ACC 555 Individual Tax Research and Planning – Full Class
ACC 555 Assignment 1 – Tax Research
Imagine that the Internal Revenue Service (IRS) has selected your client for an audit. Your client and the IRS disagree about the amount of tax revenue owed. You agree with your client’s position. You must provide a defense for the client that requires you to research the issues in order to render an educated opinion on a course of action for your client. Note: You may create and/or make all necessary assumptions needed for the completion of this assignment.
Write a three to four (3-4) page paper in which you:
1. Prepare a defensible strategy for the client by using the six (6) steps in the tax research process. Propose how each of the steps provides support for the client’s position.
2. Create a fact-based argument that you plan to propose to the client as a defense of his / her position with the IRS.
ACC 555 Assignment 2 – Tax-Deductible Losses
Write a six to eight (6-8) page paper in which you:
1. Research the manner in which tax-deductible losses originally became part of the U.S. Tax Code. Conclude whether or not tax-deductible losses overall are reasonable. Provide support for your conclusions.
2. Suggest what you believe to be a significant tax-deductible loss. Discuss whether or not the deductibility of this loss harms other taxpayers in general. Recommend changes to this tax-deductible loss you would make that would be fairer to all taxpayers.
3. Choose a type of loss that is not deductible, and argue whether these losses should continue to be disallowed, or why they should be allowed. Provide support for the rationale.
ACC 555 Assignment 3 – Tax Periods and Method
Imagine that you have always wanted to own a business and have now created a new start-up company.
Write an eight to ten (8-10) page paper in which you:
1. Analyze the start-up company you created. Include in your analysis the type of company you have created, its business objectives, and other factors that you believe are important to the success of the business.
2. Determine the types of accounting periods that you could choose from for the company. Choose the type of accounting period that would provide the greatest tax benefit. Provide example(s) to support your proposal.
3. Evaluate the appropriateness of the types of accounting methods that would be available for your business. Recommend the method that would minimize the tax liabilities for the company. Provide support for your rationale.
4. Choose at least two (2) specific transactions, and then propose one (1) special accounting method which your company would use to account for these transactions. Indicate any significant tax consequences that may result from the method you proposed.
ACC 555 Week 5 Midterm Exam Answers
1) The federal income tax is the dominant form of taxation by the federal government.
2) The Sixteenth Amendment permits the passage of a federal income tax.
3) When a change in the tax law is deemed necessary by Congress, the entire Internal Revenue Code must be revised.
4) A progressive tax rate structure is one where the rate of tax increases as the tax base increases.
5) The terms “progressive tax” and “flat tax” are synonymous.
6) A proportional tax rate is one where the rate of the tax is the same for all taxpayers, regardless of income levels.
7) Regressive tax rates decrease as the tax base increases.
8) The marginal tax rate is useful in tax planning because it measures the tax effect of a proposed transaction.
9) A taxpayer’s average tax rate is the tax rate applied to an incremental amount of taxable income that is added to the tax base.
10) If a taxpayer’s total tax liability is $30,000, taxable income is $100,000, and economic income is $120,000, the average tax rate is 30 percent.
11) If a taxpayer’s total tax liability is $4,000, taxable income is $20,000, and total economic income is $40,000, then the effective tax rate is 20 percent.
12) All states impose a state income tax which is generally based on an individual’s federal adjusted gross income (AGI) with minor adjustments.
13) The unified transfer tax system, comprised of the gift and estate taxes, is based upon the total property transfers an individual makes during lifetime and at death.
14) Gifts between spouses are generally exempt from transfer taxes.
15) The primary liability for payment of the gift tax is imposed upon the donee.
16) For gift tax purposes, a $14,000 annual exclusion per donee is permitted.
17) Property is generally included on an estate tax return at its historical cost basis.
18) Property transferred to the decedent’s spouse is exempt from the estate tax because of the estate tax marital deduction provision.
19) Gifts made during a taxpayer’s lifetime may affect the amount of estate tax paid by the taxpayer’s estate.
20) While federal and state income taxes as well as the federal gift and estate taxes are generally progressive in nature, property taxes are proportional.
21) Adam Smith’s canons of taxation are equity, certainty, convenience and economy.
22) The primary objective of the federal income tax law is to achieve various economic and social policy objectives.
23) Individuals are the principal taxpaying entities in the federal income tax system.
24) The various entities in the federal income tax system may be classified into two general categories, taxpaying entities (such as individuals and C [regular] corporations) and flow-through entities such as sole proprietorships, partnerships, S corporations, and limited liability companies.
25) In 2013, dividends paid from most U.S. corporations are taxed at the same rate as the recipients’ salaries and wages.
26) Flow-through entities do not have to file tax returns since they are not taxable entities.
27) S Corporations result in a single level of taxation.
28) In a limited liability partnership, a partner is not liable for his partner’s acts of negligence or misconduct.
29) Limited liability companies may elect to be taxed as corporations.
30) Limited liability company members (owners) are responsible for the liabilities of their limited liability company.
31) The tax law encompasses administrative and judicial interpretations, such as Treasury regulations, revenue rulings, revenue procedures, and court decisions, as well as statutes.
32) Generally, tax legislation is introduced first in the Senate and referred to the Senate Finance Committee.
33) The Internal Revenue Service is the branch of the Treasury Department responsible for administering the federal tax law.
34) Generally, the statute of limitations is three years from the later of the date the tax return is filed or the due date.
35) Arthur pays tax of $5,000 on taxable income of $50,000 while taxpayer Barbara pays tax of $12,000 on $120,000. The tax is a
- A) progressive tax.
- B) proportional tax.
- C) regressive tax.
- D) None of the above.
36) Which of the following taxes is progressive?
- A) sales tax
- B) excise tax
- C) property tax
- D) income tax
37) Which of the following taxes is proportional?
- A) gift tax
- B) income tax
- C) sales tax
- D) Federal Insurance Contributions Act (FICA)
38) Which of the following taxes is regressive?
- A) Federal Insurance Contributions Act (FICA)
- B) excise tax
- C) property tax
- D) gift tax
39) Sarah contributes $25,000 to a church. Sarah’s marginal tax rate is 35% while her average tax rate is 25%. After considering her tax savings, Sarah’s contribution costs
- A) $6,250.
- B) $8,750.
- C) $16,250.
- D) $18,750.
40) Helen, who is single, is considering purchasing a residence that will provide a $28,000 tax deduction for property taxes and mortgage interest. If her marginal tax rate is 25% and her effective tax rate is 20%, what is the amount of Helen’s tax savings from purchasing the residence?
- A) $5,600
- B) $7,000
- C) $21,000
- D) $22,400
ACC 555 Week 11 Final Exam Answers
1) For individuals, all deductible expenses must be classified as deductions for AGI or deductions from AGI.
2) In 2013, medical expenses are deductible as a from AGI deduction to the extent that they exceed 7.5 percent of the taxpayer’s AGI.
3) Medical expenses paid on behalf of an individual who could be the taxpayer’s dependent except for the gross income or joint return tests are deductible as itemized deductions.
4) Medical expenses incurred on behalf of children of divorced parents are deductible by the parent who pays the expenses but only if that parent also is entitled to the dependency exemption.
5) The definition of medical care includes preventative measures such as routine physical examinations.
6) Due to stress on the job, taxpayer Charlie began to experience chest pains. In order to relax and relieve the pains, he and his spouse went on an ocean cruise. The cost of the cruise to alleviate this medical condition is tax deductible.
7) Expenditures for a weight reduction program are deductible if recommended by a physician to treat a specific medical condition such as hypertension caused by excess weight.
8) In order for a taxpayer to deduct a medical expense, the amount must be paid to a certified medical doctor (M.D.).
9) Jeffrey, a T.V. news anchor, is concerned about the wrinkles around his eyes. Because it is job-related, the cost of a face lift to eliminate these wrinkles is a deductible medical expense.
10) Expenditures for long-term care insurance premiums qualify as a medical expense deduction subject to an annual limit based upon the age of an individual.
11) Capital expenditures for medical care which permanently improve or better the taxpayer’s property are deductible to the extent the cost exceeds the increase in fair market value to the property attributable to the capital expenditure.
12) Expenditures incurred in removing structural barriers in the home of a physically handicapped individual are deductible only to the extent the cost exceeds the increase in fair market value to the property attributable to the capital expenditure.
13) If the principal reason for a taxpayer’s presence in an institution is the need and availability of medical care, the entire cost of lodging and meals is considered qualified medical expenditures.
14) A medical expense is generally deductible only in the year in which the expense is actually paid.
15) If a prepayment is a requirement for the receipt of the medical care, the payment is deductible in the year paid rather than the year in which the care is rendered.
16) If a medical expense reimbursement is received in a year after a deduction has been taken on a previous year’s return, the previous year’s return must be amended to eliminate the reimbursed expense.
17) Assessments or fees imposed for specific privileges or services are not deductible as taxes.
18) Foreign real property taxes and foreign income taxes are not deductible as itemized deductions.
19) A personal property tax based on the weight of the property is deductible.
20) Assessments made against real estate for the purpose of funding local improvements are not deductible in the year paid but rather should be added to the cost basis of the property.
21) Self-employed individuals may deduct the full self-employment taxes paid as a for AGI deduction.
22) Finance charges on personal credit cards are considered interest and are, therefore, deductible.
23) In general, the deductibility of interest depends on the purpose for which the indebtedness is incurred.
24) Interest expense incurred in the taxpayer’s trade or business is deductible as a for AGI deduction without limitation if the taxpayer materially participates in the business.
25) Investment interest expense which is disallowed because it exceeds the taxpayer’s net investment income may be carried over and treated as incurred in subsequent years.
26) Investment interest includes interest expense incurred to purchase tax-exempt securities.
27) Taxpayers may elect to include net capital gain as part of investment income.
28) Taxpayers may not deduct interest expense on personal debt including credit card debt, car loans, and other consumer debt.
29) Qualified residence interest consists of both acquisition indebtedness and home equity interest.
30) Acquisition indebtedness for a personal residence includes debt incurred to substantially improve the residence.
31) A taxpayer is allowed to deduct interest expense incurred on home equity indebtedness limited to the lesser of $100,000 or the home equity (FMV of the residence less the acquisition indebtedness).
32) While points paid to purchase a residence are deductible as interest in the period paid, points associated with the refinancing of a residence must be amortized and deducted over the life of the loan.
33) Christopher, a cash basis taxpayer, borrows $1,000 from ABC Bank by issuing a 3-month note on December 1, 2013. Christopher receives $940 but must repay $1,000 on the due date. The amount of interest expense deductible in 2013 is $20.
34) Charitable contributions made to individuals are deductible if the individuals can show extreme financial need.
35) For charitable contribution purposes, capital gain property includes property which, if sold, would produce a long-term capital gain.
36) A charitable contribution deduction is allowed for the FMV of services rendered to a qualified charitable organization.
37) A charitable contribution in excess of the deduction limit for one taxable year can be carried forward five years.
38) If a taxpayer makes a charitable contribution to a university and in return receives the right to purchase tickets to athletic events, the taxpayer may deduct only 80% of the payment.
39) Corporate charitable deductions are limited to 10% of the corporation’s taxable income for the year.
40) Legal fees for drafting a will are generally deductible.