Calculate the tax liability for John and Joanna

John and Joanna have $125,000 in combined salary and wages, $8,000 in dividend income, and $3,000 in interest income. What is their tax liability for 2007 if they are married filing jointly, have $35,000 in itemized deductions, and claim no dependency exemptions?

Carol's difference in NPV of an investment at two different marginal tax rates

Carol wants to invest in a project that requires a $20,000 investment. She expects a before-tax return of $16,000 in years 1 through 3 from this investment. She uses a 6 percent discount rate for evaluation but is not sure if her marginal tax rate will be 15 percent or 25 percent. What difference does the marginal tax rate make ...continues

Wilma and Barney's tax transactions for the boat and the divorce

Wilma divorced Barney last year. This year she received the title to their boat that cost $45,000 and is now worth $55,000. Barney paid Wilma $1,500 per month, $500 for alimony and $1,000 for support of their two children. Wilma owed $60,000 to the bank for a loan on a failed business. To satisfy the debt, she transferred title ...continues

Federal Taxation and Gross Income Exclusions - Multiple Choice

Teresa sued her former employer for age, rage and gender discrimination. She claimed $250,000 in damages for loss of income and $500,000 in punitive damages. She settled the claim for $600,000. As a result of the settlement Teresa must include in gross income: a. 0$ b. $400,000 [$500,000/($250,000 + $500,000) x $600,000 ...continues

Tax: shareholder loans, worthless stock, gain on contribution, termination, year end

In your own words please answer the following questions. References are acceptable but not for the entire document. 1. What are the major advantages of bona fide loans from shareholders and other debt instruments over stock? 2. What conditions need to be met to avoid IRS classification of loans from shareholders as equity ...continues

Ordinary income, long-term capital gain, and short-term capital loss: Parrot Corp

During 2002, Parrot Corporation incurs the following transactions. Net income from operations $154,000 Long-term capital gain from sale of securities 66,000 Short-term capital loss from sale of securities 46,000 Parrot maintains a valid S election and does not distribute any dividends to its sole shareholder, Jami ...continues

Reasonable salary and bonus income of a sole shareholder of Camel Corp

Camel is the sole shareholder of Desert, Inc. Desert’s taxable income before the payment of Camel's salary is $175,000. Based on this, Camel has the corporation pay him a salary of $100,000 and a bonus of $75,000. A reasonable salary and bonus would be $125,000. Which of the following is correct? a. The taxable income of ...continues

Asset basis and Capital basis in a partnership: contribution of property

A taxpayer contributes property with an adjusted basis of $125,000 and a fair market value of $155,000 to her business entity. If the entity is a partnership and the transaction qualifies under § 721, the partnership's basis for the asset and the partner's basis for her partnership interest are: Asset Basis Interest Basis ...continues

Tax return preparation: where are refunded fees for preparation deducted?

Bill and Ann are unrelated taxpayers. Both had their taxes prepared last year by the same tax preparer. Bill paid $300 for his tax return preparation while Ann paid $500 for hers. Bill is an employee (receives a Form W-2) while Ann is self-employed (files Form Schedule C). Two years later, as a result of an agreement with state ...continues

Solutions Corp: accrual entries for remodeling, warranty, trade seminars

Solutions Corporation a computer vendor and consulting company used the accrual method of accounting. Its tax year is the calendar year. The following are three of the corporations transactions during the current year. 1. Solutions Corporation hired a contractor to remodel its sales floor. The contractor completed the remode ...continues