage payments.
> What are the penalties imposed on employers for filing incorrect W-2s?
> How does an employer report wages to the employee, the federal government, and the Social Security Administration? When is this notification due?
> What individuals are subject to the payroll taxes on household employees?
> If a business fails to make payroll deposits, who is held responsible?
> What are the penalties for not making timely payroll deposits?
> When must monthly and semiweekly schedule depositors make their deposits? What taxes must be deposited?
> What is a lookback period?
> Briefly explain when and how each of the two education credits is phased out.
> Explain what qualifies as education expenses for the purposes of educational tax credits.
> To determine the amount of credit for the elderly or the disabled, the appropriate base amount must be adjusted by the effect of two items. What are those two items, and in what way is the base amount adjusted?
> A taxpayer maintains a household and is entitled to a dependency exemption for an incapacitated adult child. The child lives during the week at an adult day care center and on the weekends at home with the taxpayer. The taxpayer pays a fee to the cente
> Briefly explain the purpose of the premium tax credit.
> Briefly explain the difference between a refundable and a nonrefundable tax credit and give three examples of tax credits that may be refundable (or partly refundable) discussed in this chapter.
> Briefly explain the requirements that must be met to receive a tax credit for child and dependent care expenses.
> What is the definition of qualifying child for purposes of the Earned Income Credit?
> In the case of the adoption credit, what special rules apply when adopting a child who is a citizen of another country?
> In the case of the adoption credit, what special rules apply when adopting a child who is a child with special needs?
> What limitations are associated with the adoption credit, both in terms of dollar amounts and eligibility?
> Explain the limitations pertaining to the retirement savings contributions credit.
> Paul and Olivia filed a joint tax return and reported modified AGI of $92,000. They have two qualifying children for the purposes of the child tax credit. What is the amount of their child tax credit? What is the amount of their credit if their modifi
> Taxpayers can claim a child tax credit for a qualifying child. Define qualifying child.
> Explain how the foreign tax credit limitation works.
> Les’s personal residence is in uptown New Orleans. Every year during Mardi Gras, Les rents his house for 10 days to a large corporation that uses it to entertain clients. How does Les treat the rental income? Explain.
> When depreciation is deducted on a rental property, why is it beneficial for the taxpayer to allocate the cost of the property to other assets (furniture, appliances, etc.) connected with the property, rather than allocating the entire lump sum to the bu
> What is the difference between a deductible repair expense and a capital improvement of a rental property?
> How are the income and losses from a flow-through entity reported to the taxpayer (partner, shareholder or owner)? Are all of the items from the flow-through entity reported on the same form? Explain.
> What is meant by the term flow-through entity? Give some examples.
> Explain how gains (losses) from the sale of property acquired as a gift are taxed.
> Briefly describe the types of income that are reported on a Schedule E.
> How can a taxpayer determine the basis of units from a mutual fund?
> What is royalty income, and which forms are used to report it? What factors determine which forms should be used?
> Explain the terms recapture and unrecaptured provisions as they apply to §1250 assets.
> What is a §1250 asset? How is it related to a §1231 asset?
> What is a §1245 asset? How is it related to a §1231 asset?
> Discuss the netting process of capital gains and losses. What are the possible outcomes of the netting process, and how would each situation be taxed?
> What is a §1202 gain, and how is it taxed?
> Capital gains can be taxed at several different rates. What determines the rate?
> In what ways can a capital asset be acquired, and how is the holding period determined for each method of acquisition?
> How is a net capital loss treated? Include in your answer a discussion of how a net capital loss is treated in relation to other income.
> For rental expenses to be deductible, what criteria must be met? For this question, assume no personal use of the rental property.
> Stan has $20,000 in a traditional IRA at a bank. He decided to change trustees from a bank to a financial services firm. He requests, and receives, a check from the bank that he intends to take to the financial services firm to open a new account. He
> Tax-free distributions from a Coverdell Education Savings Account can be used for what purpose? Be specific.
> Briefly discuss the conditions necessary for a taxpayer to be permitted to make tax-deductible contributions to a traditional IRA.
> Anne, a single taxpayer under age 50, has wage income of $74,000 and is not covered under a retirement plan by her employer. She would like to start a retirement plan if possible. What options are available to her?
> What is the maximum annual contribution that can be made to a Roth IRA, and how is the maximum calculated?
> What is the maximum annual contribution that can be made to a SIMPLE plan, and how is the maximum calculated?
> What is the maximum annual contribution that can be made to a traditional IRA, and how is the maximum calculated?
> Why were the hobby loss rules established? What factors determine whether an activity is a trade or business or a hobby? Is any one factor controlling?
> Discuss the limits on home office expense deductibility.
> Discuss the limits on meals and entertainment. Are meals and entertainment expenses always limited to 50%?
> What is considered personal use of a vacation rental property?
> When can a taxpayer use the standard mileage rate? Is the standard mileage rate better than the actual auto costs?
> Briefly discuss the conditions necessary for a taxpayer to be permitted to make tax-deductible contributions to a SIMPLE plan.
> Pension plans have an accumulation period and a distribution period. Explain what those terms mean.
> Discuss the concept of electing §179 expense. Does the election allow a larger expense deduction in the year of asset acquisition?
> Pension plans are subject to certain vesting requirements. What does the word vesting mean? Describe the vesting rules for pension plans.
> What are the similarities and differences between a pension plan and a profit-sharing plan?
> 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.
