Determine whether the taxpayer in each of the following situations has a claim of right to the income received: a. Sulleys Spa Spot sells hot tubs that have a 2-year warranty. The warranty provides for the replacement of all parts and the cost of labor to replace the parts. In addition, Sulleys may replace the […]
Mitch travels extensively in his job as an executive vice president of Arthur Consulting Company. During the current year, he used frequent flier miles that he had obtained during his business travel to take his family on a vacation to Europe. The normal airfare for the trip would have been $6,000. a. Discuss whether Mitch […]
Determine whether any income must be recognized in each of the following situations, as well as who must report income, how much that taxpayer should report, and when that taxpayer will report the income: a. Patz Corporation owns a gourmet restaurant. The restaurant needs to remodel its kitchen but is short of cash. Dennis owns […]
For each of the following situations, determine the proper year for recognition of the income or deduction if the taxpayer is (1) a cash basis taxpayer and (2) an accrual basis taxpayer: a. Tindle Corporation purchases office supplies costing $600 on December 21, 2010. Tindle pays for the office supplies on January 18, 2011. b. […]
Albert and Patricia are divorced during the current year. As part of their divorce agreement, Patricia agrees to pay Albert alimony of $85,000 in the current year and $5,000 per year in subsequent years. What tax problem is presented by this agreement? What will be the ultimate tax treatment of the alimony payments?
1. Detail any significant differences in the recognition of income using the cash method and using the accrual method of accounting. 2. How does the wherewithal-to-pay concept affect the tax treatment of prepaid income? 3. What is an installment sale? 4. How is the degree of completion of a long-term construction contract determined?
Tim has state income taxes of $4,500 withheld from his salary during 2009. On his 2009 federal income tax return, Tim properly deducts the $4,500 as state taxes paid. Upon filing his 2009 state income tax return, he determines that his actual state income tax for 2009 is only $3,900, and the state sends him […]
You are a CPA who has been preparing tax returns for Sign, Seal, and Deliver, a mid- Communication Skills size CPA firm, for the last 5 years. During the current year, you are assigned the individual return of a new client, Guadalupe Piaz. Guadalupe has completed and returned the tax return questionnaire that the firm […]
1. Based solely on the definitions in the chapter, is the sales tax a proportional, regressive, or progressive tax? Explain, and state how the tax might be viewed differently. 2. As stated in the text, the federal income tax is the largest revenue-producing tax in use in the United States. Why do you think the […]
In each of the following situations, explain why the taxpayers action is or is not tax evasion: a. Jamal owns an electrical appliance repair service. When a client pays him in cash, he gives the cash to his daughter Tasha. Jamal does not report the cash he gives to Tasha in his business income. Tasha […]
