MGAC50H3 Chapter Notes - Chapter 6: Dividend Tax, Progressive Tax
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22) Boxer Corporation buysequipment in January of the current year with a 7-year class lifefor $15,000. The corporation expensed the $15,000 under Sec. 179.The deduction in the year of purchase for E&P purposes due tothe acquisition and expensing of the equipment is
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23) Maxwell Corporation reportsthe following results:
Maxwell's dividends-received deduction is
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24) Identify which of thefollowing statements is false.
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25) Exit Corporation hasaccumulated E&P of $24,000 at the beginning of the current taxyear. Current E&P is $20,000. During the year the corporationmakes the following distributions to its sole shareholder who has a$22,000 basis for her stock.
The treatment of the $15,000 August 1 distribution would be
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26) Current E&P does notinclude
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27) Identify which of thefollowing statements is true.
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28) Crossroads Corporationdistributes $60,000 to its sole shareholder Harley. Crossroads hasearnings and profits of $55,000 and Harley's basis in her stock is$20,000. After the distribution, Harley's basis is
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29) Hogg Corporation distributes$30,000 to its sole shareholder, Ima. At the time of thedistribution, Hoggs' E&P is $14,000 and Ima's basis in herstock is $10,000. Ima's gain from this transaction is
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30) One consequence of aproperty distribution by a corporation to a shareholder is
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31) Identify which of thefollowing statements is true.
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32) Which of the following isnot a reason for a stock redemption?
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33) Elijah owns 20% of ParkCorporation's single class of stock. Elijah's basis in the stock is$8,000. Park's E&P is $28,000. If Park redeems all of Elijah'sstock for $48,000, Elijah must report dividend income of
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Tax Return Problem Beth R. Jordan lives at 2322 Skyview Road, Mesa, AZ 85201. She is a tax accountant with Mesa Manufacturing Company, 1203 Western Avenue, Mesa, AZ 85201 (employer identification number 11-1111111). She also writes computer software programs for tax practitioners and has a part-time tax practice. Beth is single and has no dependents. Beth was born on July 4, 1972, and her Social Security number is 123-45-6789. She wants to contribute $3 to the Presidential Election Campaign Fund.
The following information is shown on Beth's 2015 Wage and Tax Statement (Form Wâ2).
Line | Description | Amount |
---|---|---|
1 | Wages, tips, other compensation | $65,000.00 |
2 | Federal income tax withheld | 10,500.00 |
3 | Social Security wages | 65,000.00 |
4 | Social Security tax withheld | 4,030.00 |
5 | Medicare wages and tips | 65,000.00 |
6 | Medicare tax withheld | 942.50 |
15 | State | Arizona |
16 | State wages, tips, etc. | 65,000.00 |
17 | State income tax withheld | 1,650.00 |
Other 2015 transactions include the following.
Beth received interest of $1,300 from Arizona Federal Savings and Loan and $400 from Arizona State Bank. Each financial institution reported the interest income on a Form 1099âINT. She received qualified dividends of $800 from Blue Corporation, $750 from Green Corporation, and $650 from Orange Corporation. Each corporation reported Beth's dividend payments on a Form 1099âDIV.
Beth received a $1,100 income tax refund from the state of Arizona on April 29, 2015. On her 2014 Federal income tax return, she reported total itemized deductions of $8,200, which included $2,200 of state income tax withheld by her employer.
Fees earned from her part-time tax practice totaled $3,800. She paid $600 to have the tax returns processed by a computerized tax return service.
On February 8, Beth bought 500 shares of Gray Corporation common stock for $17.60 a share. On September 12, Beth sold the stock for $14 a share.
Beth bought a used sport utility vehicle for $6,000 on June 5. She purchased the vehicle from her brother-in-law, who was unemployed and was in need of cash. On November 2, she sold the vehicle to a friend for $6,500.
On January 2, Beth acquired 100 shares of Blue Corporation common stock for $30 a share. She sold the stock on December 19 for $55 a share.
Beth records revenues of $16,000 from the sale of a software program she developed. Beth incurred the following expenditures in connection with her software development business.
Cost of personal computer (100% business use) | $7,000 |
Cost of printer (100% business use) | 2,000 |
Furniture | 3,000 |
Supplies | 650 |
Fee paid to computer consultant | 3,500 |
Beth elected to deduct the maximum portion of the cost of the computer, printer, and furniture allowed under the provisions of § 179. These items were placed in service on January 15 and used 100 percent in her business.
Although her employer suggested that Beth attend a convention on current developments in corporate taxation, Beth was not reimbursed for the travel expenses of $1,420 she incurred in attending the conference. The $1,420 included $200 for meals.
Beth paid $300 for prescription medicines and $2,875 in physician and hospital bills. Medical insurance premiums were paid by her employer. Beth paid real property taxes of $1,766 on her home. Interest on her home mortgage was $3,845, and interest paid to credit card companies totaled $320.
Beth electronically contributed $30 each week to her church and $10 each week to the United Way. Professional dues and subscriptions totaled $350.
Beth paid $1,000 in estimated Federal income taxes throughout the year. She was covered for the entire year by Mesa Manufacturing's health insurance policy.
Part 1âTax Computation
Compute the 2015 net tax payable or refund due for Beth R. Jordan. If you use tax forms for your solution, you will need Forms Schedules A, B, C, D, and SE. Suggested software: H&R BLOCK Tax Software.