Question 1

In September of 2018, Michelle sold shares of qualified small business stock for $1,000,000 that had a basis of $200,000. She had held the stock for 17 months. Forty- five days after the sale she purchased other qualified small business stock for $1,100,000. What is the basis in the new stock she purchased?

Accepted Answer

The answer of In September of 2018, Michelle sold shares...

Question 2

In September of 2018, Michelle sold shares of qualified small business stock for $1,000,000 that had a basis of $200,000. She had held the stock for 17 months. Forty- five days after the sale she purchased other qualified small business stock for $1,100,000. How much of the gain will she recognize?

Accepted Answer

The gain is not recognized because the taxpayer reinvested the proceeds in other qualified small business stock within 45 days of the sale.

Question 3

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

Accepted Answer

According to the question, the bank forgives $300,000 of debt principal. This means that Exter's liabilities will decrease by $300,000. As a result, Exter's assets ($2 million) will exceed its liabilities ($1.8 million), resulting in a net increase in Exter's equity. This increase in equity represents income for Exter. Hence, Exter will recognize income of $200,000 (the difference between the forgiven debt principal of $300,000 and the remaining liabilities of $100,000). Therefore, the best choice is C.

Question 4

Chloe receives a student loan from a foundation which encourages students to pursue teaching careers. Under the terms of the loan, Chloe will not have to repay the loan if she teaches in a public school for ten years. What tax issues should Chloe consider?

Accepted Answer

The answer of Chloe receives a student loan from a...

Question 5

Taylor begins a new job as a logistics manager. His company advises him that he may need to travel internationally on occasion, so he should obtain a passport. The company reimburses Taylor for the cost of the passport. Taylor uses the passport when he vacations in Europe later in the year. What tax issues should Taylor consider?

Accepted Answer

The answer of Taylor begins a new job as a...

Question 6

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?

Accepted Answer

Jonathan's gain is not taxable because he held the qualified small business stock for more than five years, allowing him to exclude 100% of the gain under Section 1202 of the Internal Revenue Code.

Question 7

Randy and Sharon are married and have two dependent children. Their 2018 tax and other related information i follows:  Compute Randy and Sharon's taxable income. (Show all calculations in good form.)

Accepted Answer

The answer of Randy and Sharon are married and have...

Question 8

Jamal, age 52, is a human resources manager for Triple W Company. His annual salary is $110,000 and he receiv following fringe benefits during the current year:
• Triple W pays for all employees' health and accident insurance. Triple W pays $7,000 for Jamal's health insura during the year.
• Triple W provides Jamal with group- term life insurance coverage of $200,000 during the year. The monthly in amount per $1,000 of coverage is $.23.
• Triple W has a flexible benefits plan in which employees may participate to pay any qualifying medical costs n reimbursed by their health insurance. Jamal has $1,600 withheld from his salary under the plan. During the year receives reimbursements of $1,300.
• Triple W pays parking costs for all management employees. Jamal's parking costs $ 300 per month.
• Triple W pays Jamal's annual membership dues of $450 to the Society of Human Resource Management Assoc The company also subscribes to several management journals for Jamal costing $650 a year.
• Jamal took a college class on financial accounting and Triple W reimbursed his tuition of $6,000 through its tui assistance program for all employees.
• Jamal's consumption of coffee provided by Triple W is estimated at $50 a year.
How much income must Jamal report from his job?

Accepted Answer

The answer of Jamal, age 52, is a human resources...

Question 9

The tax law encourages certain forms of fringe benefits by allowing employees to deduct the value of the benefit from gross income and allowing employers to exclude the cost.

Accepted Answer

The answer of The tax law encourages certain forms of...

Question 10

The discharge of certain student loans is excluded from income if all of the following are present except for

Accepted Answer

Loan forgiveness based on age is not a condition for excluding discharged student loans from income. The other conditions listed are necessary for the exclusion.

Question 11

Adam purchased stock in 2006 for $100,000. He is considering selling it in 2018. It is currently worth $2,100,000 s would realize a $2,000,000 gain. Adam is in the top tax bracket. Determine the taxes due under the following independent situations (ignore any additional Medicare taxes on investment income):
a. Adam sells the stock, and no special circumstances apply.
b. The stock is qualified small business corporation stock.
c. The stock is qualified small business corporation stock. Within 60 days Adam invests $2,500,000 in new qualify business corporation stock.
d. The stock is qualified small business corporation stock. Within 60 days Adam invests $2,000,000 in new qualif small business corporation stock.

Accepted Answer

The answer of Adam purchased stock in 2006 for $100,000....

Question 12

Connor owes $4 million and has assets of only $1 million. He declares and files personal and business bankruptcy and his creditors approve a payment plan of $.25 per dollar. Connor has a net operating loss carryover of $2 million. The remaining 75 percent of his debt will be canceled. Connor must recognize income of

Accepted Answer

The answer of Connor owes $4 million and has assets...

Question 13

Mark, a cash- basis taxpayer, died on September 30, 2018. His wife, Charlotte, provides you with the following information.
From January 1, 2018 until his death, Mark received a salary of $35,000. Charlotte received a salary of $68,000 du 2018. Mark had earned commissions of $20,000 which Charlotte received after his death. Charlotte was the benef a $100,000 whole life policy purchased by Mark and a $50,000 group term life insurance policy purchased by Ma employer. The employer had paid premiums of $250 on Mark's behalf. In addition, the corporation paid Charlotte a $10,000 employee death benefit in Mark's name. All employees' families received similar benefits regardless of financial need. Mark and Charlotte had itemized deductions of $25,600. What is the amount of their taxable income on their 2018 tax return?

Accepted Answer

The answer of Mark, a cash- basis taxpayer, died on...

Question 14

Benedict serves in the U.S. Congress. In the current year, a lobbyist paid for Benedict to take a one- week vacation to Bermuda. Benedict did not incur any expense for the trip. What income tax issues should Benedict consider?

Accepted Answer

The answer of Benedict serves in the U.S. Congress. In...

Question 15

This year, Jason sold some qualified small business stock that he acquired in 2008. 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?

Accepted Answer

The answer of This year, Jason sold some qualified small...

Question 16

Daniel purchased qualified small business corporation stock for $200,000. In 2018 he sells the stock for $2,200,000 realizing a $2,000,000 gain. Determine the taxes due under the following independent situations (apply current t but ignore any additional Medicare taxes on investment income):
a. Daniel purchased the stock on February 1, 2006.
b. Daniel purchased the stock on March 1, 2009.
c. Daniel purchased the stock on October 1, 2010.

Accepted Answer

The answer of Daniel purchased qualified small business corporation stock...

Question 17

Discuss briefly the options available for avoiding double taxation for the U.S. citizen earning income from sources outside the United States.

Accepted Answer

The answer of Discuss briefly the options available for avoiding...

Question 18

In 2006, Gita contributed property with a basis of $500,000 and a fair market value of $3,000,000 to a qualified sm business corporation for all of its common stock. She sells the stock in 2018 for $4,000,000.
a. What is the amount of taxable gain on the transaction?
b. Assume instead that the stock was acquired in December 2010. What is the amount of the taxable gain?

Accepted Answer

The answer of In 2006, Gita contributed property with a...

Question 19

Faye is a marketing manager for Healthy Corp. She earns a salary of $100,000 and has received the following ben
• Healthy pays 75% of all employees' health and accident insurance coverage. Healthy paid $6,000 towards the c Faye's health insurance during the year.
• Faye participates in the cafeteria plan and had elected to have $2,000 withheld from her pay to cover the remai cost of the health insurance premiums and an additional $1,500 to cover dental and other health care costs not pa insurance (i.e., funding a flexible spending account). The full $1,500 was used to pay for various qualifying medi
• Healthy pays the cost of disability insurance coverage for all employees. The insurance will pay 75% of salary i employees are out of work for a significant period. The cost of Faye's premiums was $600.
• Healthy pays for the cost of veterinary insurance for all employees. The cost of coverage for Faye's dog was $4
• Healthy pays for the cost of daycare for its employees' children. The cost for Faye's two children was $8,000.
• All employees receive a 20% discount on Healthy's products. The typical markup on their products is 25%. Fay enjoyed $1,200 of savings through the discount program.
• Faye won the manager of the year award earlier in the year and received an all- expense paid week at a desert valued at $3,500.
• Healthy pays Faye's annual membership dues of $500 to the American Marketing Association.
• Healthy paid for the full $2,500 cost of Faye's attendance at the American Marketing Association's annual conf Orlando.
How much income must Faye recognize from her employment?

Accepted Answer

The answer of Faye is a marketing manager for Healthy...

Question 20

Discuss the requirements for meals provided by employers to be excluded from their employees' income. How is the de minimis rule distinguished from these requirements?

Accepted Answer

The answer of Discuss the requirements for meals provided by...

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