Question: What is a nonsimultaneous exchange? What are

> Explain the basic provisions of the Coverdell Education Saving plan.

> Explain why Congress added the kiddie tax provisions and which taxpayers are affected by it.

> Under what circumstances will a gift made in trust for a minor child qualify for the annual exclusion?

> What is a present interest and how is it distinguished from a future interest?

> How is the net investment income surtax calculated for a trust? Explain how a trust can avoid this tax.

> What purpose is served by the distributable net income of a trust or estate?

> What are adjusted taxable gifts, and how do they affect the calculation of a decedent’s estate tax?

> Why is the Section 179 expensing election more valuable to a small business than to a large business?

> How do the estate income tax rules encourage a quick distribution of estate assets?

> Sidney is a psychiatrist. Four years ago, he purchased the building in which his office is located for $375,000. Sidney transfers ownership of the building to his daughter, Nora, and signs a leaseback agreement stipulating that he pay annual rent of $35,

> Contrast the difference in bases for an appreciated asset that is given as a gift versus one that is inherited.

> How is the value of estate property determined and what is the alternate valuation date?

> Five years before his death, Troy purchased a $5 million whole life insurance policy on his life and named his son, Don, the beneficiary. Shortly after purchase, Troy transferred the policy to an irrevocable trust, naming his son as trustee. Troy retaine

> Under what circumstances is the face value of life insurance on the decedent’s life included in the decedent’s gross estate?

> What is the lifetime unified credit amount for 2017 and its related exclusion equivalent?

> What is the difference between a partner’s guaranteed payment and his salary?

> Explain the difference between inside and outside basis for partners and the partnership.

> Explain the difference between the entity and aggregate theories applicable to a partnership and give an example of the effect of these theories on partnership transactions.

> Delta Corporation purchased three assets during the current year: a new automobile costing $60,000, used office furniture costing $600,000, and a warehouse costing $850,000 (of which $100,000 is for the land). For which asset(s) should Delta Corporation

> Although partners can generally deduct their share of losses from a partnership, what three things can limit their ability to deduct these losses on their current year’s tax return?

> Explain the difference between the effects of liabilities of an S corporation on a shareholder’s stock basis and the effect of liabilities of a partnership on a partner’s partnership interest basis.

> Explain how an increase or decrease in partnership liabilities can affect the basis of a general partner and a limited partner.

> The Gem Company, a sole proprietorship, provides health insurance for its owner and two employees. The cost per person is $200 per month. Explain how the Gem Company and its sole proprietor will treat this expense.

> What types of taxes may an S corporation have to pay and under what circumstances?

> What is the difference between a prospective S election and a retroactive S election?

> What are the corporate and shareholder restrictions on making an S corporation election?

> How is income allocated to S corporation shareholders? Develop an example to illustrate this procedure.

> Why are partnerships and S corporations required to separately state certain items on the Schedule K rather than combining these items with the organization’s operating profit or loss? Provide examples of the items that must be separately stated.

> Compare an owner’s personal liability for debts of a business organized as a sole proprietorship, general partnership, limited partnership, LLP, LLC, and S corporation.

> What limits are placed on the amount and type of property that can be expensed under Section 179?

> What is the purpose of corporate earnings and profits? Why isn’t taxable income used to determine if a distribution is a dividend?

> What is the purpose of the alternative minimum tax? What is the alternative minimum tax rate for corporations?

> List three items that increase book income and three items that reduce book income when reconciling book to taxable income.

> What is the dividend received deduction? What are the percentages and when do they apply? When is the dividend received deduction limited to a percentage of taxable income?

> What are the ownership requirements for a group of corporations to file a consolidated return? Illustrate.

> What is the purpose of the accumulated earnings tax? What is the penalty tax rate that applies to excess accumulated earnings? How does a company avoid this tax?

> What is the purpose of the personal holding company tax? What is the penalty tax rate that applies to a personal holding company? How does a personal holding company avoid this tax?

> What is the difference in tax treatment for losses realized in a partial liquidation and a complete liquidation?

> What is a corporate liquidation? What are the tax consequences for a corporation that distributes property as part of a complete liquidation? What are the tax consequences to the shareholders?

> What is a corporate redemption? What are the tax consequences to the shareholder in a qualifying redemption? What are they if it is not a qualifying redemption?

> Why would a business elect to use the ADS straight-line method to compute regular income tax depreciation rather than the 200 percent declining-balance method allowed under MACRS?

> List five items that are added to a corporation’s taxable income to determine earnings and profits. List five items that are deducted from a corporation’s taxable income to determine earnings and profits.

> Can a corporation have negative amounts in both its current and accumulated earnings and profits accounts? Explain.

> What is the difference between accumulated and current earnings and profits?

> In what year are casualty losses deducted? What choices are available if the casualty occurs in a presidentially declared disaster area?

> What limits are placed on the deductibility of casualty and theft losses of personal-use property?

> How is a casualty loss that completely destroys business or investment property measured? How is a casualty loss that partially destroys business or investment property measured?

> How is a casualty loss that completely destroys personal-use property measured? How is a casualty loss that partially destroys personal-use property measured?

> What is an indirect exchange? What are the two most common forms of indirect exchanges?

> What is boot? What effect does boot have on a like-kind exchange?

> Is a depreciation deduction allowed for a warehouse used in business in the year it is sold? If yes, explain how it is calculated.

> What is a corporate reorganization? Briefly define each of the types of corporate reorganizations.

> Why do you think businesses are allowed an additional year to find qualifying replacement real estate for realty that is condemned?

> What do you believe led to the conclusion that a sole proprietorship should report its results on the owner’s tax return?

> When a business rents tangible property for use in its business, it may incur up-front costs to acquire the lease on the property. How do you think these leasehold costs are treated for tax purposes?

> Explain the general provisions applicable to a partner transferring property to a partnership in exchange for a partnership interest.

> Locate and read Publication 547: Casualties, Disasters, and Thefts. Where is a casualty loss on a personal-use asset reported? Where is a casualty gain on personal-use property reported?

> Locate and read Publication 544: Sales and Other Disposition of Assets. How is a like-kind exchange reported? If there is a recognized gain, how is that reported?

> The Cabot Corporation has had financial problems for several years. The two shareholders have discussed liquidating the corporation, but they are concerned that they will have to pay a large tax bill because of the corporation’s low basis in its assets a

> When Chet died on March 12, 2017, he owned $900,000 in stock of ABC Corporation and $100,000 in City of Omaha bonds. The ABC Corporation declared a cash dividend on March 1 that was payable to shareholders of record on March 15. In early April, the execu

> The Lincoln Trust is a simple trust whose only investments are in corporate bonds producing interest income. The trustee is thinking about moving some of the investments into municipal bonds.

> At the time of Frank’s death, he had received $6,000 in credit card bills that had not been paid.

> Jorge is a resident and citizen of Spain. He invests $500,000 in Miami Beach real estate. When Jorge died in 2017, he owned $6,000,000 in assets in Spain in addition to the Miami Beach real estate.

> Jennifer plans to establish a trust in which she will place all her income-producing investments. She will be the income beneficiary for the balance of her life, with her son having a remainder interest. She plans to name herself as trustee.

> In year 1, Loren and Tim enter into a property settlement agreement under which Tim agrees to pay $600,000 to Loren in return for the release of her marital rights. The payment is to be made in three annual installments of $200,000 each. Loren and Tim di

> Ten years ago, Carolyn created a revocable trust using marketable securities valued at $500,000. The trust department at the local bank is the trustee. Under the terms of the trust, Carolyn retained a life estate with a remainder interest for her grandch

> How do liabilities assumed by a corporation affect a shareholder transferring property to it in a qualifying Section 351 transfer?

> Martha provides the sole support for her son, David, who lives at home while he attends school. Martha gives David a $40,000 automobile for his 18th birthday.

> The Gemini Corporation, an S corporation, wants to expand its lines of business. To do so quickly, it acquires 85 percent of the stock of Trojan Corporation, a regular C corporation.

> Craig is a 20 percent shareholder in an S corporation and works an average of 20 hours per week in the business. His wife, Lynn, is a full-time employee of the corporation. The corporation provides fully paid health and life insurance benefits for hersel

> ABCD partnership, a calendar-year partnership, has four owners: A owns a 20 percent interest; B a 25 percent interest; C a 40 percent interest; and D the remaining 15 percent interest. Some of the partners have been having difficulty working with each ot

> Carol and her husband own 35 percent each of a land development partnership. Carol owns a piece of land purchased six years ago for $60,000 that has been declining in value. The partnership wants to buy the land for development but is only willing to pay

> Shana is a 20 percent limited partner in the STU partnership. Her basis in her partnership interest is $40,000 when she decides to abandon her partnership interest. The partnership’s balance sheet reports net assets of $203,000, liabilities of $200,000 a

> The owner of a corporation used corporate funds to pay for his home, all the home’s expenses, and numerous other personal expenses. This went on for a number of years until the corporation was audited. The IRS asserted that the use of the corporate funds

> Sweeney was the chairman of Sweeney, Inc., a large hardware and lumber store. When Sweeney became ill, his son took over the business but sold the property and all the inventory of lumber valued at $2,000,000 within a year. Shortly thereafter, Sweeney re

> Seven years ago, the Bonnet Corporation redeemed all of Joe Bonnet’s stock as a complete termination of interest. At the time, Joe signed a waiver of family attribution rules because his three sons retained all their stock. As part of this arrangement, J

> Barry is very dedicated to the arts and has made a career of purchasing copyrights to various art forms. Once purchased, he publicizes these works to capitalize on the copyrights and has been very successful. Last year, he acquired a book manuscript that

> What is the critical requirement of a corporate formation to ensure tax-deferred property transfers to all participants?

> Carlson Manufacturing’s plant was condemned by the federal government to allow for expansion of one of its secured locations for government employees. The government paid the company $6,800,000 for the property that had a basis of $2,500,000 and it moved

> Barry owned a number of rental properties. One of the rental properties was located next to his personal residence. Both properties were condemned by the state. Barry found a perfect residence to replace the rental property almost immediately but not one

> Claiborne, Inc. has received an offer to purchase its manufacturing facilities for $7,500,000. If sold, it would have a gain of $5,000,000 on the property. Claiborne has found an ideal location for a new facility, but the only available property is three

> The Timmins Corporation has three acres of land on which its warehouse and offices are located. The state condemned two acres of the land for an extension of a highway frontage road. The strip that was condemned took the warehouse and parking area, leavi

> Karen purchased her personal auto two years ago from a local new car dealer. Since purchasing the car, she took it into the dealer for major warranty repairs five different times and minor repairs a total of fourteen times. She is so unhappy with the car

> The Westlawn Corporation is located in a flood plain. Twelve years ago, its offices were flooded when the nearby river overflowed. Six years ago, the area received 12 inches of rain in a sixhour period, the river overflowed, and the offices flooded again

> Seth and Jacob are brothers who own all of Marboro Corporation’s 2,000 shares of outstanding common stock. Seth owns 1,100 shares to Jacob’s 900 shares, and this has caused many problems over the years. They have not spoken to each other except through t

> Kwan Lu bought 100 shares of Duchco stock on July 25, year 3, for $1,000. The company declared bankruptcy on July 8 of year 5, and his stock became worthless.

> Geralyn and Marco sold their home and moved into a smaller home. They used their Section 121 election to exclude their $20,000 gain on the sale of the larger home. Six months after they moved into the smaller home, Geralyn died. Two months later Marco ha

> Martco, a manufacturer and seller of eyeglasses and contact lenses, purchased all the stock of Fetco, a manufacturer of hearing aids. Management of Martco quickly had second thoughts about keeping Fetco in business and liquidated the company. Martco was

> What is an installment sale? If a transaction qualifies for installment sale treatment, when will the taxpayer be taxed on the sale? What does a taxpayer do if the taxpayer does not want to use the installment method?

> The Gallagher Farms has been in business for a number of years. During the peak planting and harvesting season, it hired a number of temporary workers. To house the temporary workers, it built three buildings that were essentially dormitories that had ba

> Monicon Corporation purchased a $24,000 computer in 2014 and elected to expense it under Section 179. In 2017, the IRS audited Monicon and determined that its taxable income was incorrectly calculated and was only $20,000 before considering Section 179 e

> Marble Corporation purchased 300-year-old marble statutes that it displays in the entrance hall of its main office building.

> Demark Corporation took delivery of a new machine on December 31, 2017. Due to the high number of employees out for the holidays, the machine was not set up for use until January 3, 2018.

> James Corporation had a net operating loss of $30,000 before claiming any depreciation deductions. James purchased $26,000 in equipment in 2017 but claimed no depreciation on its 2017 tax return.

> How do you think assets that are acquired and disposed of in the same tax year are handled for depreciation purposes?

> Compare the treatment of distributions of depreciated and appreciated property by an S corporation to that of a partnership.

> Why do you think Congress passed the law that allows an LLC to elect to be treated as a corporation or a partnership?

> Joan is 15 and a dependent on her parents’ return. If she has $4,400 income from her trust fund this year, how much income tax will she pay if her parents have $150,000 of taxable income?

> George transfers investment securities worth $200,000 with a tax basis of $130,000 to a trust, naming himself as trustee. The terms of the trust agreement require the trustee to pay all dividends and interest to George’s brother, Mark. George has the rig

> On May 10 of the current year, Claire purchased 1,000 shares of ABCO stock for $10 per share because she believed the price had hit bottom. She did not know that her broker had sold 500 shares that he held in her brokerage account at $18 per share on Apr