Answer & Explanation:I have a set of tax problems and I need help on finding issues and calculating the tax problems.
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August: ACC 432A
Imandoust – Final Exam
1. Joe Taxpayer was notified by the IRS that he should appear at the local IRS district office with
records supporting travel expense deductions taken on his 2013 tax return. Because he had to
meet with some clients, he did not appear at the IRS office nor did he bother to make an
appointment for an alternative time. What penalty or penalties could Joe Taxpayer be subject
2. Debtor is personally liable on real estate mortgage with an outstanding balance of $1.5 million
and the property currently has a FMV of $1.2 million. Debtor’s basis in the property is $1 million.
The property is repossess by the bank.
a. If the borrower is insolvent both before and after the repossession what taxable tax gain
if any, is recognized by the borrower?
b. Does you answer to a change if the debtor is not personally liable on the mortgage?
Why or why not?
3. Taxpayer has been engaged in the general practice of medicine for more than 30 years. In 1991,
he took over the operation of his family farm and decided to convert the farm into a cattle farm.
He employed a full-time helper on the farm but he himself did much of the physical work. In this
endeavor taxpayer had advice of assistance of a local farm agent, an expert cattleman and an
expert farm machinery mechanic. Taxpayer raised cattle as well as catfish and quarter horses.
However, after encountering technical and demand problems he discontinued the raising of the
catfish and horses. He was presently raising thoroughbreds and was confident that this venture
would be more profitable. During the period 1991 through 2014, taxpayer farming operation
resulted in substantial losses, averaging approximately $15,000 per year. During the taxable
years of 2013 and 2014 his farm losses totaled $30,000 and $25,000 respectively. The evidence
shows that taxpayer had not made a profit on a year by year basis during this entire period
although his testimony to the IRS agent was they he always had operated and still operated his
farm with a profit MOTIVE. Can taxpayer deduct the losses?
4. Taxpayer is a calendar year taxpayer who purchased 1,000 shares of Newton Corp stock on
10/23/13 for $15,000. He sold these shares on 1/17/14 for $7,000. On each of the four day
sfrom 1/20 through 1/23 he purchased 500 shares of substantially identical stock for $3,000.
What is the tax effect for taxpayer and what will be the basis of each of the four batches of new
5. Taxpayer a college professor age 58 purchased and moved into a house on August 1, 2012. He
used the house continuously until 9/1/2013 on which date he went abroad for a one year
sabbatical leave. During part of the period of leave, te property was unoccupied and it was
August: ACC 432A
Imandoust – Final Exam
leased during the remainder of the period. On October 1, 2014 one month after returning from
such leave he sold the house. Can taxpayer use the exclusion for the sale of residence?
6. In 2013 Sally sells her business to Joe but she sells the claim against Frank that arose during the
course of her business to Bob who is not in a business. The claim becomes worthless in Bob’s
hands in 2014. Can Bob take a business loss for the bad debt since it arose in the course of
7. Taxpayer has a margin account with Investment Co. The stocks and bonds in the account earned
dividends and interest of $10,000 in 2014. The $10,000 was paid directly to the margin account
and used for reinvestment purposes only. Taxpayer received a substitute form 1099-DIV which
indicated the composition of the $10,000. However, taxpayer did not report the $100,000 as
income in 2014 but rather in 2015 when taxpayer closed the account. The IRS has indicated that
Taxpayer must include the $10,000 in 2014 and in additional to taxes assessed interest and
penalties. Taxpayer seeks your advice.
8. Taxpayer is a growing contractor business and seeks to add additional staff. Taxpayer has heard
that there can be major ramification on if she hires employee’s vs independent contractors.
Explain to Taxpayer the difference between them and how to structure her contracts to achieve
one designation versus another.
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