Solutions to Self-Study Problems

E-1

appendix e

Solutions to Self-Study Problems CHAPTER 1 THE INDIVIDUAL INCOME TAX RETURN

Self-Study problem 1.1 Answer is d. Answers a, b, and c are goals of the U.S. income tax system.

Self-Study problem 1.2 1. Schedule B, Form 1040. Taxpayers that itemize deductions must use

Form 1040. 2. Schedule D, Form 1040. Taxpayers that report capital gains (not simply

distributions) must use Form 1040. 3. Schedule F, Form 1040. Taxpayers with farm income must use Form 1040. 4. Form 1041 is used to report the income of estates and trusts. 5. Schedule K-1, Form 1065 6. Form 1040. Taxpayers that itemize must use Form 1040 regardless of

income limit. 7. Schedule C, Form 1040 8. Schedule E, Form 1040 9. Schedule B, Form 1040 or Form 1040A 10. Form 1120 11. Form 1065 12. Schedule A, Form 1040 13. Form 1040EZ

Self-Study problem 1.3 1. Gross income 5 $29,000 1 $1 ,500 5 $30,500 2. Adjusted gross income 5 $30,500 2 $2,200 5 $28,300 3. Itemized deductions 5 $6,500 4. Taxable income 5 $28,300 2 $6,500 2 $4,000 5 $17,800

Self-Study problem 1.4 Refer to Figures 1.1, 1.2, and 1.3 in Chapter 1.

1. No Income is below single under 65 threshold. See Fig. 1.1 2. No Income is below MFJ with one spouse 65 or older limit. See Fig. 1.1 3. Yes Earned income above threshold for single dependent. See Fig. 1.2 4. Yes Self-employment income greater than $400. See Fig. 1.3

64487_Appendix_E_ptg01.indd 1 03/11/15 2:42 pm

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E-2 Appendix E

5. No Income is below MFJ threshold; however, the taxpayers should file to obtain a refund (See Fig. 1.1).

6. Yes Social Security taxes are due (See Fig. 1.3). 7. Yes Income is above threshold for qualifying widow for under 65 with

dependent. (See Fig. 1.1).

Self-Study problem 1.5 1. B or C 2. D 3. A 4. C 5. D 6. E The taxpayer is a ‘‘qualifying widower.’’

Self-Study problem 1.6 1. 2. Two personal exemptions. Although age and blindness affect the standard

deduction, they do not affect exemptions. 2. 4. Two personal and two dependency exemptions. 3. 1. One personal exemption; the brother fails to meet the gross

income test to be a qualifying relative. The fact that the brother is a student is irrelevant since he is older than 24.

4. 2. One personal exemption and one dependency exemption for the mother. 5. 3. One personal and two dependency exemptions.

6. 2. One personal and one dependency exemption since the scholarship is not considered support.

7. 2. One personal and one dependency exemption.

Self-Study problem 1.7 1. $6,300 2. $13,850 5 $12,600 1 $1,250 3. $9,400 5 $6,300 1 $1,550 1 $1,550 4. $9,250 5. $1,050 6. $12,600

Self-Study problem 1.8 1. $12,600 5 $12,800 2 $200 2. $8,750 3. $3,850 5 $12,800 2 $200 2 $8,750 4. $3,850 5 $12,800 2 $200 2 $8,750

5. Because the stock has been held for more than a year, the gain is a long-term capital gain. The long-term capital gain will be taxed at 0 percent for taxpayers in the 10 or 15 percent tax brackets or 15 percent for most other taxpayers and 20% for high-income taxpayers. A net investment income tax of 3.8% may also apply.

Self-Study problem 1.9 See pages E-3 to E-4.

Self-Study problem 1.10 1. True 2. True 3. True


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E-3Solutions to Self -Study Problems

Ronald Trunk

450,000

450,000

450,000

450,000200,000250,000

250,000

9,500

Self-Study problem 1.9


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E-4 Appendix E


Marcia and Scott Chang

330,000

80,000

720

720

250,000

250,0000


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Self-Study problem 1.11 1. True 2. False 3. True 4. False

CHAPTER 2 GROSS INCOME AND EXCLUSIONS

Self-Study problem 2.1 1. Included 11. Excluded 2. Included 12. Included 3. Excluded 13. Included 4. Included 14. Included 5. Included 15. Excluded 6. Excluded 16. Excluded 7. Excluded 17. Included 8. Excluded 18. Included 9. Included 19. Excluded 10. Included

Self-Study problem 2.2 See Pages E-7 and E-8.

Self-Study problem 2.3 1. None For divorce agreements executed after 1984,

an alimony payment is defined as a payment in cash.

2. $1,200/month The remainder, $800 ($2,000 2 $1,200), is treated as child support.

3. None Transfers of property in settlement of a marital obligation are not taxable. The husband is likely to take the ex-wife’s $20,000 basis.

Self-Study problem 2.4 1. $2,000 2. $10,000 3. $2,500 4. $5,000 5. $0. A service award less than $400 may be excluded from income.

Self-Study problem 2.5 part a

$14,645 The amount excluded from income will be $16,500 3 [$42,500/ ($1,500 3 12 months 3 21 years)] 5 $1,855. Therefore, Phil will have taxable income of $14,645 ($16,500 2 $1,855).


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E-6 Appendix E

part b

SIMPLIFIED METHOD WORKSHEET 1. Enter total amount received this year. 1. $ 16,500.00 2. Enter cost in the plan at the annuity starting date. 2. $ 42,500.00 3. Age at annuity starting date:

Enter55 and under 360 56–60 310 61–65 260 3. 260 66–70 210 71 and older 160

4. Divide line 2 by line 3. 4. $ 163.46 5. Multiply line 4 by the number of monthly payments this 5. $ 1 ,798.06

year. If the annuity starting date was before 1987, also enter this amount on line 8; and skip lines 6 and 7. Otherwise, go to line 6.

6. Enter the amount, if any, recovered tax free in prior years. 6. 0.00 7. Subtract line 6 from line 2. 7. $ 42 ,500.00 8. Enter the smaller of line 5 or 7. 8. $ 1 ,798.06 9. Taxable amount this year: Subtract line 8 from line 1. Do 9. $ 1 4,701.94

not enter less than 0.

Self-Study problem 2.6 Amount received $ 13 ,250 Less: 1/10 of $100,000 (10,000) Taxable interest $ 3 ,250

Self-Study problem 2.7 $40,000 Gifts in a business setting are taxable income, even if there was no obliga-

tion to make the payment. This problem is similar to the facts of a court case (Duberstein) in which the Supreme Court held that the value of the automobile was income, even where there was no legal obligation to make the gift.

Self-Study problem 2.8 1. Excluded 4. Included 2. Included 5. Included 3. Included 6. Included

Self-Study problem 2.9 None. Neither the premiums nor the reimbursement are included in gross income.

Self-Study problem 2.10 1. Excluded 4. Included 2. Included 5. Excluded 3. Excluded 6. Excluded


1. 7%

1 2 .285 9.72%

2. 6.5%

1 2 .335 9.70%


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Mango CorporationQuince Savings and LoanU.S. Treasury Bonds

Bill and Betty Brown

Apple Corp.Apple Corp.Pear Corp.Grape Inc.Grape Inc.

4252,150

175

2,750

2,750

275175450300450

1,650


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E-8 Appendix E


1,650

1,650

1,65038,350

38,35040,00074,900

1,6501,6501,650

464,850

40,00040,000

1,650

00

00

4,8344,834

4,834

5,081

0

0

40,000

0

0

X


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Self-Study problem 2.12 $3,000 Unemployment compensation is fully taxable.

Self-Study problem 2.13 1. Excluded 2. Included (the excess discount over 15%)3. Excluded 4. Excluded 5. Included 6. Included 7. Excluded

Self-Study problem 2.14 Simplified Taxable Social Security Worksheet (for most people)

1. Enter the total amount of Social Security income. 1. $13,000 2. Enter one-half of line 1. 2. 6,500 3. Enter the total of taxable income items on Form 1040 except Social 3. 20,000

Security income. 4. Enter the amount of tax-exempt interest income. 4. 30,000 5. Add lines 2, 3, and 4. 5. 56,500 6. Enter all adjustments for AGI except for student loan interest, the domestic 6. 0

production activities deduction, and the tuition and fees deduction. 7. Subtract line 6 from line 5. If 0 or less, stop here, none of the Social 7. 56,500

Security benefits are taxable. 8. Enter $25,000 ($32,000 if married filing jointly; $0 if married filing 8. 32,000

separately and living with spouse at any time during the year). 9. Subtract line 8 from line 7. If 0 or less, enter -0-. 9. 24,500

Note: If line 9 is 0 or less, stop here; none of your benefits are taxable. Otherwise, go on to line 10.

10. Enter $9,000 ($12,000 if married filing jointly; $0 if married filing 10. 12,000separately and living with spouse at any time during the year).

11. Subtract line 10 from line 9. If 0 or less, enter -0-. 11. 12,500 12. Enter the smaller of line 9 or line 10. 12. 12,000 13. Enter one-half of line 12. 13. 6,000 14. Enter the smaller of line 2 or line 13. 14. 6,000 15. Multiply line 11 by 85% (.85). If line 11 is 0, enter -0-. 15. 10,625 16. Add lines 14 and 15. 16. 16,625 17. Multiply line 1 by 85% (.85). 17. 11,050 18. Taxable benefits. enter the smaller of line 16 or line 17. 18. $11,050

CHAPTER 3 BUSINESS INCOME AND EXPENSES, PART I

Self-Study problem 3.1 See Schedule C on Pages E-11 and E-12.


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E-10 Appendix E


Self-Study problem 3.3 Marc’s transportation deduction is the greater of his actual costs or his deduction using the standard mileage method.

Actual Cost Calculation:

Cash Outlays $ 4,028 Depreciation 3,000 $ 7,028 Business percentage (13,325/16,250) 382% Subtotal $ 5,763 Tolls & Fees 327 Actual Costs $ 6,090

Standard Mileage Calculation:

13,325 miles @ 57.5¢ $ 7,662Tolls & Fees 327 Marc’s deduction for 2015 is $ 7,989

Self-Study problem 3.4 Deductible expenses:

Airfare $ 190 Hotel while working on the audit 325 Meals while working on the audit 68 Laundry 22 Taxi 72 Total travel deduction $677

Self-Study problem 3.5 Business meals $1,700 3 50% 5 $850. Dues and personal expenses are not generally deductible.

62,500

178,750

241,250

68,400

172,850


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Golf Teacher

1234 Pinecrest DriveKennesaw, GA 30152

475

3,036

28,004

28,00412,121

1,015985

3,000

250

2,700

660

40,125

40,125

40,125

40,125

466-47-8833

8 1 2 9 9 0

Teri Kataoka


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E-12 Appendix E


5,280 4,250 6,000

01 01 2015


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Self-Study problem 3.6 Lodging $1,200 Transportation 350 Meals (50% of $200) 100 Books 175 Tuition 550

Total Deduction $2,375

The cost of the weekend trip to the Grand Canyon is not deductible.

Self-Study problem 3.7 1. Deductible 2. Deductible 3. Not Deductible 4. Deductible 5. Not Deductible

Self-Study problem 3.8 Safety shoes and orange vest $ 650 Climbing equipment, etc. 275

Total Special Clothing Deduction $ 925

Self-Study problem 3.9 1. Mr. Jones $ 20 2. Mr. Brown 25 3/4. Mrs. and Mr. Green 25 5. Ms. Gray 0 6. Mr. Edwards 75 7. Various customers 140

Total Business Gift Deduction $ 285

Self-Study problem 3.10 1. Business 2. Nonbusiness 3. Nonbusiness 4. Business 5. Nonbusiness

Self-Study problem 3.11 Gross income $ 2,800 Less: interest and taxes (2,100) Balance $ 700 Less: maintenance, utilities, and cleaning ($1,400) limited to (700) Net income $ 0

Note: The excess expenses of $700 may be carried forward.


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E-14 Appendix E

Self-Study problem 3.12 1. F NOL deductions are carried back 2 years and then forward 20 years. 2. F Generally, NOLs are only from the operation of a trade or

business, casualty and theft losses, or confiscation losses. 3. T 4. T 5. F In 2015, the NOL is carried back 2 years and forward 20 years, unless an

election is made to forgo the 2-year carryback.

Self-Study problem 3.13 The maximum amount of expenses that can be deducted is $250, the amount of incomefrom the hobby activity. The expenses of $250 are deductible as a miscellaneous itemized deduction, subject to the 2 percent of adjusted gross income limitation. The sales must be reported as miscellaneous income even though the 2 percent of AGI limitation may prevent the expenses from being deducted.

CHAPTER 4 BUSINESS INCOME AND EXPENSES, PART II

Self-Study problem 4.1 See Schedule E on Page E-15.

Self-Study problem 4.2 See Form 8582 on Page E-16.

Self-Study problem 4.3 $20,710 5 $15,000 1 $2,000 1 $3,000 1 $710 (limited by age)

Self-Study problem 4.4 1. $ 6,650 2. $ 0 A plan with no deductible does not qualify. 3. $ 2,000 4. $ 0 Individuals are not allowed to make contributions to

an HSA after age 65 and qualify for Medicare.

Self-Study problem 4.5See Form 3903 on Page E-17.


a. $4,950 5 $5,500 3$71,000 2 $62,000

$10,000

b. $4,400 5 $131,000 2 $119,000

$15,0003 $5,500

Self-Study problem 4.7a. $10,000, the lesser of (0.25/1.25) 3 $50,000 or $53,000 b. i. $10,000, lesser of 25% 3 $40,000 or $18,000 (annual dollar limit effective

for 2015)ii. $18,000 (annual dollar limit effective for 2015)


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225

2

1,700

600900545

3,970

2,030

2,030

2,030

6,000

3,970

1,700545

6,000

Janet Randolf

14 Lancaster Drive, Salem, OR 97305

365


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E-16 Appendix E


Sherry Moore

21,000

15,000

(21,000)

(15,000)

21,000

24,00021,000

021,000

(36,000)

150,000102,000

48,000


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(a) $650 for lodging plus 2,687 mileage × $0.23 per mile. Meals are not deductible.


4,100

1,268 (a)

5,368

5,000

368

Maureen Motsinger


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E-18 Appendix E

Self-Study problem 4.8 a. $12,500, lesser of 25% 3 $50,000 or $53,000 (annual limit effective for 2015) b. $53,000 (annual dollar limit effective for 2015)

Self-Study problem 4.9 a. $150,000 b. $120,000 ($150,000 2 20% 3 $150,000) c. August 30, 20XX, which is the 60th day after the day the distribution was

received, unless the hardship waiver provisions apply d. $150,000

CHAPTER 5 ITEMIZED DEDUCTIONS AND OTHER INCENTIVES

Self-Study problems 5.1 through 5.6 See Schedule A and Form 4684 on Pages E-19 to E-20.Line 1 of Schedule A is computed as follows:

Medical insurance $ 425Prescription medicines and drugs 364Hospital bills 2,424Doctor bills 725Eyeglasses for Frank’s dependent mother 75Doctor bills for Betty’s sister, who is claimed as a dependent by Frank and Betty 220Medical transportation in personal vehicle (610 miles * $0.23) 140Total 4,373Less reimbursement (1,420)Medical and dental expenses $2,953

Line 5 of Schedule A—The $225 refund is included on Line 10 of Form 1040 as gross income.Line 14 of Schedule A—Investment interest is deductible only to the extent of net investment income of $1,000.Line 16 of Schedule A—The Mexican Red Cross is not a qualified recipient.

Self-Study problem 5.7 1. DFROM The employer does not have an accountable plan. The actual

$950 of expenses are treated as miscellaneous itemized deductions subject to the 2 percent of adjusted gross income limitation.

2. DFROM Employee business expenses which are not reimbursed are treated as miscellaneous itemized deductions subject to the 2 percent of adjusted gross income limitation.

3. DFOR The employer has an accountable reimbursement plan and the employee substantiates the expenses on a timely basis.

Self-Study problem 5.8 (Note: At the time we go to press, the tuition deduction has not been extended. The solution uses the 2014 phase-out thresholds.)

a. $0 b. $2,000. Henry’s AGI is under $95,000 so there is no phase-out.


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Self-Study problems 5.1, 5.2, 5.3, 5.4, and 5.6

25,4001,905

1,408

1,960

10,250

1,285

2,530

2,953

1,050

82585

9,250

1,000

335

150800

1,700

1,080

35,000

Dues, Job Hunting, Journals

Safe Deposit, Bank Trust Fees

450

3,230700


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E-20 Appendix E


6,000

2,900

9,000

6,0009,000

3,100

0

3,100100

3,000

3,000

3,000

2,500

500

0

0

Vivian Walker

Coin Collection, 2007


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Self-Study problem 5.9 Elvis and Greta may deduct $26,550 of the $30,000. The reduction is calculated as the lesser of: $3,350 5 3% 3 ($421,550 2 $309,900) or $8,000 5 80% 3 ($30,000 2 $20,000) Deduction allowed 5 $26,650 5 $30,000 2 $3,350

CHAPTER 6 CREDITS AND SPECIAL TAXES

Self-Study problem 6.1 a. $1,200. See Child Tax Credit worksheet on Page E-22.b. $2,000. Two children under the age of 17 at $1,000 each.c. Child tax credit 5 $383

Additional child tax credit 5 $2,617. See Child Tax Credit worksheets on Pages E-24 to E-25 and Schedule 8812 on Pages E-26 to E-27.

Self-Study problem 6.2 See Worksheet A - 2015 EIC on Page E-28.


Self-Study problem 6.4a 1. $0. Talia and James are exempt from the individual shared responsibility. The

2015 filing threshold for married filing jointly is $20,600. Talia and James’ AGI is only $20,000. Emma’s income is not included for purposes of the shared respon-sibility calculation of AGI because she is not required to file a tax return.

2. $474. Income of $34,000 2 $10,300 5 $23,700 3 2% 5 $474. The flat amount is $325. The greater of the two is the income amount of $474. This is below the cost of a bronze plan.

3. $0. Jill was without MEC for only two consecutive months and thus can use one of the exceptions to avoid the individual shared responsibility.

4. $135. See Shared Responsibility Payment Worksheet on Page E-32 and Flat Dollar Amount Worksheet on Page E-33.

5. $6,388. Income of $340,000 2 $20,600 5 $319,400 3 2% 5 $6,388. The flat amount is $975 since the actual flat amount ($325 3 2 1 $162.50 3 4 5 $1,300) is greater than the 2015 family maximum. The greater of the two amounts is $6,388. The average bronze premium for a family of five or more is $1,035 per month or $12,420 in 2015.

Self-Study problem 6.4B 1. $3,636.2. Excess credit of $2,160.3. Repayment of $1,500.See Form 8962 on Page E-34.


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E-22 Appendix E

2 2,000

125,400

110,000

16,000

800

1,200



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13,431

13,431

1,200

0



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E-24 Appendix E

3 3,000

36,400

110,000

0

3,000

Self-Study problem 6.1 part c


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383

383

383

0



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E-26 Appendix E

Marie and Pierre Curry

3,000

3832,617

5,01033,400

36,400



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2,617

2,785

2,785

2,7855,010



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E-28 Appendix E


(Wages, Salaries)

(Adjusted Gross Income)

15,800

3,359

15,900

3,359

X

X


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Julie Brown

Ivy ChildcareDe Anza Adult Care 13 Fort Harrison Rd., Dewey, IN 47805

1 Sun�ower Street, Terre Haute, IN 4780399-1234567

99-7654321

1,500

456-23-6543

Chuck Brown 123-33-3333Devona Neuporte 456-66-6666

0

2,400

1,900

1,900

1,900

380

380

20

6,171

90,000

90,000

90,000

p

* Student required to assume some data.


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E-30 Appendix E

2,000

00

2,000

3,9002,000

90,000

90,000

2,000

5,000

2,0000

0

2,000

0

6,0002,000

4,0001,900

1,900



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Self-Study problem 6.5a. $500. Refundable American Opportunity tax credit, Line 8 of Form 8863.

$750. Nonrefundable American Opportunity tax credit, Line 19 of Form 8863. See Form 8863 on Pages E-35 to E-36.

b. $1,040 5 20% 3 $5,200 ($10,000 maximum)

Self-Study problem 6.6Country A $10,000 3 20% 5 $ 2,000Country B $20,000 3 50% 5 10,000

$12,000 Total foreign taxes paidOverall limitation:

$30,000$90,000

3 $20,000 5 $6,667

The foreign tax credit is limited to $6,667. The remaining balance of $5,333 can be carried back one year or carried forward 10 years.

Self-Study problem 6.7See Form 8839 on Pages E-37 and E-38.

Self-Study problem 6.8a. $7,500. The Nissan Leaf qualifies for the full $7,500 credit.b. $3,000 (30% 3 $10,000). The solar system for the hot tub is not an allowed cost

for the credit.Self-Study Problem 6.9

Self-Study problem 6.9See Form 6251 on Page E-39.

Line 1 of Form 6251 is computed as follows: Adjusted gross income $200,000Less itemized deductions:

Home mortgage interest expense $23,000Contributions 11,000Property taxes 10,000State income taxes 40,000Miscellaneous 10,000 (94,000)Taxable income before personal exemption $ 106,000

Line 29 of Form 6251 is computed as follows:Line 28—AMTI $ 166,000

Less: Line 29 maximum for Single 119,200 46,800

Phase-out—25% (11,700)Deducted from minimum for Single 53,600Exemption $ 41,900

Self-Study problem 6.10Step 1:

Unearned income $3,000Less: greater of $1,050 (standard deduction) or (1,050) investment expensesLess: amount taxed at 10% (1,050) Net unearned income, taxed at parents’ rates $ 900

(This problem is continued on Page E-40.)


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E-32 Appendix E

TED

325

1 1 1 1 1

1 1 1 1 1

1 1 1 1 1

325 325 325 325

522,00020,600

1,40028

1,625

1351,070

135

X X X X X

Shared Responsibility Payment Worksheetp

If you or another member of your tax household had neither minimum essential coverage nor a coverage exemption for any month during 2015, use the Shared Responsibility Payment Worksheet, below, to figure your shared responsibility payment. You will enter the amount from line 14 of the worksheet on Form 1040, line 61; Form 1040A, line 38; or Form 1040EZ, line 11.

Complete the monthly columns by placing “X's” in each month in which you or another member of your tax household had neither minimum essential coverage nor a coverage exemption.

Name Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

1. Total number of X's in a month. If 5 or more, enter 5 . . . . . . . . . . . . . . . . .

2. Total number of X's in a month for individuals 18 or over* . . . . . . . . . . .

3. One-half the number of X's in a month for individuals under 18* . . . . . . . . .

4. Add lines 2 and 3 for each month . . .

5. Multiply line 4 by $325 for each month. If$975 or more, enter $975 . . . . . . . .

6. Sum of the monthly amounts entered on line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7. Enter your household income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8. Enter your filing threshold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9. Subtract line 8 from line 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10. Multiply line 9 by 2% (.02) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11. Is line 10 more than $975?

Yes. Multiply line 10 by the number of months for which line 1 is more than zero. . . . . . . . . . . . .

No. Enter the amount from line 14 of the Flat Dollar Amount Worksheet12. Divide line 11 by 12.0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13. Multiply line 6 by $207** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14. Enter the smaller of line 12 or line 13 here and on Form 1040, line 61; Form 1040A, line 38; or Form 1040EZ, line 11. This is your shared responsibility payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

*For purposes of figuring the shared responsibility payment, an individual is considered under 18 for an entire month if he or she did not turn 18 before the first day of the month. An individual turns 18 on the anniversary of the day the individual was born. For example, someone born on March 1, 1999, is considered age 18 on March 1, 2017, and, therefore, is not considered age 18 for purposes of the shared responsibility payment until April 2017.**$207 is the 2015 national average premium for a bronze level health plan available through the Marketplace for one individual and should not be changed.

Self-Study problem 6.4a

*at the time we went to press, the 2015 shared responsibility worksheets were not available. The 2014 worksheets have been adapted for use in 2015.


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325325325325325

1,625

1,625

Flat Dollar Amount Worksheet

CAUTION! Do not complete this worksheet unless the amount on line 10 of the Shared Responsibility Payment Worksheet is less

than $975.

For each month, is the amount on line 5 of the Shared Responsibility Payment Worksheet less than the amount on line 10 of the Shared Responsibility Payment Worksheet?*

Yes No

Enter the amount from line 10

Enter the amount from line 5

1. January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2. February . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3. March . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4. April . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5. May . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6. June . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7. July . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8. August . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9. September . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10. October . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11. November . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12. December . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13. Add the amounts in each column . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14. Add the amounts on line 13 of both columns. Enter the result on line 11 of the Shared Responsibility Payment Worksheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

*If the amount on line 1 of the Shared Responsibility Payment Worksheet is -0- for any month, leave both columns of this worksheet blank for that month.

Self-Study problem 6.4a


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E-34 Appendix E

Harold and Mary Killington 123-44-5555

4

068,000

23,850285

.0907

514

68,000

6,168

11,196 9,804 6,168 3,636 3,636 5,796

3,6365,796

2,1601,500

1,500

Self-Study problem 6.4B


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Santiago and Sophia Estudiante XXX

180,000

2,500

500

170,000

10,000

1,250

500

750

0

750

20,000

XXXXXX

p


*Because the taxpayers have a large tax liability relative to the AOTC, it will not be limited.


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E-36 Appendix E

Santiago and Sophia Estudiante XXX

Judy Estudiante

4,0002,000

500

2,500

YYY YY YYYY

Southwestern University

1234 Cleveland Ave., El Paso, TX 79925

XX XXXX

X X - X X X X X X X



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11,738

11,738

11,738

11,7381,662

205,970

4,960

124

13,400

13,400

17,000

Allison

James and Michael Bass

Bass 2015 466-47-3311


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E-38 Appendix E


4,000

0

13,400

4,000

4,000

496

3,504

4,960

205,970

124

496

3,504


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Harold Brown

106,000

50,00010,000

41,900

124,100

32,266

32,266

19,97912,287

166,000


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E-40 Appendix E

Step 2: Parents’ taxable income $46, 050 Plus: child’s net unearned income 900 Revised taxable income $ 46,950 Tax from tax table on revised $ 6,124 taxable income ($46,950) Less: tax from tax table on regular taxable (5,989) income ($46,050)Parental tax $ 135

Step 3:Regular tax (at 10% assumed rate) $ 105Parental tax 135 Total tax liability $ 240

Self-Study problem 6.11a. Tom’s salary (50 percent) $20, 000 Rachel’s salary (50 percent) 15, 000 Dividends, Rachel’s property (100 percent) 3, 000 Interest (50 percent) 2, 000 Total $40, 000

b. Tom’s salary (50 percent) $20, 000 Rachel’s salary (50 percent) 15, 000 Dividends, Tom’s property (50 percent) 2, 500 Dividends, Rachel’s property (50 percent) 1, 500 Interest (50 percent) 2,000 Total $ 41, 000

Self-Study problem 7.1 Step 1:

Annualize the income $48,000 3 12/10 5 $57,600 Step 2:

Tax on annualized income 15% 3 $50,000 5 $ 7,500 25% 3 7,600 5 1,900

9,400Step 3:

Short-period tax $9,400 3 10/12 5 $ 7,833

Self-Study problem 7.2a Business income $ 63,000 Less: business expenses (42,000) Operating income $ 21,000 Add: rent received 9,000 Add: prepaid interest received 12,000 Less: rent expense for one month ($7,200/6) (1,200) Net income $ 40,800

CHAPTER 7 ACCOUNTING PERIODS AND METHODS AND DEPRECIATION


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Self-Study problem 7.2B 1. Yes 2. Yes 3. No 4. Yes, assuming this is a personal service corporation.

Self-Study problem 7.3Year Depreciation Deduction 20X1 $ 583 20X2 700 20X3 700 20X4 700 20X5 700 20X6 117 Total $3,500

Self-Study problem 7.4 a. With bonus depreciation:

Bonus: $12,000 3 50% 5 $6,000 MACRS: $6,000 3 0.1429 5 $857 Bonus: $2,000 3 50% 5 $1,000 MACRS: $1,000 3 0.1429 5 $143 Real estate: $175,000 3 0.02033 5 $3,558

Without Bonus Depreciation: MACRS: $14,000 3 0.1429 5 $2,001 See Form 4562 on Pages E-43 and E-44.

b. If Bonus Depreciation in 2015: MACRS: $6,000 3 0.2449 5 $1,469 MACRS: $1,000 3 0.2449 5 $245 Real estate: $175,000 3 0.02564 5 $4,487 Without Bonus Depreciation in 2015: MACRS: $14,000 3 0.2449 5 $3,429


Cost $37,500Section 179 (25,000) 12,500MACRS 3 0.1429 1,786Section 179 25,000Total depreciation (including election to expense) $26,786

part b

Cost $737,500Section 179 (500,000) 237,500MACRS 3 0.1429 33,939Section 179 500,000Total depreciation $533,939


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E-42 Appendix E

Self-Study problem 7.6 1. Yes Qualified business use does not include investment use. 2. No Qualified business use is more than 50 percent; therefore,

Laura may use the accelerated method of depreciation. 3. Yes Since the computer was acquired for Vicky’s own convenience, not

the convenience of her employer, qualified business use does not include use of the property in performing services as an employee.

Self-Study problem 7.7 2015: ($26,000 3 20%) 3 90% 5 $4,680, but limited to

$3,160 3 90% 5 $2,844. If the $8,000 bonus depreciation on autos is extended into 2015, then the limit ($11,160 3 90% 5 $10,044) will not apply.

Self-Study problem 7.8 1. 15-year Amortization. 5. 15-year Amortization.2. Useful Life. 6. Not Amortizable. 3. Useful Life. 7. 15-year Amortization. 4. 15-year Amortization. 8. Not Amortizable.

Self-Study problem 7.9 1. 56%; 40% owned directly and 16% (80% 3 20%) through X Corporation. 2. 40%; 20% owned directly plus 20% as Gene’s brother. 3. 40%; 20% owned directly plus 20% as Frank’s brother. 4. $0; since they are related parties, the loss would be disallowed.

CHAPTER 8 CAPITAL GAINS AND LOSSES

Self-Study problem 8.1 1. No Inventory is specifically excluded from the definition of a capital asset. 2. Yes 3. No Property held by the creator is specifically excluded from

the definition of a capital asset. 4. No Accounts receivable are specifically excluded from the

definition of a capital asset. 5. Yes 6. No Section 1231 assets (depreciable property and real

estate used in a trade or business) are specifically excluded from the definition of a capital asset.

7. Yes 8. Yes 9. Yes

10. Yes 11. No Inventory is specifically excluded from the definition of a capital asset. 12. Yes

Self-Study problem 8.2 1. Short-term 2. Long-term 3. Short-term 4. Long-term


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Self-Study problem 7.4*

Mary Moser

7,000

175,00003/30/2015

HY7 yrs 200 DB 1,000

3,558

11,558

7,000

*This solution assumes that bonus depreciation was extended into 2015.


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E-44 Appendix E

Self-Study problem 7.4*

Mary Moser

14,000

175,00003/30/2015

HY7 yrs 200 DB 2,001

3,558

5,559

*This solution assume no bonus depreciation.


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Self-Study problem 8.3 1. Adjusted basis 5 $11,000 2. Capital improvements 5 $2,000 3. Accumulated depreciation 5 $15,000 4. Original cost 5 $23,000

Self-Study problem 8.4 Net long-term ($12,000 2 $4,000) 1 $ 4,500 ($14,000 2 $17,500) 5 Net short-term (1,800) Net capital gains $ 2,700 Capital gains rate 3 15% Tax $ 405

Self-Study problem 8.5 See Schedule D, Form 8949, and the qualified dividends and capital gains tax worksheet on Pages E-47 through E-51.

Self-Study problem 8.6 See Form 4797 on Pages E-52 and E-53.

Self-Study problem 8.7 1. $12,000 2 $7,000 5 $5,000 2. $5,000 1 $7,000 5 $12,000 3. $12,000 2 $5,000 5 $7,000 4. $6,000 2 $5,000 5 $1,000 5. $1,000, the lesser of the amounts in (3) or (4) above. 6. $1,000 (gain realized) 2 $1,000 (Section 1245 ordinary income) 5

$0. All of the gain is Section 1245 ordinary income.

Self-Study problem 8.8 Step 1: Compute separate casualty gains and losses

Casualty Gain or (Loss)

Furniture $2,000, lesser of adjusted basis or decrease in fair market value, less $1,600 insurance reimbursement, less $100 floor $ (300)

Jewelry $2,500 insurance reimbursement, less $1,800, adjusted basis 700 Business $14,000, adjusted basis, less machinery $10,000 insurance reimbursement (4,000)

Step 2: Net all personal casualty gains and losses

$(300) 1 $700 5 $400 net casualty gain

Step 3: Determine nature of casualty gains and losses a. Personal casualty gains and losses — Since an overall gain

results, the gain or loss on each item of personal property is treated as a capital gain or loss as follows:

Furniture — Short-term capital loss $ (300) Jewelry — Long-term capital gain $ 700

b. Business casualty gains and losses — $(4,000) Machinery — Ordinary loss


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E-46 Appendix E

The capital gain and capital loss are netted with other capital gains and losses for the year. Since personal casualty gains exceed personal casualty losses, the loss recognized on the furniture is not subject to the 10 percent of adjusted gross income limitation.

Self-Study problem 8.9 Cash $ 20,000 Add: buyer’s note 100,000 Selling price $ 120,000 Less: the adjusted basis ($80,000 2 $26,000) (54,000) Total gain realized $ 66,000 Contract price ($20,000 1 $100,000) $ 120,000 Taxable gain in 2015 5 $66,000 / $120,000 3 $20,000 $ 11,000

Self-Study problem 8.10 Calculation of gain recognized:

Fair market value of new truck $ 22,000 Add: liability assumed by the buyer 8,000 Total amount realized 30,000 Less: the adjusted basis of the property given up (18,000) Gain realized $ 12,000 Boot received (liability assumed by the buyer) $ 8,000Gain recognized (the lesser of the gain realized or the boot received) $ 8,000 Basis of the property received: Basis of property given up $ 18,000 Less: boot received (8,000) Add: the gain recognized 8,000 Basis of the property received $ 18,000

Self-Study problem 8.11 1. Insurance proceeds $ 150,000

Less: the adjusted basis of the property (70,000) Gain realized $ 80,000 Insurance proceeds $ 150,000 Less: the cost of the replacement store (135,000) Proceeds not reinvested $ 15,000 Gain recognized (the lesser of the gain realized or the proceeds not reinvested) $ 15,000

2. Cost of the new store $ 135,000 Less: the gain deferred ($80,000 2 $15,000) (65,000) Basis of the new store $ 70,000

Self-Study problem 8.12a. Sales price $350,000

Basis 30,000 Realized Gain $320,000

Exclusion 250,000 Recognized Gain $ 70,000

(This problem is continued on Page E-54.)


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12,000 19,200 (7,200)

43,000 33,500 9,500

9,500

(7,200)

Gerry Appel


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E-48 Appendix E


2,300

0

0


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Gerry Appel

Rose Stock 04/18/2015 12/07/2015 12,000 19,200 (7,200)

12,000 19,200 (7,200)



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E-50 Appendix E


Purple Stock

Blue Stock

06/21/2006

12/18/2007

08/15/2015

10/02/2015

18,000

25,000

12,500 5,500

4,00021,000

43,000 33,500 9,500

Gerry Appel


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2,300

2,30056,700

37,45037,45037,450

02,300

0

413,200

59,00056,700

2,300

2,3002,300

00

9,97510,320

10,320

10,550

2,300

59,000

2,300

345

X


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E-52 Appendix E


Gary Farmer

LandComputer

12/03/200404/05/2012

01/05/201505/02/2015

37,00014,000

24,500

74-8976432

12,500(6,700)

5,800

5,800

0

5,175 25,875


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E-54 Appendix E

b. $0. The $500,000 exclusion for joint filers exceeds the $320,000 realized gain.

c. $25,000 5 ($350,000 2 $200,000) 2 (½ 3 $250,000)

CHAPTER 9 WITHHOLDING, ESTIMATED PAYMENTS, AND PAYROLL TAXES

Self-Study problem 9.1 1. Monthly salary $3,000.00

Less: exemptions ($333.30 3 5) (1,666.50) Income subject to withholding $ 1,333.50

Withholding: $76.80 1 [($1,333.50 2 $960.00) 3 15%] $ 132.83

2. From Appendix C, withholding 5 $136.00


1,380 00

Ray Adams 466-47-1131

*

*$1,380 5 ($7560/4) 2 $510

Self-Study problem 9.3 Debbie: Soc. Sec. — 6.2% 3 $118,500 $ 7,347.00

Medicare — 1.45% 3 $125,000 1,812.50 Total employee FICA tax $ 9,159.50

Debbie’s employer: Soc. Sec. — 6.2% 3 $118,500 $ 7,347.00Medicare — 1.45% 3 $125,000 1,812.50 Total employer FICA tax $ 9,159.50

Total FICA tax $18,319.00



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95-1234567

Big BankPO Box 12344San Diego, CA 92101

464-74-1132

Mary Jones6431 Gary StreetSan Diego, CA 92115

16,150.0016,150.0016,150.00

2,422.001001.30234.18

969.0016,150.00800 4039250 092CA

a Employee’s social security numberOMB No. 1545-0008

This information is being furnished to the Internal Revenue Service. If you are required to �le a tax return, a negligence penalty or other sanction may be imposed on you if this income is taxable and you fail to report it.

b Employer identi�cation number (EIN)

c Employer’s name, address, and ZIP code

d Control number

e Employee’s �rst name and initial Last name Suff.

f Employee’s address and ZIP code

1 Wages, tips, other compensation 2 Federal income tax withheld

3 Social security wages 4 Social security tax withheld

5 Medicare wages and tips 6 Medicare tax withheld

7 Social security tips 8 Allocated tips

9 10 Dependent care bene�ts

11 Nonquali�ed plans 12a See instructions for box 12Co d e

12bCo d e

12cCo d e

12dCo d e

13 Statutory employee

Retirement plan

Third-party sick pay

14 Other

15 State Employer’s state ID number 16 State wages, tips, etc. 17 State income tax 18 Local wages, tips, etc. 19 Local income tax 20 Locality name

Form W-2 Wage and Tax Statement 2015

Department of the Treasury—Internal Revenue Service

Safe, accurate, FAST! Use

Copy C—For EMPLOYEE’S RECORDS (See Notice to Employee on the back of Copy B.)

Big BankPO Box 12344San Diego, CA 92101

95-1234567 464-74-1132

Mary Jones

6431 Gary Street

San Diego, CA 92115

461.00

Form 1099-INT

2015 Interest Income

Copy B

For Recipient

Department of the Treasury - Internal Revenue Service

This is important tax information and is

being furnished to the Internal Revenue

Service. If you are required to �le a

return, a negligence penalty or other

sanction may be imposed on you if

this income is taxable and the IRS

determines that it has not been reported.

OMB No. 1545-0112

CORRECTED (if checked)PAYER’S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone no.

PAYER’S federal identi�cation number RECIPIENT’S identi�cation number

RECIPIENT’S name

Street address (including apt. no.)

City or town, state or province, country, and ZIP or foreign postal code

FATCA �ling requirement

Account number (see instructions)

Payer's RTN (optional)

1 Interest income

$2 Early withdrawal penalty

$3 Interest on U.S. Savings Bonds and Treas. obligations

$4 Federal income tax withheld

$5 Investment expenses

$6 Foreign tax paid

$7 Foreign country or U.S. possession

8 Tax-exempt interest

$

9 Speci�ed private activity bond interest

$10 Market discount

$

11 Bond premium

$12 13 Bond premium on tax-exempt bond

$14 Tax-exempt and tax credit

bond CUSIP no.15 State 16 State identi�cation no. 17 State tax withheld

$$

Form 1099-INT (keep for your records) www.irs.gov/form1099int

Self-Study problem 9.6See Schedule SE on Pages E-59 and E-60.

Self-Study problem 9.7See Form 940 on Pages E-61 and E-62.

Self-Study problem 9.8See Schedule H on Pages E-63 and E-64.



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E-56 Appendix E

Self-Study problem 9.9a. $450 5 0.9% 3 ($250,000 2 $200,000) b. $450 refund – Since Marcia has no earnings, their joint income does not exceed

the $250,000 threshhold, so they are not subject to the 0.9% Medicare surtax.

CHAPTER 10 PARTNERSHIP TAXATION

Self-Study problem 10.1 1. Yes 2. No A corporation is not a partnership, but a separate type of

entity. 3. No The mere joint ownership of property does not constitute a

partnership; the owners must engage in some type of business activity.

4. Yes The marketing of oil qualifies the venture as a partnership. 5. Yes

Self-Study problem 10.2 1. None 2. $36,000 The amount of cash contributed. 3. None 4. $17,500 The same as Linda’s basis in the equipment contributed

to the partnership. 5. $17,500 The same as Linda’s basis in the equipment contributed.

Self-Study problem 10.3See Form 1065 and Schedule K-1 on Pages E-65 to E-70.

Self-Study problem 10.4 1. Partnership income before guaranteed payments $ 32,000

Less: guaranteed payments (36,000) Partnership loss after guaranteed payments $ (4,000)

Jim’s income: Guaranteed payments $ 36,00050% of the $4,000 partnership loss (2,000)

Total income $ 34,000

2. Jack’s income (loss): 50% of the $4,000 partnership loss $(2,000)

Self-Study problem 10.5 12 months 3 $1,000 per month guaranteed payment $ 12,000 Add: Robert’s distributive share of income 21,000

Total income $33,000

The $1,500 per month received in September, October, November, and December of 2015 will be reported on Robert’s 2016 income tax return. The guaranteed payments received are reported for the partnership tax year that ends with or within the partner’s tax year, in the same manner as a distributive share of the partnership income.


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Self-Study problem 10.6 1. Maxwell has a $5,000 realized loss ($70,000 2 $75,000), but the loss is not

recognized since he is a more-than-50 percent partner, 50 percent directly and 50 percent indirectly from his daughter.

2. The daughter has a $15,000 gain ($40,000 2 $25,000). Since she is a more-than-50 percent partner (50 percent directly and 50 percent indirectly), and the car is not a capital asset to the partnership, the gain is ordinary income.

Self-Study problem 10.7 1. $45,000, his amount at risk in the activity. 2. Profit $ 31,000

Less: carryover of disallowed loss from the prior year ($60,000 2 $45,000) (15,000) Taxable income for next year $ 16,000

Self-Study problem 10.8 1. False An election must be made to be treated like a corporation for

tax purposes. 2. False 3. True 4. True 5. True

CHAPTER 11 THE CORPORATE INCOME TAX

Self-Study problem 11.1$22,250 1 (39% 3 [$275,000 2 $100,000]) 5 $90,500

Self-Study problem 11.2$22,250 1 (39% 3 [$110,000 2 $100,000]) 5 $26,150

None of the capital losses may be used to offset current year ordinary income. The capital losses may be carried back 3 years and forward 5 years to offset capital gains, if any, recognized during those years.

Self-Study problem 11.3 The dividends received deduction is equal to the lesser of $56,000 5 80% 3 $70,000; or $48,000 5 80% 3 $60,000 ($90,000 1 $70,000 2 $100,000). Therefore, $48,000 is the amount of the deduction.


104,000

154,100

41,0009,100 4,700

4,700

4,0008,700

145,400

4,000

(The next self-study problem is on Page E-71.)


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E-58 Appendix E


Charlotte York

9,600

9,600

1,190

9,600

2

X

995

1,468

2,463

2,463

2,467

x4

278


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Robert Boyd

27,45027,450

25,350

3,879

1,940


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E-60 Appendix E


Robert Boyd


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Rhus Company

9 4 0 0 0 1 1 1 2

C

39,000

113,000

A

39,000

74,000444

444444

00


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E-62 Appendix E


150156

6672

444

Rhus Company 94-0001112


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2,250279

65

344

2,250

Susan Green


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E-64 Appendix E



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Malus Valley Partnership

255,600

255,600

255,600

255,600168,000

9,250

6,10012,000

195,350

9,250

60,250

257,750

2015


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E-66 Appendix E



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E-68 Appendix E


60,250

1,500

60,250

50,000


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58,750

Initial Return10,000

115,0009,250 105,750

115,000

257,750

29,750

257,750

0

58,750

50,000

50,00040,250

58,750

58,750

031,500

58,750

90,250

40,250

187,750

27,000

58,750

10,000


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E-70 Appendix E


Malus Valley Partnership

Robert Conrad

Individual

000

5050

108,750

015,75029,37525,00020,125

50

30,125

A 750

30,125

A 25,000

X

X

X

X


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Self-Study problem 11.5 See Form 1120 on Pages E-73 to E-77. The calculation of tax for Aspen Corporation is as fol-lows: 15% 3 $12,000 taxable income 5 $1,800 total tax. Net income per the books is equal to $17,200, $19,000 net income before income tax expense 2 $1,800 income tax expense.

Self-Study problem 11.6 See Form 1120S and Schedule K-1 on Pages E-78 to E-84.

Self-Study problem 11.7 Tammy’s realized gain is $125, 000 1 $34, 000 2 $75, 000 5 $84, 000.

Tammy’s recognized gain is $0. Tammy’s basis in her stock is $75, 000 2 $0 1 $0 2 $34, 000 5 $41, 000. The corporation’s basis in the real estate is $75, 000 1 $0 5 $75, 000.

Self-Study problem 11.8 20% 3 $190,000 5 $38,000Only $190,000 ($340,000 2 $150,000) is subject to the accumulated earnings tax.

Self-Study problem 11.9 Regular taxable income $ 70,000 Corporate tax preference items 55,000 Alternative minimum taxable income $125,000Less: exemption (40,000) Alternative minimum tax base $ 85,000 Tax rate 3 20% Gross alternative minimum tax $ 17,000Less: regular tax (12,500) Alternative minimum tax liability $ 4,500

CHAPTER 12 TAX ADMINISTRATION AND TAX PLANNING

Self-Study problem 12.1 1. False The IRS has nine major services and enforcement offices.2. True 3. False The commissioner of internal revenue is appointed

by the president of the United States. 4. False The IRS is part of the Treasury Department. 5. True

Self-Study problem 12.2 1. True 2. False An office audit is conducted at the IRS office. 3. True 4. True 5. False Audits can be appealed to the next level of the IRS.


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E-72 Appendix E

Self-Study problem 12.3part a. Failure-to-pay penalty:

$3,000 3 0.5% 3 2 months $ 30 Failure-to-file penalty: $3,000 3 5% 3 2 months $ 300 Less: failure-to-pay penalty (30)

270Total $300

part b. 20% 3 $10,000 $2,000 part c. 75% 3 $10,000 $ 7,500

Self-Study problem 12.4 1. True 2. False For bad debts, the statute of limitations is 7 years. 3. False There is no statute of limitations for fraudulent returns. 4. True 5. True

Self-Study problem 12.5 1. False Lawyers and enrolled agents may also represent taxpayers

before the IRS. 2. False A college degree is not required. 3. False Anyone may prepare corporate tax returns. 4. True 5. True 6. True 7. False The burden of proof is on the IRS. 8. False The burden of proof remains on the taxpayer. 9. True

10. True 11. True

Self-Study problem 12.6 1. True 2. True 3. True Publication 1 directs the reader to Publication 594. 4. True 5. True 6. True

Self-Study problem 12.7 1. 20.28% 5 $18,050 / $89,000 2. 20.33% 5 $18,300 / $90,0003. 25% 5 ($18,300 2 $18,050) / ($90,000 2 $89,000)


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Aspen Corporation

01/01/2015

183,000

285,000

285,00080,000

90,00082,0008,000

205,00010,000

215,000

11,000

5,000

196,00019,000

12,0001,8002,000

200

7,0007,000

200


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E-74 Appendix E


7,00010,000

7,000

7,00010,000


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1,800

1,800

1,800

1,800

2,000

2,000

2,000

2,000


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E-76 Appendix E



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35,000

10,000

120,000

18,000

183,000

25,800

140,000

17,200

183,000

19,0000

17,2000

125,0005,000

140,000

17,2001,800

19,000

17,2000

17,200


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E-78 Appendix E


Aspen Corporation01/01/2015

183,000

1

285,000

285,00080,000

90,00082,0008,000

205,000

205,000

11,000

5,000

196,0009,000

0

0

0

01/01/2015


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E-80 Appendix E


9,000

10,00010,000


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19,000


35,000

10,000

120,000

18,000

183,000

183,000

24,000

140,000

19,000

125,0005,000


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E-82 Appendix E


19,0000

19,000

19,000

09,000

10,000

19,000

19,000


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Aspen Corporation

Janet Nall

100

9,000

10,00010,000


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E-84 Appendix E


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Documents

Solutions to Self-Study Problems