Exam 1: Introduction to Taxation

Emma owns 40% of Johnson, Inc., a regular C corporation, that reported a net loss of $50,000 for the year. Emma acquired her stock on January 1 of the current year by investing $4,000 cash. In July, the corporation took out a bank loan for $25,000. How much of the loss can Emma deduct on her tax return for the year?

Which of the following types of taxes is not levied by the U.S. government?

What are the fiduciary entities and how are they created?

What is the earliest year to which a corporation can carry a net operating loss realized in 2017?

Which of the following business entities does not file a separate tax return to report business operations?

Jerry and Matt decide to form a business. Jerry will contribute $4,200 for a 35% interest and Matt will contribute $7,800 for a 65% interest. The business will take out a $25,000 loan to cover the balance of their working capital needs. They expect that the business will have a loss of $38,000 for the first year. In the second year, the business will have a profit of $52,000 and it will distribute $5,200 to Matt and $2,800 to Jerry. Jerry is in the 33% marginal tax bracket and Matt is in the 28% marginal tax bracket. Their marginal tax brackets will not change as a result of profit or loss from this business. What is Matt's income tax savings (rounded to the nearest dollar) for the first year if they organize the business as an S corporation?

Which of the following statements is false?

William lives in Delaware but works for a company that has offices in both Maryland and Pennsylvania. William spent four months working in Pennsylvania and 8 months working in Maryland.

William is single and had salary income from his position as Chief Financial Officer of Zippy Bank of $450,000 (the 39.6 tax bracket). He also had $35,000 in income from the dividends on the stock of his previous employer. What tax rate will apply to William's dividend income?

_____ 12. All interest paid to a taxpayer must be included in gross income.

Compare a sales tax to a use tax.

Cragen Corporation has gross income of $625,000 and operating expenses of $418,000. What is its taxable income? What is its income tax liability?

Abigail is married filing separately with taxable income of $200,000. What is her marginal tax rate?

Jerry and Matt decide to form a business. Jerry will contribute $4,200 for a 35% interest and Matt will contribute $7,800 for a 65% interest. The business will take out a $25,000 loan to cover the balance of their working capital needs. They expect that the business will have a loss of $38,000 for the first year. In the second year, the business will have a profit of $52,000 and it will distribute $5,200 to Matt and $2,800 to Jerry. Jerry is in the 33% marginal tax bracket and Matt is in the 28% marginal tax bracket. Their marginal tax brackets will not change as a result of profit or loss from this business. How much tax will Jerry pay in the second year (rounded to the nearest dollar) due to this business if they organize the business as an S corporation?

When appreciated property is transferred, the gift tax is based on

Kate received $130,000 in salary in 2017. What is her FICA tax if the Medicare rate is 1.45%, the Social Security rate is 6.2% on a maximum of $127,200 in 2017?

Jerry and Matt decide to form a business. Jerry will contribute $4,200 for a 35% interest and Matt will contribute $7,800 for a 65% interest. The business will take out a $25,000 loan to cover the balance of their working capital needs. They expect that the business will have a loss of $38,000 for the first year. In the second year, the business will have a profit of $52,000 and it will distribute $5,200 to Matt and $2,800 to Jerry. Jerry is in the 33% marginal tax bracket and Matt is in the 28% marginal tax bracket. Their marginal tax brackets will not change as a result of profit or loss from this business. How much tax will Jerry pay in the second year (rounded to the nearest dollar) due to this business if they organize the business as a partnership?

Darden Corporation has taxable income of $200,000. If it distributes 25 percent of its after-tax income to its sole shareholder who is in the 25 percent marginal tax bracket, what is the total tax burden on this $200,000 of income?

Charlotte is a head of household with taxable income of $40,000. What is her marginal tax rate?

Daniel is a single with taxable income of $40,000. What is his marginal tax rate?