ACCT 324 Federal Tax Accounting I
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Week 1
Week 1 Discussion Question 1
What is meant by the terms tax avoidance and tax evasion? Is there a difference between the two? Why should one be legal and the other illegal?
Week 1 Discussion Question 2
A client comes to your tax firm. She asks you to research a tax issue and advise her on how to reduce her exposure to an IRS audit. What resources would you use in your research, and what would your advice be?
ACCT 324 Week 1 Quiz
(TCO 1) Which, if any, of the following would tend to decrease the ad valorem tax on real estate?
(TCO 1) Characteristics of a national sales tax include:
(TCO 1) Which statement is FALSE with respect to tax treaties?
(TCO 8) State income taxes generally can be characterized by:
(TCO 8) Which, if any, of the following items is a deduction for AGI?
(TCO 8) In 2011, Barney had the following transactions:
(TCO 8) Which, if any, of the following statements does NOT correctly describe the “kiddie tax”?
(TCO 9) What are pitfalls in interpreting the Internal Revenue Code?
(TCO 11) Which of the following indicates that a decision has presidential value for future cases?
(TCO 12) Which of the following is characteristic of the IRS audit procedure?
Week 2
Week 2 Discussion Question 1
Please select an exclusion from income. Explain the exclusion and its purpose. What do you think the congressional intent was for this exclusion?
Week 2 Discussion Question 2
Why is the cash method generally used for computing taxable income? When would the accrual method be used, and why?
ACCT 324 Week 2 Quiz
(TCO 2) John owns interest coupons that mature on December 31, 2011. The coupons can be converted into cash at any bank at maturity. John does NOT convert the coupons to cash until 2012. John:
(TCO 3) Iris, a widow, elected to receive the proceeds of a $100,000 face value life insurance policy on the life of her deceased husband in annual installments of $12,500 over the remainder of her life, estimated to be 10 years.
(TCO 3) Section 119 excludes the value of meals from the employee’s gross income:
(TCO 3) In 2011, Kathy sold an apartment building to her 100% controlled corporation, Kathy, Inc.
(TCO 7) Evaluate the following statements:
(TCO 7) A C corporation is required to annualize its income:
(TCO 7) Hal sold land held as an investment with a fair market value of $100,000 for $36,000 cash and a note for $64,000 that was due in two years. The note bore interest of 11% when the applicable federal rate was 7%.
(TCO 7) Joe sells property to Jack for $10,000 cash plus Jack’s note (fair market value and face amount of$90,000).
(TCO 7) The installment method CANNOT be applied to the following:
(TCO 2) Which of the following is an exclusion from wage and salary taxable income?
ACCT 324 Week 2 You Decide Tax Preparation Scenario Summary
Week 3
Week 3 Discussion Question
Why do you think that mortgage interest and real estate taxes for a personal residence are tax deductible, but rent payments are not? Are rental payments for a business tax deductible?
Week 3 Discussion Question 2
When an individual pays for business expenses, he or she needs to be careful not to mix the personal with the business. What are some expenses or areas that should be of a concern, where individuals need to be careful not to mix them?
ACCT 324 Week 3 Quiz
(TCO 2) Janice is single, has gross income of $38,000, and incurred the following expenses:
(TCO 2) During the year, Rick had the following insured personal casualty losses (arising from one casualty). Rick also had $18,000 AGI for the year.
(TCO 3) During the current year, Chuck’s home was burglarized. Chuck had the following items stolen:
(TCO 10) Benita incurred a business expense on December 10, 2011, which she charged on her bank credit card. She paid the credit card statement, which included the charge on January 5, 2012. Which of the following is correct?
(TCO 10) Paula pursued a hobby of making bedspreads in her spare time. During the year, she sold the bedspreads for $6,000. She incurred expenses as follows:
(TCO 10) Jim loaned his friend Sam $8,000 several years ago. During the current year, Sam declared bankruptcy and Jim was paid $1,000. For the current year, Jim has a salary of $80,000 and a long-term capital gain of $15,000. What amount of net loss may Jim deduct for the current year?
(TCO 10) Two years ago, Sharon loaned her sister $10,000 to buy a car. No note was issued for the loan, no provision for interest was made, and no repayment date was specified. During the current year, Sharon’s sister died leaving no estate. Sharon’s bad debt deduction for the current year is:
(TCO 10) Tan Company acquires a new machine (10-year property) on January 15, 2011 at a cost of $200,000. Tan also acquires another new machine (seven-year property) on November 5, 2010 at a cost of $40,000. No election is made to use the straight-line method. The company does NOT make the § 179 election. Determine the total deductions in calculating taxable income related to the machines for 2011.
(TCO 10) Carlos purchased an apartment building on November 16, 1993 for $1 million. Determine the cost recovery for 2011.
(TCO 2) Jane’s automobile, which was used only for business purposes, was destroyed by fire. Jane had unintentionally allowed her insurance coverage to expire. The fair value of the automobile was $9,000 at the time of the fire, and its adjusted basis was $10,000. Jane is allowed a loss deduction of:
ACCT 324 Course Project, Deductions, Losses and Depreciation
Week 4
Week 4 Discussion Question 1
What expenditures are deductible for self-employed individuals but are not deductible for employees? Discuss why there would be this distinction.
Week 4 Discussion Question 2
In order to take the home office deduction, there are various requirements that must be met. What are they, and why do you feel that they are in place? In addition, employees must meet an additional requirement. What is it, and why is it in place?
Week 4 Midterm Exam
ACCT 324 Week 4 Midterm Exam
- Question : (TCO 9) In terms of probability, which of the following taxpayers would least likely be audited by the IRS?
- Question : (TCO 9) A characteristic of fraud penalties is:
- Question : (TCO 1) Federal tax legislation generally originates in what body?
- Question : (TCO 1) Subchapter S covers which specific area of tax law?
- Question : (TCO 11) Kyle, whose wife died in December 2009, filed a joint tax return for 2009. He did NOT remarry, but has continued to maintain his home in which his two dependent children live. What is Kyle’s filing status regarding 2012?
- Question : (TCO 11) Arnold is married to Sybil, who abandoned him in 2008. He has NOT seen or communicated with her since April of that year. He maintains a household in which their son, Evans, lives. Evans is age 25 and earns over $20,000 each year. For tax year 2011, Arnold’s filing status is:
- Question : (TCO 7) Orange Cable TV Company, an accrual basis taxpayer, allows its customers to pay by the year in advance ($350 per year), or two years in advance ($680). In September 2011, the company collected the following amounts applicable to future services:
- Question : (TCO 7) With respect to the prepaid income from services, which of the following is true?
- Question : (TCO 3) Section 119 excludes the value of meals from the employees’ gross income:
- Question : (TCO 3) Adam repairs power lines for the Egret Utilities Company. He is generally working on a power line during the lunch hour. He must eat when and where he can and still get his work done. He usually purchases something at a convenience store and eats in his truck. Egret reimburses Adam for the cost of his meals.
- Question : (TCO 10) On June 1, 2010, Irene places in service a new automobile that cost $21,000. The car is used 70% for business and 30% for personal use (Assume that this percentage is maintained for the life of the car.). She does NOT elect to take additional first-year depreciation. Determine the cost recovery deduction for 2011.
- Question : (TCO 10) Which of the following is correct?
- Question : (TCO 10) On May 2, 2011, Karen places in service a new sports utility vehicle that costs $70,000 and has a gross vehicle weight of 6,300 lbs. The vehicle is used 40% for business and 60% for personal use. Determine the cost recovery deduction for 2011.
- Question : (TCO 10) Danielle owns a vacation cottage. During the current year, she rented it for $1,500 for 48 days, and lived in it for 12 days. How would any expenses be accounted for?
- Question : (TCO 3) During the year, Rick had the following insured personal casualty losses (arising from one casualty). Rick also had $18,000 AGI for the year.
- Question : (TCO 3) John had adjusted gross income of $60,000. During the year, his personal use summer home was damaged by a fire. Pertinent data with respect to the home follows:
- Question : (TCO 3) Jim purchases a ticket for $80 for a special concert by the symphony (a qualified charity). If the price of a ticket is normally $25, what is the amount allowed as a charitable deduction?
- Question : (TCO 3) Karen, a calendar year taxpayer, made the following donations to qualified charitable organizations in the current year:
- Question : (TCO 3) This year, Ralph made the following contributions to the University of the Northwest (a qualified charitable organization):
- Question : (TCO 3) Several years ago, Joy acquired a passive activity. Until 2008, the activity was profitable. Joy’s at-risk amount at the beginning of 2008 was $250,000. The activity produced losses of $100,000 in 2008, $80,000 in 2009, and $90,000 in 2010. During the same period, no passive income was recognized. How much is suspended under the at-risk rules and the passive loss rules at the beginning of 2011?
- Question : (TCO 3) Wes’ at-risk amount in a passive activity is $25,000 at the beginning of the current year. His current loss from the activity is $35,000, and he has no passive activity income. At the end of the current year, which of the following statements is incorrect?
- Question : (TCO 2) The installment method applies to which of the following sales with payments being made in the year following the year of sale?
- Question : (TCO 2) In 2010, Helen sold property and reported her gain by the installment method. Her basis in the property was $150,000 ($250,000 cost less $100,000 of depreciation). Helen sold the property for $375,000, with $75,000 due on the date of the sale and $300,000 (plus interest at the federal rate) due in 2011. Helen’s recognized installment sale gain in 2011 is:
- Question : (TCO 2) Todd, a CPA, sold land for $200,000 plus a note for $400,000. The interest rate on the note was equal to the federal rate. The fair market value of the note was $360,000. Todd’s basis in the land was $75,000.
- Question : (TCO 2) Both economic and social considerations can be used to justify:
- Question : (TCO 3) Joe’s automobile, which was used only for business purposes, was damaged in an accident. At the date of the accident, the fair market value of the automobile was $13,000 and its adjusted basis was $7,000. After the accident, the automobile was appraised at $4,000. Calculate Joe’s loss. Is it a for or from AGI deduction?
- Question : (TCO 1) In 2010, David had the following transactions:
Week 5
ACCT 324 Week 5 Discussion Question 1
What was the purpose of the AMT? Do you think that AMT currently promotes fairness?
ACCT 324 Week 5 Discussion Question 2
Why do you think a credit is given for some expenditures but not others? Is there an expenditure that you think merits credit status?
ACCT 324 Week 5 Quiz
- Question : (TCO 4) Several years ago, Floyd purchased a structure for $150,000 that was originally placed in service in 1929. In the current year, he incurred qualifying rehabilitation expenditures of $200,000.
- Question : (TCO 4) Which, if any, of the following correctly describes the research activities credit?
- Question : (TCO 4) During the year, Purple Corporation (a U.S. corporation) has U.S.-source income of $900,000 and foreign income of $300,000. The foreign-source income generates foreign income taxes of $100,000. The U.S. income tax before the foreign tax credit is $408,000. Purple Corporation’s foreign tax credit is:
- Question : (TCO 4) Which of the following issues does not need resolution in an employer’s effort to comply with employment tax payment requirements?
- Question : (TCO 4) Which of the following correctly reflects current rules regarding estimated tax payments for individuals?
- Question : (TCO 5) Prior to the effect of tax credits, Eunice’s regular income tax liability is $200,000 and her tentative AMT is $190,000. Eunice has general business credits available of $12,500. Calculate Eunice’s tax liability after tax credits.
- Question : (TCO 5) A factor(s) that can cause the adjusted basis for AMT purposes to be different from the adjusted basis for
- Question : (TCO 5) Which of the following are permitted deductions for purposes of the AMT for an individual taxpayer?
- Question : (TCO 4) Refundable tax credits include:
- Question : (TCO 4) The maximum amount of the disabled access credit is:
ACCT 324 Week 5 Course Project
Week 6
ACCT 324 Week 6 Discussion Questions
What property exchanges are taxable? Why do you think they are taxable?
ACCT 324 Week 6 Discussion Question 2
What property exchanges are nontaxable? Why do you think they are nontaxable?
ACCT 324 Week 6 Quiz
- Question : (TCO 6) Alice owns land with an adjusted basis of $305,000, subject to a mortgage of $175,000. Real estate taxes are $4,500 per calendar year and are payable on December 31. On April 1, 2010,
- Question : (TCO 6) Katie sells her personal use automobile for $15,000. She purchased the car three years ago for $31,000. What is Katie’s recognized gain or loss?
- Question : (TCO 6) The holding period of property acquired by gift may begin on:
- Question : (TCO 6) Tobin inherited 100 acres of land on the death of his father in 2010. A federal estate tax return was filed, and the land was valued at $150,000 (its fair market value at the date of the death). The father had originally acquired the land in 1963 for $12,000 and, prior to his death, had made permanent improvements of $3,000. What is Tobin’s basis in the land?
- Question : (TCO 6) The basis of personal use property converted to business use is:
- Question : (TCO 6) If the taxpayer qualifies under § 1033 (nonrecognition of gain from an involuntary conversion), makes the appropriate election, and the amount reinvested in replacement property is less than the amount realized, then realized gain is:
- Question : (TCO 11) A taxpayer receives stock as a gift from his uncle. The adjusted basis of the stock is $10,000 and the fair market value is $17,000. The taxpayer trades the stock for bonds with a fair market value of $15,000 and $2,000 cash. What is the taxpayer’s recognized gain and the basis for the bonds?
- Question : (TCO 11) A taxpayer exchanges a warehouse for a building she will use as an office building. The adjusted basis of the warehouse is $600,000, and the fair market value of the office building is $350,000. In addition, the taxpayer receives cash of $150,000. What is the recognized gain or loss and the basis of the office building?
- Question : (TCO 11) An office building with an adjusted basis of $320,000 was destroyed by fire on December 30, 2010. On January 11, 2011, the insurance company paid the owner $450,000. The fair market value of the building was $500,000, but under the coinsurance clause, the insurance company is responsible for only 90 percent of the loss. The owner reinvested $410,000 in a new office building that was smaller than the original office building.
- Question : (TCO 11) Virginia, who is single, sells her principal residence (adjusted basis of $150,000) on January 5, 2010 for $380,000. She has owned and occupied it as her principal residence for 20 years. She incurs a realtor’s commission of $22,000 and legal fees of $5,000. On January 3, 2010, Virginia purchases a townhouse for $300,000 and uses it as her principal residence.
Week 7
Week 7 Discussion Question 1
What is the purpose behind congress’ taxing capital gains at a rate lower than ordinary income? Will this lower tax rate help to stimulate investment spending and the economy?
Week 7 Discussion Question 2
What does “recapture” refer to? What is the effect of recapture? How do you treat recapture? At what rate would you tax the recapture (i.e., ordinary or capital gains)? Why?
ACCT 324 Week 7 Quiz
- Question : (TCO 6) Recognized gains and losses must be properly classified. Proper classification depends upon three characteristics. Which of the following is NOT one of those three characteristics?
- Question : (TCO 6) Which of the following events causes the purchaser of an option to add the cost of the option to the basis of the property to which the option relates?
- Question : (TCO 6) On August 10, 2010, Black, Inc. acquired an office building as a result of a like-kind exchange. Black had given up a factory building that it had owned for 18 months as part of the like-kind exchange. Which of the statements below is correct?
- Question : (TCO 6) Which of the livestock below is a § 1231 asset?
- Question : (TCO 11) Sylvia purchased for $680 a $2,000 bond when it was issued two years ago. Sylvia amortized $200 of the original issue discount, and then sold the bond for $1,800. Which of the following statements is correct?
- Question : (TCO 11) On July 1, 2010, Brandon purchased an option to buy 1,000 shares of General, Inc. at $30 per share. He purchased the option for $2,000. It was to remain in effect for five months. The market experienced a decline during the latter part of the year, so Brandon decided to let the option lapse as of December 1, 2010. On his 2010 tax return, what should Brandon report?
- Question : (TCO 11) Tan, Inc. has a 2010 $50,000 long-term capital gain included in its $185,000 taxable income. Which of the following is correct?
- Question : (TCO 11) Vertigo, Inc., has a 2010 net § 1231 loss of $45,000 and had a $32,000 net § 1231 gain in 2009. For 2010, Vertigo’s net §1231 loss is treated as:
- Question : (TCO 11) Which of the following creates potential § 1245 depreciation recapture?
- Question : (TCO 11) Alice acquired a $100,000 business machine and deducted $70,000 depreciation before selling it for $80,000. What is the 1245 gain and the 1231 gain?
ACCT 324 Final Exam
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