Exam 6: Accounting Methods and Taxes

If a corporation has a short tax year, other than their first or last year of operation, explain how the corporation calculates the tax for the short period.

The Dot Corporation has changed its year-end from a calendar year-end to August 31.The income for its short period from January 1 to August 31 is $54,000.The tax for this short period is:

The Affordable Care Act (ACA)added a Medicare tax of 3.8 percent on net investment income

Kate is an accrual basis, calendar-year taxpayer.On November 1, 2018, Kate leased out a building for $4,500 a month.On that day Kate received 7 months rental income on the building, a total of $31,500 ($4,500 × 7 months).How much income must Kate include on her 2018 tax return as a result of this transaction?

Vernon is a cash basis taxpayer with a calendar tax year.On October 1, 2018, Vernon entered into a lease to rent a building for use in his business at $3,000 a month.On that day Vernon paid 18 months' rent on the building, a total of $54,000 ($3,000 × 18 months).How much may Vernon deduct for rent expense on his 2018 tax return?

Assume Alan's parents make gifts of $10,000 to him every year starting at age one, Alan's parents are in the 35 percent income tax bracket, and Alan is now 15 years old and has $11,700 of interest income for 2018.​ a.Calculate the tax on Alan's interest income if his income is not included on his parents' return. b.Explain why the "kiddie tax" rules are in the law.

Sales of property at a gain may be restricted under the related party rules of the Internal Revenue Code.

In 2018, household employers are not required to pay FICA taxes on cash payments of less than $2,100 paid to any household employee in a calendar year.