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

Which of the following constitutes constructive receipt in 2018? a. A check received on December 29, 2018. The check was postdated January 5, 2019. b. A check received on January 4, 2019. It had been mailed on December 29, 2018. c. A rent check, received on December 31, 2018, by the manager of an apartment complex. The manager norma collects rent for the owner who is out of town. d. A salary check received at 5:30 p.m. on December 31, 2018, after all banks are closed. e. A paycheck received on December 26, 2018. The check was not honored by the bank because the employer's account did not have sufficient funds.

An individual is planning to establish a new corporation and is weighing the choice between the C corporation form and the S corporation form. She expects the corporation to be profitable each year, with all profits reinvested except to the extent needed to pay corporate taxes or shareholder taxes on profits. The shareholder's plan is to sell the business after six years for a substantial gain. Factors to consider in modelling the entity choice include all of the following except

What factors are considered in determining whether a redemption will be treated as an exchange subject to capital gain or loss treatment?

During the current year, Jack personally uses his summer home for 25 days. He also rented his summer home to a group of vacationers for 12 days for $600 per day. How much income does Jack report from the rental of his summer home?

Marabel Corporation has three shareholders who together own more than 50% of the stock throughout the year. More than 60% of Marabel's adjusted gross income is from dividends and interest income. Marabel has $300,000 of taxable income this year after taking a $40,000 dividends- received deduction. Marabel paid $50,000 of dividen to shareholders earlier in the year. a. What is Marabel's personal holding company tax? b. Assume the tax year is not quite over, and you are doing year- end projections for the board. How much in additional dividends should Marabel pay to shareholders in order to avoid the personal holding company tax?

In 1980, Artima Corporation purchased an office building for $400,000 for use in its business. The building is sold during the current year for $550,000. Total depreciation allowed for the building was $390,000; straight- line would have been $360,000. As result of the sale, how much Sec. 1231 gain will Artima Corporation report?

What are special allocations of partnership items and when are they permitted?

What are some of the factors to consider when deciding in which court to file a tax- related claim?

Discuss the tax consequences of a complete liquidation to the liquidated corporation and to the shareholders.

Gain on sale of a patent by an inventor generally is ordinary income.

A corporation has the following capital gains and losses during the current year: The tax result to the corporation is

Individuals Gayle and Marcus form GM Corporation. Gayle transfers land and a building with a $750,000 adjusted basis and a $830,000 FMV in exchange for 50% of the stock of the GM Corporation worth $800,000 and a $30,000 note. Marcus transfers cash of $830,000 for 50% of the stock worth $800,000 and a note of the GM Corporation valued at $30,000. The basis of the land and building to GM Corporation is

Jillian, a single individual, earns $230,000 in 2018 through her job as an accounting manager. What is her FICA tax?

One characteristic of the Pension Model is the fact that, like the Current and Deferred Models, only after- tax dollars are invested.

In 2018, Thomas, a single taxpayer who has a marginal tax rate of 10%, sells land that is Sec. 1231 property at a gain of $4,000. If he has no other 1231 transactions or capital asset transactions and has no nonrecaptured 1231 gain, Thomas will pay no tax on the $4,000 gain.

Most taxpayers elect to expense R&E expenditures because of the immediate tax benefit.

Andrea died with an unused capital loss carryover of $3,300. The carryover

If "R" equals the before- tax rate of return and "t" equals the investor's marginal tax rate, then the after- tax rate of return represented by "r" can be expressed as

Patty, a single taxpayer, has $100,000 of U.S. source taxable income and $300,000 of foreign source taxable income from countries X and Y for a total worldwide taxable income of $400,000. Countries X and Y levy a total of $89,000 in foreign taxes upon the foreign source taxable income. U.S. taxes before credits are $115,690. The foreign tax credit limitation is

The Deferred Model investment outperforms the Current Model investment if interest rates and tax rates are constant over time because the interest on the Deferred Model investment grows tax free until withdrawal.