ACC 555 Week 3 Assignment 1 – Tax Research

ACC 555 Week 3 Assignment 1 – Tax Research

Imagine that the Internal Revenue Service (IRS) has selected your client for an audit. Your client and the IRS disagree about the amount of tax revenue owed. You agree with your client’s position. You must provide a defense for the client that requires you to research the issues in order to render an educated opinion on a course of action for your client. Note: You may create and/or make all necessary assumptions needed for the completion of this assignment.
Write a three to four (3-4) page paper in which you:
1. Prepare a defensible strategy for the client by using thesix (6) steps in the tax research process. Propose how each of the stepsprovides support for the client’s position.
2. Create a fact-based argument that you plan to propose to the client as a defense of his / her position with the IRS.

ACC 555 Final Exam Answers

ACC 555 Final Exam Answers

1) For individuals, all deductible expenses must be classified as deductions for AGI or deductions from AGI.

2) In 2013, medical expenses are deductible as a from AGI deduction to the extent that they exceed 7.5 percent of the taxpayer’s AGI.

3) Medical expenses paid on behalf of an individual who could be the taxpayer’s dependent except for the gross income or joint return tests are deductible as itemized deductions.

4) Medical expenses incurred on behalf of children of divorced parents are deductible by the parent who pays the expenses but only if that parent also is entitled to the dependency exemption.

5) The definition of medical care includes preventative measures such as routine physical examinations.

6) Due to stress on the job, taxpayer Charlie began to experience chest pains. In order to relax and relieve the pains, he and his spouse went on an ocean cruise. The cost of the cruise to alleviate this medical condition is tax deductible.

7) Expenditures for a weight reduction program are deductible if recommended by a physician to treat a specific medical condition such as hypertension caused by excess weight.

8) In order for a taxpayer to deduct a medical expense, the amount must be paid to a certified medical doctor (M.D.).

9) Jeffrey, a T.V. news anchor, is concerned about the wrinkles around his eyes. Because it is job-related, the cost of a face lift to eliminate these wrinkles is a deductible medical expense.

10) Expenditures for long-term care insurance premiums qualify as a medical expense deduction subject to an annual limit based upon the age of an individual.

11) Capital expenditures for medical care which permanently improve or better the taxpayer’s property are deductible to the extent the cost exceeds the increase in fair market value to the property attributable to the capital expenditure.

12) Expenditures incurred in removing structural barriers in the home of a physically handicapped individual are deductible only to the extent the cost exceeds the increase in fair market value to the property attributable to the capital expenditure.

13) If the principal reason for a taxpayer’s presence in an institution is the need and availability of medical care, the entire cost of lodging and meals is considered qualified medical expenditures.

14) A medical expense is generally deductible only in the year in which the expense is actually paid.

15) If a prepayment is a requirement for the receipt of the medical care, the payment is deductible in the year paid rather than the year in which the care is rendered.

16) If a medical expense reimbursement is received in a year after a deduction has been taken on a previous year’s return, the previous year’s return must be amended to eliminate the reimbursed expense.

17) Assessments or fees imposed for specific privileges or services are not deductible as taxes.

18) Foreign real property taxes and foreign income taxes are not deductible as itemized deductions.

19) A personal property tax based on the weight of the property is deductible.

20) Assessments made against real estate for the purpose of funding local improvements are not deductible in the year paid but rather should be added to the cost basis of the property.

21) Self-employed individuals may deduct the full self-employment taxes paid as a for AGI deduction.

22) Finance charges on personal credit cards are considered interest and are, therefore, deductible.

23) In general, the deductibility of interest depends on the purpose for which the indebtedness is incurred.

24) Interest expense incurred in the taxpayer’s trade or business is deductible as a for AGI deduction without limitation if the taxpayer materially participates in the business.

25) Investment interest expense which is disallowed because it exceeds the taxpayer’s net investment income may be carried over and treated as incurred in subsequent years.

26) Investment interest includes interest expense incurred to purchase tax-exempt securities.

27) Taxpayers may elect to include net capital gain as part of investment income.

28) Taxpayers may not deduct interest expense on personal debt including credit card debt, car loans, and other consumer debt.

29) Qualified residence interest consists of both acquisition indebtedness and home equity interest.

30) Acquisition indebtedness for a personal residence includes debt incurred to substantially improve the residence.

31) A taxpayer is allowed to deduct interest expense incurred on home equity indebtedness limited to the lesser of $100,000 or the home equity (FMV of the residence less the acquisition indebtedness).

32) While points paid to purchase a residence are deductible as interest in the period paid, points associated with the refinancing of a residence must be amortized and deducted over the life of the loan.

33) Christopher, a cash basis taxpayer, borrows $1,000 from ABC Bank by issuing a 3-month note on December 1, 2013. Christopher receives $940 but must repay $1,000 on the due date. The amount of interest expense deductible in 2013 is $20.

34) Charitable contributions made to individuals are deductible if the individuals can show extreme financial need.

35) For charitable contribution purposes, capital gain property includes property which, if sold, would produce a long-term capital gain.

36) A charitable contribution deduction is allowed for the FMV of services rendered to a qualified charitable organization.

37) A charitable contribution in excess of the deduction limit for one taxable year can be carried forward five years.

38) If a taxpayer makes a charitable contribution to a university and in return receives the right to purchase tickets to athletic events, the taxpayer may deduct only 80% of the payment.

39) Corporate charitable deductions are limited to 10% of the corporation’s taxable income for the year.

40) Legal fees for drafting a willare generally deductible.

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ACC 455 Entire Course Corporate Taxation

ACC 455 Entire Course CorporateTaxation

ACC 455 Week 1 Individual Tax Return Position Paper

Suppose you have a concern about taking a particular position on a tax return.

Write a 700- to 1,050-word paper that discusses the following:

• What are the primary sources of tax law?
• What are the secondary sources of tax law?
• What is substantial authority?
• What is the role of the courts and the Internal Revenue Service in interpreting and applying the sources of tax law?

Format your paper consistent with APA guidelines.

Discussion Questions

DQ 1 What business entities are available for a newbusiness? What are the tax and nontax advantages of each form? Select twobusiness types and provide an example of when that selection is mostappropriate from a tax perspective and from a nontax perspective.

DQ 2 Once a business has elected its tax status usingcheck-the-box regulations, what options are available if it needs to change itstax status? What should a business consider before electing to change its taxstatus?

DQ 3 Do the following decisions have the same precedentialvalue: (1) Tax Court regular decisions, (2) Tax Court memo decisions (3)decisions under the small cases procedure of the Tax Court? Why?

ACC 455 Week 2 Individual AssignmentProblem Set

Complete the problems found in Ch. 2of Prentice Hall’s Federal Taxation 2010: Corporations.

• C:2-3 Black LLC
• C:2-54 Bear Corporation

C:2-55 Wildcat Corporation

• C:2-56 Tax Strategy for Wildcat Corporation

Read the scenario and respond to the questions.

Support your answers with calculations, as needed.

Show your work.

Submit your completed assignment as a Microsoft^®  Excel^®, a Microsoft^® Word, or a PDF document.

ACC 455 Week 2 Discussion Questions

The answers need to be 200-300 wordsand can have a citation, using APA 6th edition. The text is PrenticeHall’s Federal Taxation 2010: Corporations, Ch. 3 and Ch. 5.

Week Two Starter Question 1:

o   What are the alternative tax years available to a corporation? What factors should be considered in electing the tax year?

Week Two Starter Question 2:

o   What methods ofaccounting are available to a small business and to a large business? If thebusiness decides to make an accounting methods change, how is thisaccomplished?

Week Two Starter Question 3:

o   What are the requirements for the following deductions: U.S. production activity deduction, dividend received deduction, and net operating loss? Discuss any recent legislative changes.

Week Two Starter Question 4:

o   What is the legislative intent behind the corporate alternative minimum tax (AMT)? Define tax preference items, AMT adjustment, and minimum tax credit.

ACC 455  Learning Team Week 3 Problem Set

Complete the problems found in Ch. 3 & 5 of Prentice Hall’s Federal Taxation 2010: Corporations with your Learning Team.

• C:3-3 Discussion Question – Case Scenario on Tax Elections (Ch. 3)
• C:5-8 Discussion Question – Identify Items as AMT Adjustment or Preference (Ch. 5)
• C:3-37 Problem – Charitable Contributions of Property (Ch. 3)
• C:3-64 Tax Form /Return Preparation Problem – Knoxville Musical Sales Inc. Tax Return Preparation (Ch. 3)

Read the scenario and respond to the questions.

Support your answers with calculations, as needed.

Show your work.

Submit your completed assignment as a Microsoft^®  Excel^®, a Microsoft^® Word, or a PDF document.

ACC 455 Week 3 Discussion Questions

Here is the instructors instructions for the discussion questions

•  
• Initial answers to each Discussion Starter Question will be at least 200-300 words. Outside research may be necessary and please include references and citations using APA 6th edition standards. I do not count repeating the question or your signature block toward the 200-300 minimum word count for DSQ initial answers. Discussion Starter Questions (DSQs) initial responses do count toward participation, and are not mandatory. However, your responses to these DSQs will help to start our more informal class discussions. As you reply to others’ initial DSQ responses by asking questions, adding ideas, making connections to the readings, etc., you will be creating the substantive messages that will also count toward your participation grade. Note: The participation requirement for University of Phoenix, Online Campus students is that you must post eight substantive messages over at least 3 days each week.

Meaning of Substantive For this class, substantive means that your message has substance and helps to further the discussion of course content. Substantive messages will often include contributions of additional ideas and sources, insights or questions about classmates’ comments, connections to the course readings, ways of applying the lessons from the course, etc. As a rule of thumb, your substantive comments should be at least several sentences in length. Short comments, such as “Good idea” or “I agree,” do not constitute substantive posts on their own. Neither do comments that are unrelated to the topics at hand (for example, “I saw that movie, too!”) If you say you agree about something, please explain why you agree, and add an additional insight or question. Tips for Creating Substantive Participation:

• Explain why you agree or disagree, and add some examples to support your belief.
• Relate your personal or work experiences to the topic at hand.
• Ask additional questions of your classmates.
• Make connections between the topics at hand and the readings in the text. • Add ways you can apply the lessons from the class in your work and educational life.

Week Three Discussion Question One:

• How does a corporation compute earnings and profits (E&P)? What income is deferred to a later year when computing taxable income but is included in E&P in the current year? What deductions are allowed for taxable income purposes but denied for E&P?

Week Three Discussion Question Two:

• Distinguish between current and accumulated earnings and profits. Why is it important to make this distinction?

Week Three Discussion Question Three:

• The corporation owns a building with a $160,000 adjusted basis and $120,000 fair market value. The company has earnings and profits of $200,000. Is it more advantageous for the company to sell the property and distribute the sales proceeds to its shareholders or distribute the property to its shareholders and let them sell the property? Why? If you were a shareholder, what would be most advantageous to you?

Week Three Discussion Question Four:

• What is a stock redemption? What are some reasons for redeeming stock? Why are some redemptions treated as sales and others as dividends?

ACC 455 Week 4 Problem Set

C:6-5 Compare the tax consequences to the shareholder and the distributing corporation of the following three kinds of corporate distributions: ordinary dividends, stock redemptions, and complete liquidations.

Current E&P Computation.Water Corporation reports $500,000 of taxable income for the current year.

The following additional information is available:

• For the current year, Water reports an $80,000 long-term capital loss and no capital gains.
• Taxable income includes $80,000 of dividends from a 10%-owned domestic corporation.
• Water paid fines and penalties of $6,000 that were not deducted in computing taxable income
• In computing this year’s taxable income, Water deducted a $20,000 NOL carryover from a prior tax year.
• Water claimed a $10,000 U.S. production activities deduction.
• Taxable income includes a deduction for $40,000 of depreciation that exceeds the depreciation allowed for E&P purposes.

Assume a 34% corporate tax rate. What is Water’s current E&P for this year?

Comparison of Dividends and Redemptions.Bailey is one of four equal unrelated shareholders of Checker Corp.

Bailey has held Checker stock for four years and has abasis in her stock of $40,000. Checker has $280,000 of current

and accumulated E&Pand distributes $100,000 to Bailey.

1. What are the tax consequences to Checker and to Bailey if Bailey is an individual andthe distribution is treated

as a dividend?

1. In Part a, what would be the tax consequences if Bailey were a corporation?
2. What are the tax consequences to Checker and to Bailey (an individual) if Bailey surrendersall her stock in a redemption qualifying for sale treatment?
3. In Part c, what would be the tax consequences if Bailey were a corporation?
4. Which treatment would Bailey prefer if Bailey were an individual? Which treatmentwould Bailey Corporation prefer?

ACC 455 Week 4 Discussion Questions

Week Four Discussion Questions

Question one: – chapter 9

o    Sue and Bill plan to open an accounting firm and expect to work full time in the firm. They expect to incur a small loss during their first year of operation and expect to be profitable after the first year. What are the tax law requirements for structuring the business as a partnership or an S corporation? Which would you recommend and why?

Question two: – chapter 9

o    Bob and Dave plan to start a business. Bob will contribute land and Dave will contribute services. Would you recommend this business be formed as a partnership or as an S corporation? Why?

Question three: – chapter 11

o    The corporation owns a building with a $160,000 adjusted basis and $120,000 fair market value. The company has earnings and profits of $200,000. Is it more advantageous for the company to sell the property and distribute the sales proceeds to its shareholders or distribute the property to its shareholders and let them sell the property? Why? If you were a shareholder, what would be most advantageous to you?

Question four: – chapter 11

What is the difference between a distribution and a distributive share? How do these affect the owner’s K-1 and individual taxes?

ACC 455 Week 5 Problem

Week 5 problems for me to do.

C:9-32 Partnership Income and Basis Adjustments. Mark and Pamela are equal partners in MP

Partnership. The partnership, Mark, and Pamela are calendar year taxpayers. The partnership

incurred the following items in the current year:

Sales $450,000

Cost of goods sold 210,000

Dividends on corporate investments 15,000

Tax-exempt interest income 4,000

Section 1245 gain (recapture) on equipment sale 33,000

Section 1231 gain on equipment sale 18,000

Long-term capital gain on stock sale 12,000

Long-term capital loss on stock sale 10,000

Short-term capital loss on stock sale 9,000

Depreciation (no Sec. 179 or bonus depreciation components) 27,000

Guaranteed payment to Pamela 30,000

Meals and entertainment expenses 11,600

Interest expense on loans allocable to:

Business debt 42,000

Stock investments 9,200

Tax-exempt bonds 2,800

Principal payment on business loan 14,000

Charitable contributions 5,000

Distributions to partners ($40,000 each) 80,000

1. Compute the partnership’s ordinary income and separately stated items.
2. Show Mark’s and Pamela’s shares of the items in Part a.
3. Compute Mark’s and Pamela’s ending basis in their partnership interests assuming

their beginning balances are $150,000 each.

C:10-1 Javier is retiring from the JKL Partnership. In

January of the current year, he has a $100,000

basis in his partnership interest when he receives a

$10,000 cash distribution. The partnership plans

to distribute $10,000 each month this year, and

Javier will cease to be a partner after the December

payment. Is the January payment to Javier a current

distribution or a liquidating distribution?

ACC 455 Week 5 Discussion Questions

Week 5 Discussion Questions

Question one:

• What is a liquidating distribution? What is a nonliquidating distribution? Provide an example of each.

Question two:

• What is an inadvertent termination of an S election? How does an S corporation and its shareholders rectify an inadvertent termination? What could happen if a company fails to rectify the termination?

Question three:

• What events will cause an S election to terminate? What would you recommend S corporations do to plan for an orderly termination of an S election?

Question 4:

• A C corporation has incurred substantial losses and the owners have decided to close the business. What considerations should the owners make in this termination? Should they consider making an S election and then later, terminating the S corporation? If you were their tax advisor, what would you recommend?

ACC 455 Week 5 Mini Questions

Week 5 mini-questions

Javier is retiring from the JKL Partnership. In January of the current year, he has a $100,000 basis in his partnership interest when he receives a$10,000 cash distribution. The partnership plans to distribute $10,000 each month this year, and Javier will cease to be a partner after the December payment. Is the January payment to Javier a current distribution or a liquidating distribution?

• Lia has a $40,000 basis in her partnership interest just before receiving a parcel of land as a non-liquidating (current) distribution. The partnership purchased the land, and Lia has no pre-contribution gain. Under what conditions will Lia’s basis in the land be $40,000? Under what conditions will Lia’s basis in the land be a carryover basis from the partnership’s basis in the land?

Interest before receiving a non-liquidating (current) distribution of property having a $4,500 basis and a $6,000 FMV from the CDE Partnership. Cindy has a choice of receiving either inventory or a capital asset. She will hold the distributed property as an investment for no more than two years before she sells it. What tax difference (if any) will occur because of Cindy’s selection of one property or the other to be distributed by the partnership?

Mariel has a $60,000 basis in her partnership interest just before receiving a parcel of land as a liquidating distribution. She has no remaining pre-contribution gain and will receive no other distributions. Under what conditions will Mariel’s basis in the land be $60,000?

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