Exam 16: Tax Deductions and Travel Expenses for Employees and Self-Employed Individuals

According to the Statements on Standards for Tax Services, CPAs must verify all tax return information submitted by reviewing client documentation.

Brian purchased some equipment in 2018 which he intends to use in his trade or business. He approaches you to assist him in planning for the ultimate disposal of the asset-whether it be by sale, charitable contribution to the local university, gift to his sister for use in her business, or some other means. Discuss the tax considerations.

If a taxpayer disposes of an interest in a passive activity, unused carryover losses are available to the purchaser of the interest.

In 2018, Sean, who is single and age 44, received $55,000 of gross income and had $5,000 of deductions for AGI and $5,600 of itemized deductions. Sean's taxable income is

Exter Company is experiencing financial difficulties. It has assets worth $2 million, but owes liabilities of $2.1 million. It has a longstanding relationship with the bank. The bank has agreed to forgive $300,000 of debt principal. Because of this debt forgiveness, Exter will recognize income of

Stella has two transactions involving the sale of capital assets during the year resulting in a STCL of $5,200 and LTCL of $2,400. As a result, Stella can offset

Jenkins Corporation has the following income and expense items during the current year: The allowed dividends- received deduction is

Chen contributes a building worth $160,000 (adjusted basis $180,000) and $40,000 in services to a partnership for a partnership interest. Chen's basis in the partnership interest is

Losses incurred in the sale or exchange of personal- use property are deductible as capital losses.

For purposes of the child and dependent care credit, qualifying employment- related expenses cannot include payments to a relative.

What type of property should be transferred to heirs at a decedent's death and why? Should estate planning also mean that some property is transferred prior to death? Why?

In a defined contribution pension plan, fixed amounts are contributed based upon a specific formula and retirement benefits are based on the value of a participant's account at the time of retirement.

Tess has started a new part- time business. She is concerned that the IRS will call it a hobby if her return is audited. This first year of business showed a small profit, and she expects it to continue to show modest profits. She would like to take advantage of the three out of five year profit rule to shift the burden of proof to the IRS. Because of the three- year statute of limitations, this will not be possible for the first year of business.

A corporation earns $500,000 of current E&P and has an accumulated deficit of $300,000. The corporation pays a

Olivia exchanges land with a $50,000 basis plus marketable securities with a $20,000 basis for a larger parcel of land worth $110,000 in a transaction that otherwise qualifies as a like- kind exchange. The FMV of the land and marketable securities exchanged by Olivia is $75,000 and $35,000 respectively. a. What is the amount of gain realized and recognized by Olivia on each asset? b. What is the amount of Olivia's basis in the new land?

With some exceptions, amounts withdrawn from a pension plan prior to the normal starting date are subject to a ten percent nondeductible penalty.

Vanessa owns a houseboat on Lake Las Vegas that she personally uses for 25 days out of the year and rents for 280 days. For tax purposes, the houseboat is classified as

Jan can invest $4,000 of after- tax dollars (AT$) directly in a taxable bond outside an IRA, or she can contribute the $4,000 to a nondeductible IRA and invest in the same bond through the IRA vehicle. In either case, the bond yields an annual 4% before- tax rate of return (BTROR). Jan's marginal tax rate is 15%, and she expects it to remain so for the entire investment horizon of 25 years. What is her annualized after- tax rate of return (annualized ATROR) for the "bond inside the IRA"?

Jake and Christina are married and file a joint return for 2018 with taxable income of $100,000 and tax preferences and adjustments of $20,000 for AMT purposes. Their regular tax liability is $13,879. What is the amount of their total tax liability?

An individual taxpayer sells a business building placed in service five years ago and recognizes a gain. This is the taxpayer's first and only sale of Sec. 1231 property. Since the gain will be treated as LTCG, the details of the sale should be reported on Schedule D of Form 1040.