Federal Taxation

BA 431 Federal Taxation, Fall 2017
1. T and Z are married and file a joint return. Their itemized deductions for the current year are $13,000. Assuming the standard deduction is $6,300, T and Z should use______________________________________.
2. X suffered a net operating loss for 2017. Under the general rules, X may carry back ___________years and carry
forward__________________years.
3. The ___________________________ method of depreciation must be used for amortizing intangible property.
4. E moved from Monmouth to San Jose, CA to accept a new job as an accountant. During the trip, he spent $400 on lodging and $500 on
meals. E may deduct $___________________.
5. H's house was flooded this year due to abnormal rainfall. She was forced to stay in a motel while the water subsided. Her motel stay,
which cost $600, was not covered by her insurance policy. H may deduct $______________________for the motel stay as part of her casualty loss
from the flood.
6. Assuming a taxpayer itemizes deductions and is under the age of 65, medical expenses are deductible only to the extent that they exceed
___________________________% of the taxpayer’s AGI.
7. J graduated from the University of Texas during the current year and accepted a job in Kansas City. J lived in Austin and moved to
Kansas City to commence work on June 1. J drove 1,800 miles pulling a trailer with all of his belongings. J rented the trailer for $650. J owns
2 cats and paid a transport company $400 to move the cats to Kansas City. On June 1 he moved into an apartment and lived there with his cats
temporarily at a cost of $10 per day through July 15. On July 16 he moved into his new home with his pets. What will J be able to claim as a
moving expense?
8. P, a calendar year, cash basis taxpayer, started a business on June 1, 2017. His lease required monthly payments of $800 beginning on
June 1. Insurance for premises also began on June 1 and was to be paid every three months and cost $125 per month. Premiums were paid on June
1, 2017, September 1, 2017, December 1, 2017 and March 1, 2018. What are the total expenses that P may deduct for 2017?
9. Complete Depreciation Schedule for a passenger automobile used solely for business purposes.
Year
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Unadjusted Basis
27000
27000
27000
27000
27000
27000
27000
27000
27000
27000
Depreciation %
0.2
0.32
0.192
0.1152
0.1152
0.0576
MACRS Depreciation
Limit
3160
5100
3050
1875
1875
1875
1875
1875
1875
1875
Deduction
Cumulative Depreciation
Adjusted Basis
10. Y's inventory records reveal the following information:
Item Cost FMV
1 3,300 3,400
2 5,500 5,700
3 6,300 6,000
4 7,500 8,000
5 4,900 4,700
For financial accounting purposes, Y values inventory using FIFO and the lower of cost or market. For tax purposes, the value of Y’s ending
inventory is:
11. Peggy and Clyde Wagner have an AGI of $65,000 for 2017. Their expenses for 2017 are:
Prescription drugs $ 4,580
Interest on home mortgage 9,700
Doctor and dental bills paid 2,700
Hospital bills paid 1,900
Property taxes paid on home 3,650
State Income Taxes withheld from wages 2,700
Safe deposit box rental 360
Interest on automobile loan 1,750
Credit Card Interest paid 500
Medical Insurance Premiums 2,600
Eyeglasses for Peggy 565
Fair Market Value of TPP, Inc stock donated to church 2,800
Union Dues paid by Clyde 720
Cash contributions to church 2,800
Tax preparation fee 450
Both Peggy and Clyde are under 40 and have lived in Oregon for the entire year. They have four children, ages 8, 10, 14 and 17. They will file
a joint income tax return for this year.
a. Calculate their total itemized deductions.
b. What is their taxable income?
c. Calculate their tax liability.
d. If they had a total of $5,600 of Federal withholding from their employment, will they have an overpayment (refund) or underpayment (tax to pay)?
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