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

Charlotte pays $8,000 in tax deductible property taxes. Charlotte's marginal tax rate is 24%, effective tax rate is 20% and average rate is 22%. Charlotte's tax savings from paying the property tax is

Frasier and Marcella, husband and wife, file separate returns. Frasier and Marcella live in a community property state that considers separate property income to be separate. Frasier's salary is $42,000 and Marcella's salary is $46,000. Marcella receives dividend income of $4,000 from stock inherited from her parents. Frasier receives interest income of $1,000 from bonds purchased with his salary after marriage. Frasier and Marcella receive $3,200 dividend income from stock they purchased jointly. Marcella's income would be

Rocco Corporation, a C corporation, owns 60% of the stock of Bien Corporation. Bien Corporation is a French corporation which conducts all of its business in France. Bien pays a $100,000 dividend to Rocco Coorporation. Rocco Corporation will have a 100% dividend received deduction on these dividends, resulting no tax on these dividends.

In the case of casualty losses of personal- use property in a federally declared disaster, the losses sustained in each separate casualty are reduced by both $100 and 10 percent of the taxpayer's AGI for the year.

Statements on Standards for Tax Services are issued by

Terra Corporation, a calendar- year taxpayer, purchases and places into service machinery with a 7- year life that costs $1,140,000. It was placed in service early in the year and was the only addition this year. Terra elects to depreciate the maximum under Sec. 179 and does not apply bonus depreciation. Terra's taxable income for the year before the Sec. 179 deduction is $1,700,000. What is Terra's total depreciation deduction related to this property?

Discuss the conflict between advocacy for a client and responsibility to the IRS.

A business distributes land to one of its owners. The business purchased the land a few years ago for $15,000, but it is now worth $35,000. Compare the treatment of this distribution when made by a partnership as opposed to an S corporation. Consider the impact on the business and the partner/shareholder and the determination of basis in the property.

If a fully- taxable bond yields a BTROR of 10% (R_b = 10%) and a tax- exempt bond of similar risk earns a BTROR of 7.5% (R_f = 7.5%), then the implicit tax rate is

Tess buys Harry's partnership interest in Oval Partnership. Oval holds several highly appreciated assets, and this appreciation is reflected in the price Tess paid for the partnership interest. Tess can make a Sec. 754 election to increase the basis of her share of partnership assets.

In determining whether a worker is considered to be in travel status for tax purposes, a general rule is that if a person is reassigned for an indefinite period, the individual's tax home shifts to the new location and the worker is not considered to be in travel status.

Investments conforming to the Current Model provide no deferral advantages because earnings are taxed currently.

Points paid to refinance a mortgage on a principal residence are fully deductible in the year paid.

Bartlett Corporation, a U.S. manufacturer, reports the following results in its financial accounting records: The dividend income is from very minor holdings in U.S. stocks. Calculate Bartlett's taxable income, income tax and any carryovers generated.

This year, Jonathan sold some qualified small business stock that he acquired in December 2010. His basis in the stock was $100,000 and he sold it for a $300,000 gain. How much of Jason's gain is taxable?

In order to be treated as alimony for tax purposes, payments must be made in cash.

If the threat of condemnation exists and the taxpayer has reasonable grounds to believe that the property will be condemned, the taxpayer may elect to defer gain even if the taxpayer sells the property to a party other than the governmental unit that is threatening to condemn the property.

Star Corporation, in complete liquidation, makes distributions to its two shareholders. Tim surrenders his Star stock (adjusted basis of $70,000) to the corporation in exchange for land with a $90,000 adjusted basis and a $100,000 FMV. Lindsey receives $100,000 cash for her shares (adjusted basis $110,000). What is the amount of gains and or losses recognized by Tim and Lindsey as a result of these transactions?

Jade is a single taxpayer in the top tax bracket, with salary of $500,000 and investment income of $100,000. She is considering the sale of some shares of stock which will result in a $50,000 gain. She purchased the shares three years ago. Taking all taxes into account, how much tax will she pay due to this gain?

Lee and Whitney incurred qualified adoption expenses in 2017 of $2,000, and then incurred $7,000 more in 2018 when the adoption of their child became final. Their 2017 AGI was $120,000 and their 2018 AGI was $140,000. The allowable adoption credit is