AC 280 Tax Preperation Study Guide Problems

41. Joaquin did not have any money to pay his $2,000 tax liability on April 15, so he did not file his tax return. He finally filed the return in July and paid $1,000 of the tax due. He paid the remaining tax due in October. What is his total penalty?

42. Teddy, a single man, has $5,000 of taxable dividends, $3,000 of interest income from State of Oredgon bonds, a $5,000 long-term capital gain, and $9,000 of social Security income. What is Teddy's adjusted gross income?

43.Cargo company offers its employee a cafeteria plan. Julie is allotted $5,000 to spend a fringe benefits. She chooses a health insurance plan that costs $2,500 per year, a $50,000 whole life insurance policy with a $500 annual premium, and the remaining $2,000 she uses for the company's child and dependent care program. What is Julie's taxable compensation if her salary is $42,000?

44. George took a customer to dinner where they discussed business and then to a play. He spent $80 for the meal and left a $15 tip. Cab fare to the theater was $10, and George paid a scalper $200 for the two play tickets with a face value of $80 each. What is George's allowable deduction for these expenses?

45. Determine the amount of capital gain or loss in each the following transactions and state whether the gain or loss is long-term or short-term.

a. 100 share of Bilco bought for $8,000 on January 22 of year 3 and sold for $10,000 on January 22 of year 4.

b. 20 acres of investment land bought for $8,000 on January 31 of year 3 and sold for $7,000 on February 2 of year 4.

c. 150 shares of Data stock bought for $15,000 on April 1 of year 2 and sold for $17,000 on May 28 of year 4.

46. Sarah's building is condemned by the State on October 19,2005. The building has a basis of $400,000 and Sarah receives $600,000 from the state on February 10,2006. On January 20,2008 Sarah purchases qualifying replacement property for $565,000. What is Sarah's realized and recognized gain for loss on the condemnation?

47. Clarence receives a liquidating distribution of receivables (fair market value and basis both == $20,000) and land (fair market value = $25,000 and basis = $18,000) for his partnership interest with a $70,000 basis in a liquidating distribution. What is Clarence's realized and recognized gain or loss on this distribution and his basis in the property received?

48. Seth and Clara have three dependent children ages two, six and 10. They have AGI of $119,250 in 2005. What is their allowable child tax credit?

49. Sam and Judy married last year. Sam is very wealthy and had Judy sign a prenuptial agreement. Judy did not want a family, but Sam promised to put $1,000,000 in a bank account solely in her name if she has a child. Judy agrees and gives birth to a child one year later. Sam put the $1,000,000 in Judy's bank account. Is this a taxable gift? Explain.

50. In 2005, Boris put $2,000,000 in a irrevocable trust for his great grandson. What amount of tax will Boris have to pay because of his transfer?