...ACCT553 Week 7 Homework Chapters 10-11-12 1. Please explain the distinction between a "realized" gain and a "recognized" gain. (5 pts) A realized gain is the excess of the amount realized on a sale or exchange over the basis of the property sold or exchanged. The recognized gain is the amount of the realized gain that will be treated as income and subject to tax on the seller’s income tax return. 2. Are there any limits to the deductibility of losses on sales and exchanges between related parties? What code section defines this limitation? (5 pts.) No loss deduction is allowed on sales or exchanges of property, directly or indirectly between certain related parties. This can be found under Code Section 267. 3. What is the basis of property received (i.e. new property) in a like-kind exchange? What is the holding period for the new asset? (5 pts.) To figure out the basis of the new property, start with the fair market value of the like-kind property received. Any deferred gain is subtracted and deferred losses are added. This gives the basis of the acquired property. The holding period for property acquired in a nontaxable exchange includes the holding period of the property given in exchange if the property was a capital asset or property used in a taxpayer’s trade or business. 4. David purchased stock in Zoll Corporation in 1985 for $6,000. On April 16, 2013 he gifted the stock to his daughter Susan; at the time of the gift, the Zoll stock was valued...
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...ACCT553 Week 4 Homework ¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬_________________________________________________________ Please provide your answer to each question in the space provided below. When finished, submit to the DropBox. Chapter 14 1. Please describe the concept of "double taxation" and discuss which entity(ies) are subject to this type of taxation. (5 pts) Double taxation is tax on income of a business entity and second tax on distributions made to owners. The classic example is dividends paid to an owner from a corporation. 2. What types of taxpayers are considered "with regard to special ordinary loss treatment of IRC Section 1244 stock? (5 pts.) The eligible" taxpayers are the individuals or partnerships who are the original owners of shares in electing domestic small business corporation. The stock must be issued for property, common or preferred, domestically chartered and otherwise meet the tests to qualify as 1244 stock. 3. Please describe how the treatment of capital gains (losses) differs for a C Corporation as compared to an Individual. ( 5 pts.) Individuals net their capital gains and losses together, and the result is reported on an individual form 1040. Net long term capital gains are taxed at rates currently discounted to ordinary rates. Capital losses can be deducted up to $3,000 per year against ordinary income, with carrybacks and carry forwards available for those losses. C corporations may net capital losses against capital gains only, and pay tax...
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...ACCT553 Week 4 Homework _________________________________________________________ Please provide your answer to each question in the space provided below. When finished, submit to the DropBox. Chapter 14 1. Please describe the concept of "double taxation" and discuss which entity(ies) are subject to this type of taxation. (5 pts) Corporations other than S Corps are considered double taxed. The corp is taxed on income and then if the earnings are paid out to shareholders that money is taxable income to the shareholder. If any of it was deductible then perhaps it wouldn’t be double taxation but this is not the case. However, for taxpayers in the 10% tax bracket they are not taxed on the dividend income. 2. What type of taxpayers are considered "eligible" taxpayers with regard to special ordinary loss treatment of IRC Section 1244 stock? (5 pts.) A taxpayer is considered eligible if; the individual sustaining the loss who was issued stock by a small business or corp and, An individual who is a partner in a partnership at the exact time that the stock was acquired from the issuance of a small business. The stock must have been continually held from date of issuance in order to claim a deduction under section 1244. A corporation, any trust or estate is not entitled to such deductions. 3. Please describe how the treatment of capital gains(losses) differ for a C Corporation as compared to an Individual. ( 5 pts.) Professor, A main difference is that...
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...ACCT553 Week 1 Homework _______________________________________________________ Please provide your answer to each question in the space provided below. When finished, submit to the DropBox. Chapter 1 (5 pts) 1. Briefly discuss the purpose of the Sixteenth Amendment. The 16th amendment states that congress has the power to indirectly or directly tax income from any source derived. The purpose of the sixteenth amendment is to allow the government to create income taxes. The 16th amendment was adopted in 1903, when three-fourths of the states ratified the agreements. If these taxes are not paid, the government has the night to take income or land as payment. Chapter 2 (5 pts) 2. Explain the two "safe harbors" available to an Individual taxpayer to avoid a penalty for underpayment of estimated tax. The first safe harbor rule states that as long as the taxpayers quarterly payments equals 90% of what is due on the tax return they can escape a penalty. The second safe harbor allows the taxpayer to avoid a penalty as long as they pay 100% of the amount from the previous year’s tax return. If the taxpayer’s AGI exceeds $150,000, they must pay 110% of the previous year’s return. Chapter 3 (5 pts) 3. Explain the distinction between an "above the line" deduction (i.e. FOR AGI) and a below the line deduction (i.e. FROM AGI). Which one is more valuable? Above-the-line, or For AGI deductions, are taken out before your AGI is calculated. Above- the-line deductions include alimony...
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...ACCT553 Week 5 Homework _________________________________________________________ Please provide your answer to each question in the space provided below. When finished, submit to the DropBox. Don't forget you also have a "Homework ES" due this week that you will complete under the Week 5 tab and you can take it over and over again during the week until you earn 8/8 MC's - don't forget you 'must' re-submit your essay responses EACH time! Chapter 14 1. Please explain how Charitable Contributions come into play in determining "Corporate" taxable income. (5 pts) Corporate gross income is firstly computed by summing up company’s gross income from sales and domestic dividends received. Subtract deductible expenses and NOL carryover from the corporate gross income and come up “adjusted taxable income.” The charitable contributions cannot exceed 10% of adjusted taxable income. Thus, the charitable contribution allowed in the current tax year is computed by adjusted taxable income x 10%. If the total charitable contribution exceeds 10% of adjusted taxable income, the difference will have to be carried over to the next tax year. 2. What happens to a loss on the Corporate Tax Return (Form 1120)? Does it pass through to the shareholders? Is it available for future or past periods? Please explain in detail. (5 pts.) Corporations can file capital loss when a loss incurred on the tax return. Corporate taxpayers can only claim capital loss to offset against capital...
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...ACCT553 Week 5 Homework Solutions _________________________________________________________ Chapter 14 1. Please explain how Charitable Contributions come into play in determining "Corporate" taxable income. (5 pts) The maximum amount deductible by a corporation for charitable contributions is 10 percent of its adjusted taxable income. The deduction is limited to the lesser of 10 percent of adjusted taxable income or the sum of the initial measures of all property donated during the tax year. Adjusted taxable income is equal to taxable income without regard to the charitable contribution deduction, the dividends-received deduction, any net operating loss carryback, any capital loss carryback, and the domestic production activities deduction. If the charitable contributions for the tax year exceed the 10 percent limitation, the excess can be carried forward for five years. Carryovers are used on a first-in, first-out basis after first deducting the current year’s contributions. 2. What happens to a loss on the Corporate Tax Return (Form 1120)? Does it pass through to the shareholders? Is it available for future or past periods? Please explain in detail. (5 pts.) If a company has a loss they can claim relief from Corporation Tax by offsetting the loss against other gains or profits from the business in the same accounting period. They can also carry the loss back or it will be carried forward to another accounting period. Corporations can elect to pass loss to shareholders....
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...ACCT553 Week 2 Homework _________________________________________________________ Please provide your answer to each question in the space provided below. When finished, submit to the DropBox. ID # D40300930 Name : Rahim Ramzan Ali Gilani Chapter 4 1. Your brother is short on cash and cannot pay his rent this month. You pay his rent for him. Is this taxable income to your brother? Do you get a deduction? (2 pts) No, this would not be taxable income to my brother. A person cannot reassign income to another person. It would fall under the gift category which has its own set of rules. No, you would not have a deduction for your taxes. In fact if the amount you gave your brother was over $13,000 you would have to pay a gift tax 2. Which of the following items would be excluded from income? (a) $100 bill found under the sugar caddy at the restaurant (b) Inheritance of a car from your grandmother valued at $5,000. (c) Loan from your father-in-law to start your business, (d) Child Support received totaling $16,500. (4 pts) The inheritance of a car from your grandmother valued at $5,000 would be excluded from income as long as the $5,000 was under the caps. The tax code where you would find this would be under sections 101-139. Chapter 5 3. Shaun & Kayla earned the following in 2013: Interest on a Savings account of $36, Interest on a U.S. Series EE Savings Bond of $25, Interest on a CD that has not matured yet of $20. How much taxable interest income...
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...ACCT553 Week 7 Homework – Tanushant Sharma _________________________________________________________ Please provide your answer to each question in the space provided below. When finished, submit to the DropBox. Chapters 10-11-12 1. Please explain the distinction between a "realized" gain and a "recognized" gain. (5 pts) Difference between: Recognized Gain: Profit from sale of asset, which is reported for income tax purpose. It is the difference between basis of asset and the sale price. Realized Gain: Realized gain is the amount which is actually received from the sale of asset. Cost, which is associated with the sale of asset, is deducted while calculating realized gain. All realized gains are recognized gains unless and otherwise specified. As per IRS if an asset is sold after holding it for one year or more then the gain on sale will be long term gain. 2. Are there any limits to the deductibility of losses on sales and exchanges between related parties? What code section defines this limitation? (5 pts.) Deduction for the losses on sale and exchange is not allowed if the sale or exchange is between related parties takes place directly or indirectly. Exception to this is distribution of assets in case of complete liquidation. The limits are mentioned in Sec 267 of U.S. Code. As per this code if partnership, corporation, estate or trust is holding interest directly or indirectly then it will be treated as the partners, beneficiaries etc. are holding proportionate...
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...ACCT553 Week 1 Homework _________________________________________________________ Please provide your answer to each question in the space provided below. When finished, submit to the DropBox. Chapter 1 (5 pts) 1. Briefly discuss the purpose of the Sixteenth Amendment. The sixteenth amendment, which was passed by Congress in 1909, grants the power to collect federal income taxes (Smith et al. 2015). Congress is given the authority to collect tax on any source of income, whether directly or indirectly. All individuals, and businesses, are required to pay federal taxes. Prior to the sixteenth amendment, Congress was only able to levy tariffs on imported goods. Congress tried to tax individuals on their property for additional revenue, but this tax was considered unconstitutional in the Pollock Case (Hart 2002). The reason for this being unconstitutional, was because it was deemed as an unapportioned tax, which was not allowed by the Constitution at the time. There was a large disparity between the rich and poor class, and income tax was intended to “level the plainfield”. The original purpose of the sixteenth amendment was to provide a tax relief to wage earners (Hart 2002). Now that all wages are taxed, whether apportioned or not, taxing the rich was supposed to assist the lower classes while generating revenue for the government. Hart, Phil. "Phil Hart -- Constitutional Income: The Purpose of the 16th Amendment. Part1."Phil Hart -- Constitutional Income: The Purpose...
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...You Decide-Week 4 ACCT553 John Smith tax issues: a. How is the $300,000 treated for purposes of federal tax income? Mr. Smith, in regards to your $300,000 earnings for the successful litigation of your clients case, this will be treated as current year earnings. The payment fits all three doctrines of income starting with the economic doctrine which states “all income from whatever source derived” IRC Code Sec. 61 (a). The constructive receipt doctrine, outlining constructive receipt of payments, allows us to treat the payment for this current year only even though it was income from a case that lasted two years. “Income is not constructively received if the taxpayer’s control of its receipt is subject to substantial limitations or restrictions.” Reg. §1.451-2. Since these earnings were under the restriction of a successful verdict for your client, the payment could not be considered as earned any sooner than now. Since you operate your legal practice through an LLC, the assignment of income falls to the Limited Liability Corporation of which you are the primary member. Although the income is assigned to the LLC, there is only one layer of income tax, yours, since the LLC is treated as a conduit entity. All income will pass through to you as ordinary income, after business exclusions and deductions of course. The LLC is a disregarded entity and for federal tax purposes the activities of the business will be treated as if you were a sole proprietor (IRC Code Sec.752)...
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