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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
clients 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 clients 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 taxpayers 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 taxpayers 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 taxpayers 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 individuals 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 decedents spouse is exempt from the estate tax because of
the estate tax marital deduction provision.

19) Gifts made during a taxpayers lifetime may affect the amount of estate tax paid by the
taxpayers 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 Smiths 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 partners 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

1. A) progressive tax.
2. B) proportional tax.
3. C) regressive tax.
4. D) None of the above.

36) Which of the following taxes is progressive?

1. A) sales tax
2. B) excise tax
3. C) property tax
4. D) income tax

37) Which of the following taxes is proportional?

1. A) gift tax
2. B) income tax
3. C) sales tax
4. D) Federal Insurance Contributions Act (FICA)

38) Which of the following taxes is regressive?

1. A) Federal Insurance Contributions Act (FICA)

2. B) excise tax
3. C) property tax
4. D) gift tax

39) Sarah contributes $25,000 to a church. Sarahs marginal tax rate is 35%
while her average tax rate is 25%. After considering her tax savings, Sarahs
contribution costs

250. A) $6,250.
251. B) $8,750.
252. C) $16,250.
253. 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 Helens tax savings from purchasing the residence?

1. A) $5,600
2. B) $7,000
3. C) $21,000
4. 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 taxpayers AGI.

3) Medical expenses paid on behalf of an individual who could be the taxpayers 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
taxpayers 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 taxpayers 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 years return, the previous years 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 taxpayers 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 taxpayers 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 corporations taxable income
for the year.

40) Legal fees for drafting a will are generally deductible.