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Chapter: 16 -Problem: 36 >> PinkCo, Inc., operates in two states, both of which equally weight the three apportionment factors. PinkCo reports the following results for the year. Compute the apportionment percentage for both states. Amounts are stated in millions of dollars. Transcribed Image Text: State A State B Totals Sales
Answer Preview: STATE A STATE B TOTAL SALES 25 75 100 PAYROLL 20 30 50 PROPERTY 0 100 100 APPORTION …

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, Chapter: 2 -Problem: 11 >> What is meant by the term petitioner?
Answer Preview: The petitioner is the party who presents a petition to the …

, Chapter: 7 -Problem: 2 >> Refer to the facts in the preceding problem. Assume that Blue Corporation disposes of the manufacturing asset at the beginning of year 7 for $40,000. Compute the amount of gain or loss recognized for book and tax purposes. What is the book-tax difference in the year of disposition?
Answer Preview: To compute the amount of gain or loss recognized for book and tax purposes, we need to compare the s…

, Chapter: 5 -Problem: 8 >> Data, Inc., purchased and placed in service a $5,000 compute on August 24, year 3. This is the only asset purchase during the year. Code § 179 expensing and bonus depreciation were not elected. The computer was sold during year 5. Using the excerpt of the MACRS half-year convention table below, what is the MACRS depreciation in year 5 for the computer?a. $360 b. $437 c. $480 d. $960
Answer Preview: Computer falls under 5 year life and therefore 5-year table will be used to com…

, Chapter: 6 -Problem: 5 >> Since the first bitcoin transaction in 2009, the number of virtual currencies has grown to over 1,500 and some taxpayers trade the currencies multiple times each day (i.e., like a day trader). Find a reliable article on investment strategies for virtual currency and a software tool that can help the investor track the basis, fair market value, and dates of the trades. Send an email to your profess
Answer Preview: Subject: Investment strategies and software tools for virtual currency trading Dear Professor, I hop…

, Chapter: 4 -Problem: 29 >> Katie, a resident of Virginia, is considering purchasing a North Carolina bond that yields 4.6% before tax. She is in the 35% Federal marginal tax bracket and the 5% state marginal tax bracket. Katie is aware that State of Virginia bonds of comparable risk are yielding 4.5%. Virginia bonds are exempt from Virginia tax, but the North Carolina bond interest is taxable in Virginia. Which of the two o
Answer Preview: To determine which bond will provide the greater after-tax return to Katie, we need to calcul…

, Chapter: 4 -Problem: 12 >> Megan is a college student who works as a part-time server in a restaurant. Her usual tip is 20% of the price of the meal. A customer ordered a piece of pie and said that he would appreciate prompt service. Megan fulfilled the customer’s request. The customer’s bill was $8, but the customer left a $100 bill on the table and did not ask for a receipt. Megan gave the cashier $8 and pocketed the $100
Answer Preview: Dolly should include $92 (100 received from customer minus $8 given to cashier) …

, Chapter: 9 -Problem: 5 >> How do U.S. individuals generate their income? Does it vary by size of income (AGI)? Go to the IRS tax statistics website (irs.gov/statistics), and look for recent information on “sources of income” using the Individual Statistical Tables by Size of Adjusted Gross Income. Compare the following types of income by size of AGI: (1) wages, (2) capital gain distributions, (3) sales of capital assets, a
Answer Preview: Memo To: [Instructor's Name] From: [Your Name] Subject: Sources of Income for U S. Individuals by Adjusted Gross Income According to the data availab…

, Chapter: 5 -Problem: 14 >> Bell, Inc., an accrual basis taxpayer, makes and sells personal computing equipment. It includes basic one-year warranty service with most of its products and, for financial reporting purposes, recognizes an estimate of the expenses related to honoring those warranties when the products are sold. Bell reports the following in its financial statements for the year.
Answer Preview: Warranty expense can be deducted only for the amount of a…

, Chapter: 18 -Problem: 18 >> Indigo, Inc., a closely held C corporation, incurs the following income and losses.a. Calculate Indigo’s taxable income. b. Would the answer in part (a) change if the passive loss was $320,000 rather than $333,000? Explain. Transcribed Image Text: Active income $325,000 Portfolio income 49,000 Passi
Answer Preview: To calculate Indigo's taxable income, we need to first determine its total income and deductions. I…

, Chapter: 11 -Problem: 27 >> In June of 2021, Enrique and Denisse Espinosa traveled to Denver to attend a three-day conference sponsored by the American Society of Implant Dentistry. Denisse, a self-employed practicing oral surgeon, participated in scheduled technical sessions dealing with the latest developments in surgical procedures. On two days, Enrique attended group meetings where various aspects of family tax planning
Answer Preview: ANSWER airfare 1 ticket $1000 lodging $750 meals(2…

, Chapter: 3 -Problem: 45 >> LaceCo has engaged in activities that it believes qualify for the research activities credit. LaceCo estimates that it will reduce its Federal income tax liability by $400,000 as a result of these strategies, but that the IRS is likely to challenge the policies in an audit. LaceCo estimates that the tax benefit ultimately realized may be less than the current tax savings. The potential benefits an
Answer Preview: Benefit to be recognised is the largest amount with morethan or equal to 50% probabilit…

, Chapter: 17 -Problem: 7 >> Betty is age 34 and has AGI of $50,000 and regular taxable income of $35,000. The following items may qualify as itemized deductions for Betty:What is the alternative minimum taxable income (AMTI)? a. $35,000 b. $37,500 c. $37,000 d. $52,800 Transcribed Image Text: Qualified medical expenses (before
Answer Preview: answer b. $37,500 steps Qualified medical expenses (before percentag…

, Chapter: 16 -Problem: 29 >> Velocity, Inc., a non-U.S. corporation, earned $500,000 U.S.-source income from royalties that it collected and $400,000 interest from its investment in U.S. Treasury bonds. Compute Velocity’s U.S. income tax on these amounts.
Answer Preview: Velocity, Inc. as a non-U S. corporation would be subject to U S. …

, Chapter: 4 -Problem: 31 >> As a result of a cancer diagnosis in early 2021, Laura has begun chemotherapy treatments. A cancer specialist has given Laura less than one year to live. She has incurred sizable medical bills and other general living expenses and is in need of cash. Laura is considering selling stock that cost her $35,000 and has a fair market value of $50,000. This amount would be sufficient to pay her medical b
Answer Preview: answer; a. Selling the stock would result in more beneficial tax treatment. The sale of the stock wo…

, Chapter: 14 -Problem: 1 >> Ryan Ross (111-11-1112), Oscar Omega (222-22-2223), Clark Carey (333-33-3334), and Kim Kardigan (444-44-4445) are equal active members in ROCK the Ages LLC. ROCK serves as agent and manager for prominent musicians in the Los Angeles area. The LLC’s Federal ID number is 55-5555556. It uses the cash basis and the calendar year and began operations on January 1, 2008. Its current address is 6102 Wils
Answer Preview: a. Form 1065 for ROCK the Ages LLC for the year ended December 31, 2020: ROCK the Ages LLCForm 1065 - U S. Return of Partnership IncomeFor the year en…

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, Chapter: 15 -Problem: 4 >> Based on the most recent data from irs.gov/taxstats or the IRS Data Book, use Microsoft Excel to prepare a pie chart showing the total number of business tax returns filed, including sole proprietorships (nonfarm), partnerships, C corporations, S corporations, and Forms 1120–RIC and 1120–REIT.
Answer Preview: To create a pie chart in Excel, you will need to follow these steps: Enter your data into a new Exce…

, Chapter: 17 -Problem: 5 >> Betty is age 34 and has AGI of $50,000. The following items may qualify as itemized deductions for Betty:What is the itemized deduction add-back for the AMT? a. $2,000 b. $2,800 c. $3,800 d. $8,800 Transcribed Image Text: Qualified medical expenses (before 7.5% of AGI floor) $6,000 Real estate tax 1
Answer Preview: To calculate the itemized deduction add-back for the AMT, we need to add back any deductions that …

, Chapter: 3 -Problem: 7 >> DraftJacks, Inc., took an uncertain tax position in 2019, recording an unrecognized tax benefit of $100,000. In 2021, the IRS challenged the position and DraftJacks agreed to pay $120,000 to settle it. What impact does the settlement have on DraftJacks’s 2021 book tax expense and book income? Explain.
Answer Preview: Given Solution: The current market value of an ordinary share of a company is the current price o…

, Chapter: 2 -Problem: 29 >> Go to the U.S. Tax Court website (ustaxcourt.gov). a. What different types of cases can be found on the site? b. What is a Summary Opinion? Find one. c. What is a Memorandum decision? Find one. d. Find the court’s Rules of Practice and Procedures, and summarize one and its citation. e. Is the site user-friendly? E-mail suggested improvements to your instructor.
Answer Preview: a. The different types of cases that can be found on the U S. Tax Court website (ustaxcourt gov) are …

, Chapter: 6 -Problem: 35 >> Akiko, a single taxpayer, incurred higher-than-expected expenses in her active business in 2021. In addition, the economy moved into a mild recession, so her revenues were lower than in last year. Her deductible expenses totaled $2,400,000, and her taxable revenues totaled only $2,000,000. She materially participates in this business, but she also receives $320,000 in interest on a portfolio of lo
Answer Preview: All amounts are in $ Firstly we have to compute excess business loss Dedu…

, Chapter: 5 -Problem: 1 >> Banks Corp., a calendar year corporation, reimburses employees for properly substantiated qualifying business meal expenses. The employees are present at the meals, which are neither lavish nor extravagant, and the reimbursement is not treated as wages subject to withholdings. For 2023, what percentage of the meal expense may Banks deduct?a. 0% b. 50% c. 80% d. 100%
Answer Preview: b. 50% In the United States, under the tax code, business mea…

, Chapter: 12 -Problem: 1 >> Mateo is a real estate broker who specializes in commercial real estate. Although he usually buys and sells on behalf of others, he also maintains a portfolio of property of his own. He holds this property, mainly unimproved land, either as an investment or for sale to others.In early 2017, Irene and Al contact Mateo regarding a tract of land located just outside the city limits. Mateo bought the
Answer Preview: Cost of Moore Farm = $ 600000 Sale Consideration = Interest bearing Note matured after 5 …

, Chapter: 3 -Problem: 46 >> Jazz, Inc., claimed $100,000 of rehabilitation credits on its 2021 tax return. There was sufficient tax authority to take the credits. However, due to uncertainty regarding the eligibility of some of the expenditures, Jazz only recognized $70,000 of the benefits in its 2021 financial statements. When its tax return was audited in 2022, the IRS challenged the eligibility of some of the expenditures
Answer Preview: answer; a. The settlement impacts Jazz's 2022 book tax expense by $20,000. b. The journal entry …

, Chapter: 15 -Problem: 1 >> John Parsons (123-45-6781) and George Smith (123-45-6782) are 70% and 30% owners, respectively, of Premium, Inc. (11-1111111), a candy company located at 1005 16th Street, Cut and Shoot, TX 77303. Premium’s S election was made on January 15, 2012, its date of incorporation. The following information was taken from the company’s 2020 income statement. Premium’s book income for the year was $704,574
Answer Preview: answers Note: S…

, Chapter: 14 -Problem: 1 >> Gray is a 50% partner in Fabco Partnership. Gray’s tax basis in Fabco on January 1, year 4, was $5,000. Fabco made no distributions to the partners during year 4 and recorded the following.What is Gray’s tax basis in Fabco on December 31, year 4?a. $21,000 b. $16,000 c. $12,000 d. $10,000 Transcribed Image Text:
Answer Preview: Grey's tax basis must be increased by His share in ordin…

, Chapter: 11 -Problem: 6 >> Samantha recently was employed by an accounting firm. During the year, she spends $2,500 for a CPA exam review course and begins working on a law degree in night school. Her law school expenses were $4,200 for tuition and $450 for books (which are not a requirement for enrollment in the course). Assuming no reimbursement, how much of these expenses can Samantha deduct?
Answer Preview: Samantha can deduct the cost of the CPA exam review course as a mi…

, Chapter: 5 -Problem: 7 >> Data, Inc., purchased and placed in service a $5,000 computer on August 24, year 3. This is the only asset purchase during the year. Code § 179 expensing and bonus depreciation were not elected. Using the excerpt of the MACRS half-year convention table below, what is the MACRS depreciation in year 3 for the computer?a. $500 b. $715 c. $960 d. $1,000
Answer Preview: ANSWER The MACRS depreciation in year 3 for the computer is $960. EXPLAN…

, Chapter: 1 -Problem: 1 >> This textbook includes many features beyond the text materials in each chapter. For example, there is a glossary in the appendices and a list of suggested readings and a list of key terms at the end of each chapter. Throughout each chapter “Digging Deeper” notations highlight additional online information and examples to help deepen your understanding of chapter materials. Skim through the chapter
Answer Preview: Glossary in the appendices: A glossary is a list of terms and their definitions that ar…

, Chapter: 16 -Problem: 3 >> Which of the following statements best describes a multistate corporation’s approach to the apportionment and allocation of its income? I. The corporation will allocate its nonbusiness income. II. The corporation will apportion its business income. a. I only. b. II only. c. Both I and II. d. Neither I nor II.
Answer Preview: c. Both I and II. A multistate corporation will typically use a combination of both allocation and a…

, Chapter: 11 -Problem: 30 >> Christine is a full-time fourth-grade teacher at Vireo Academy. During the current year, she spends $1,400 for classroom supplies. On the submission of adequate substantiation, Vireo reimburses her for $500 of these expenses—the maximum reimbursement allowed for supplies under school policy. [The reimbursement is not shown as income (Box 1) of Form W–2 given to Christine by Vireo.] What are the in
Answer Preview: a. If Christine itemizes her deductions from AGI, she can deduct the $900 of classroom sup…

, Chapter: 7 -Problem: 4 >> Many see the “step-up in basis at death” rule as an expensive tax loophole enjoyed by the wealthy. a. Find the latest estimates of the revenue loss to the Treasury that is attributable to this rule. b. How does Canada’s tax law determine the basis of property acquired from a decedent? c. Send an e-mail to a member of the House Ways and Means Committee expressing a preference for retaining or elimi
Answer Preview: a. The latest estimates of the revenue loss to the Treasury that is attributable to the step-up in b…

, Chapter: 12 -Problem: 3 >> Bengal Corporation’s reported book income was $30,000,000. Bengal’s net income included straight-line depreciation of $3,500,000, $25,000 of City of Denver bond interest, $4,000,000 of dividend income from a 30%-owned U.S. corporation, and $6,800,000 of Federal income tax expense. Bengal Corporation paid $8,000,000 to the U.S. government toward its current-year tax liability. Bengal’s MACRS deduct
Answer Preview: To calculate Bengal Corporation's Federal income tax, we need to adjust …

, Chapter: 17 -Problem: 6 >> Betty is age 34 and has AGI of $50,000. The following items may qualify as itemized deductions for Betty:What are the itemized deductions allowed for the AMT? a. $2,500 b. $2,900 c. $3,400 d. $3,700 Transcribed Image Text: Qualified medical expenses (before percentage of AGI floor) $3,000 Real estat
Answer Preview: To determine the itemized deductions allowed for the alternative minimum tax (AMT), we need to make …

, Chapter: 7 -Problem: 11 >> Marvin exchanged real property used for his printing business for new real property. The adjusted basis of the real property he gave up was $15,000. The new real property had a fair market value of $8,000, and Marvin received $8,000 in cash. What is Marvin’s basis in the new real property, and how much gain must Marvin recognize on the transaction?
Answer Preview: To determine Marvin's basis in the new real property and the amount of gain he must recognize, we n…

, Chapter: 13 -Problem: 2 >> Emerald Corporation must change its method of accounting for Federal income tax purposes. The change will require that an adjustment to income be made over three tax periods. Jonas, the sole shareholder of Emerald, wants to better understand the implications of this adjustment for E & P purposes, as he anticipates a distribution from Emerald in the current year. Prepare a memo for your firm’s file
Answer Preview: Memorandum To: Firm's Files From: [Your Name] Date: [Today's Date] Subject: Implications of Accoun…

, Chapter: 11 -Problem: 25 >> During 2021, José, a self-employed technology consultant, made gifts in the following amounts.In addition, on professional assistants’ day, José takes Haley to lunch at a local restaurant at a cost of $82. Presuming that José has adequate substantiation, how much can he deduct? Transcribed Image Text:
Answer Preview: The total amount that Jos can deduct is $191. This includes the $36 gift to …

, Chapter: 17 -Problem: 5 >> In an e-mail to your instructor, outline an AMT planning opportunity not mentioned in the chapter. In the e-mail, discuss the feasibility of the suggested planning opportunity.
Answer Preview: Designing a model is an important phase and is a multi-proc…

, Chapter: 12 -Problem: 19 >> Dan Knight and Patricia Chen form Crane Corporation. Dan transfers land (worth $200,000, basis of $60,000) for 50% of the stock in Crane. Patricia transfers machinery (worth $150,000, adjusted basis of $30,000) and provides services worth $50,000 for 50% of the stock. a. Will the transfers qualify under § 351? Explain. b. What are the tax consequences to Dan and Patricia? c. What is Crane Corporat
Answer Preview: a. The transfers will qualify under 351 because they are made in exchange for stock in a corporation …

, Chapter: 11 -Problem: 4 >> Prepare an outline of a speech on the topic “Should a Millennial Establish a Roth IRA and Contribute to It?” for your school’s Investment Club.
Answer Preview: 1 . Introduction - A Roth IRA is an individual retirement account that offers tax - free growth and …

, Chapter: 2 -Problem: 2 >> Using the title “The Future of Tax Research in the Era of Artificial Intelligence,” write a two-page paper to submit in your accounting information systems or data analytics course. Find examples of AI uses that might be suitable for tax research, address issues and opportunities of this approach to research, and describe any changes needed to the skills and knowledge of a tax adviser when AI is u
Answer Preview: The Future of Tax Research in the Era of Artificial Intelligence Artificial intelligence (AI) has rapidly evolved in recent years and is having a majo…

, Chapter: 3 -Problem: 6 >> While auditing a client, you notice its current tax expense does not equal the tax liability that is reflected on the client’s tax return for the year. Provide at least two possible explanations for the difference and where you might look to see if those explanations are relevant.
Answer Preview: Provide Explanations for its current tax expense does not equal tax liability that is reflected on client's tax return for the year: The discrepancy …

, Chapter: 8 -Problem: 30 >> In 2021, Beth Jarow had a $28,000 loss from the sale of a personal residence. She also purchased from an individual inventor for $7,000 (and resold in two months for $18,000) a patent on a rubber bonding process. The patent had not yet been reduced to practice. Beth purchased the patent as an investment. In addition, she had the following capital gains and losses from stock transactions.What is Be
Answer Preview: Calculation of Net Capital Gain or Loss: Short-term capital gain: $21,000Short-term capital loss: ($…

, Chapter: 1 -Problem: 18 >> In 2021, Madden, who is single, has adjusted gross income of $145,200, uses the standard deduction of $12,550, and has $132,650 of taxable income. Compute the following for Madden. a. Federal income tax liability using the appropriate Tax Rate Schedule. b. Statutory tax rate(s). c. Marginal tax rate. d. Average tax rate. e. Effective tax rate, using adjusted gross income.
Answer Preview: a. Federal income tax liability using the appropriate Tax Rate Schedule: Based on Madden's taxable …

, Chapter: 4 -Problem: 36 >> In the current year, Madero Corporation made a $400,000 interest-free loan to Francisco Madero, the corporation’s controlling shareholder. Mr. Madero is also the corporation’s chief executive officer and receives a salary of $300,000 a year. What are the tax consequences of classifying the loan as a compensation-related loan rather than as a corporation-shareholder loan?
Answer Preview: If the loan is classified as a compensation-related loan, it would be treated as additional ta…

, Chapter: 10 -Problem: 20 >> Reba is a single taxpayer. Lawrence, Reba’s 84-year-old dependent grandfather, lived with Reba until this year, when he moved to Lakeside Nursing Home because he needs specialized medical and nursing care. During the year, Reba made the following payments on behalf of Lawrence:Lakeside has medical staff in residence. Disregarding the AGI floor, how much, if any, of these expenses qualify for a med
Answer Preview: The medical expense deduction is available for expense…

, Chapter: 3 -Problem: 22 >> In its books, Ion Corporation reports income tax expense and income tax payable of $200,000 and $250,000, respectively. Assume that Ion will be able to use only $30,000 of any deferred tax asset, with the balance expiring unused. Determine the amount of Ion’s deferred tax asset and any necessary valuation allowance, and construct the appropriate journal entry that Ion would record.
Answer Preview: To determine the amount of Ion's deferred tax asset and any necessary valuation allowance, we can u…

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10 Reviews for South-Western Federal Taxation 2022 Essentials Of Taxation Individuals And Business Entities Textbook Questions And Answers