Question & Answer

Gator Inc. reported taxable income of $1,000,000 this year and paid federal income taxes of $210,000. Included in the company’s computation of taxable income is gain from the sale of a depreciable asset of $50,000. The income tax basis of the asset was $100,000. The E&P basis of the asset using the alternative depreciation system was $175,000. Compute Gator’s current E&P.

Two accountants for the firm of Elwes and Wright are arguing about the merits of presenting an income statement in a multiple-step versus a single-step format. The discussion involves the following 2014 information related to P. Bride Company ($000 omitted). Administrative expense Offi cers’ salaries $ 4,900 Depreciation of offi ce furniture and equipment 3,960 Cost of goods sold 60,570 Rent revenue 17,230 Selling expense Delivery expense 2,690 Sales commissions 7,980 Depreciation of sales equipment 6,480 Sales revenue 96,500 Income tax 9,070 Interest expense 1,860 Instructions (a) Prepare an income statement for the year 2014 using the multiple-step form. Common shares outstanding for 2014 total 40,550 (000 omitted). (b) Prepare an income statement for the year 2014 using the single-step form. (c) Which one do you prefer? Discuss.

[Research} Devon owns 1,000 shares of stock worth $10,000.  This year he received 200 additional shares of this stock from a stock dividend.  His 1,200 shares are now worth $12,500.  Must Devon include the dividend paid in stock in income?

Should the Fed have the power to provide assistance to firms, such as Bear Stearns, that are not commercial banks? (LO5)

Lincoln Brown has used a piece of land in their business for the past five years. The land qualifies as §1231 property. It is unclear whether Lincoln will have to recognize a gain or loss when they eventually sell the asset. Lincoln asks their accountant how the gain or loss would be characterized if they decide to sell. The accountant says that selling §1231 assets gives sellers “the best of both worlds.” Explain what the accountant means by this statement.

Clyde is a cash method taxpayer who reports on a calendar-year basis.  This year Paylate Corporation has decided to pay Clyde a year-end bonus of $1,000.  Determine the amount Clyde should include in his gross income this year under the following circumstances: a.       Paylate Corporation wrote the check and put it in his office mail slot on December 30 of this year, but Clyde did not bother to stop by the office to pick it up until after year-end. b.       Paylate Corporation mistakenly wrote the check for $100.  Clyde received the remaining $900 after year-end. c.       Paylate Corporation mailed the check to Clyde before the end of the year, (and it was delivered before year-end). Although Clyde expected the bonus payment, he decided not to collect his mail until after year-end. d.       Clyde picked up the check in December, but the check could not be cashed immediately because it was postdated January 10.

Once equipment has been installed and placed in operation, subsequent expenditures relating to this equipment are frequently thought of as repairs or general maintenance and, hence, chargeable to operations in the period in which the expenditure is made. Actually, determination of whether such anexpenditure should be charged to operations or capitalized involves a much more careful analysis of the character of the expenditure. What are the factors that should be considered in making such a decision? Discuss fully.

Assume TDW Corporation’s (calendar-year-end) has 2024 taxable income of $950,000 for purposes of computing the §179 expense. The company acquired the following assets during 2024:

Suppose you asked your favorite AI query tool “Under the timing strategy, does it make sense for a person to accelerate income recognition when tax rates are increasing?” and the AI tool responded as follows:

Briefly describe the plastic extrusion process.

Ida and Clem were married for several years, but in 2018 they finalized their divorce. In the divorce decree, Ida agreed to deed their car to Clem and pay Clem $10,000 per year for twenty years (but not beyond his death). Did these transfers qualify as alimony for tax purposes? Explain.

Describe the spinning process in glassworking

Stereolithography is to be used to build the part in Figure 33.1 in the text. Dimensions of the part are: height = 125 mm, outside diameter = 75 mm, inside diameter = 65 mm, handle diameter = 12 mm, handle distance from cup = 70 mm measured from center (axis) of cup to center of handle. The handle bars connecting the cup and handle at the top and bottom of the part have a rectangular cross section and are 10 mm thick and 12 mm wide. The thickness at the base of the cup is 10 mm. The laser beam diameter = 0.25 mm, and the beam can be moved across the surface of the photopolymer at = 500 mm/s. Layer thickness = 0.20 mm. Compute an estimate of the time required to build the part, if 10 s are lost each layer to lower the height of the platform that holds the part. Neglect post-curing time.

How are defined benefit plans different from defined contribution plans? How are they similar?

Under what circumstances will a partner recognize a gain from an operating distribution?

Jim recently joined the Austin Barter Club, an organization that facilitates the exchange of services between its members. This year Jim provided lawn-mowing services to other club members. Jim received the following from the barter club. Determine the amount, if any, Jim should include in his gross income in each of the following situations:

What is the difference between powder injection molding and metal injection molding?

Clyde is a cash-method taxpayer who reports on a calendar-year basis. This year Paylate Corporation has decided to pay Clyde a year-end bonus of $1,000. Determine the amount Clyde should include in his gross income this year under the following circumstances:

Does the consumer in the importing country gain or lose from dumping?

Jimmy has fallen on hard times recently. Last year he borrowed $250,000 and added an additional $50,000 of his own funds to purchase $300,000 of undeveloped real estate. This year the value of the real estate dropped dramatically and Jimmy’s lender agreed to reduce the loan amount to $230,000. For each of the following independent situations, indicate the amount Jimmy must include in gross income and explain your answer:

What determines if a taxpayer is required to file a tax return?  If a taxpayer is not required to file a tax return, does this mean that the taxpayer should not file a tax return?

On the last day of its current tax year, Buy Rite LLC received $300,000 when it sold a machine it had purchased for $200,000 three years ago to use in its business. At the time of the sale, the basis in the equipment had been reduced to $100,000 due to tax depreciation taken. How much did the members’ self-employment earnings from Buy Rite increase when the equipment was sold? [Hint: See §1402(a)(3).]

How is surface texture distinguished from surface integrity?

For each of the following situations, indicate how much the taxpayer is required to include in gross income and explain your answer:

Garner Inc. provides the following information related to its postretirement benefits for the year 2014. Accumulated postretirement benefi t obligation at January 1, 2014 $710,000 Actual and expected return on plan assets 34,000 Prior service cost amortization 21,000 Discount rate 10% Service cost 83,000 Instructions Compute postretirement benefit expense for 2014.