Federal Taxation 2017

BA 431 Federal Taxation, Fall 2017

Midterm 2

Name:________________________________________________

1. T and Z are married and file a joint return. Their itemized deductions for the current

year are $13,000. Assuming the standard deduction is $6,300, T and Z should use______________________________________.

2. X suffered a net operating loss for 2017. Under the general rules, X may carry back ___________years and carry forward__________________years.

3. The ___________________________ method of depreciation must be used for amortizing intangible property.

4. E moved from Monmouth to San Jose, CA to accept a new job as an accountant. During the trip, he spent $400 on lodging and $500 on meals. E may deduct $___________________.

5. H's house was flooded this year due to abnormal rainfall. She was forced to stay in a motel while the water subsided. Her motel stay, which cost $600, was not covered by her insurance policy. H may deduct $______________________for the motel stay as part of her casualty loss from the flood.

6. Assuming a taxpayer itemizes deductions and is under the age of 65, medical expenses are deductible only to the extent that they exceed ___________________________% of the taxpayer’s AGI.

7. J graduated from the University of Texas during the current year and accepted a job in Kansas City. J lived in Austin and moved to Kansas City to commence work on June 1. J drove 1,800 miles pulling a trailer with all of his belongings. J rented the trailer for $650. J owns 2 cats and paid a transport company $400 to move the cats to Kansas City. On June 1 he moved into an apartment and lived there with his cats temporarily at a cost of $10 per day through July 15. On July 16 he moved into his new home with his pets. What will J be able to claim as a moving expense?

8. P, a calendar year, cash basis taxpayer, started a business on June 1, 2017. His lease required monthly payments of $800 beginning on June 1. Insurance for premises also began on June 1 and was to be paid every three months and cost $125 per month. Premiums were paid on June 1, 2017, September 1, 2017, December 1, 2017 and March 1, 2018. What are the total expenses that P may deduct for 2017?

9. Complete Depreciation Schedule for a passenger automobile used solely for business purposes.

Year	2012	2013	2014	2015	2016	2017	2018	2019	2020	2021
Unadjusted Basis	27000	27000	27000	27000	27000	27000	27000	27000	27000	27000
Depreciation %	0.2	0.32	0.192	0.1152	0.1152	0.0576
MACRS Depreciation
Limit	3160	5100	3050	1875	1875	1875	1875	1875	1875	1875
Deduction
Cumulative Depreciation
Adjusted Basis

10. Y's inventory records reveal the following information:

Item Cost FMV

1 3,300 3,400

2 5,500 5,700

3 6,300 6,000

4 7,500 8,000

5 4,900 4,700

For financial accounting purposes, Y values inventory using FIFO and the lower of cost or market. For tax purposes, the value of Y’s ending inventory is:

11. Peggy and Clyde Wagner have an AGI of $65,000 for 2017. Their expenses for 2017 are:

Prescription drugs $ 4,580

Interest on home mortgage 9,700

Doctor and dental bills paid 2,700

Hospital bills paid 1,900

Property taxes paid on home 3,650

State Income Taxes withheld from wages 2,700

Safe deposit box rental 360

Interest on automobile loan 1,750

Credit Card Interest paid 500

Medical Insurance Premiums 2,600

Eyeglasses for Peggy 565

Fair Market Value of TPP, Inc stock donated to church 2,800

Union Dues paid by Clyde 720

Cash contributions to church 2,800

Tax preparation fee 450

Both Peggy and Clyde are under 40 and have lived in Oregon for the entire year. They have four children, ages 8, 10, 14 and 17. They will file a joint income tax return for this year.

a. Calculate their total itemized deductions.

b. What is their taxable income?

c. Calculate their tax liability.

d. If they had a total of $5,600 of Federal withholding from their employment, will they have an overpayment (refund) or underpayment (tax to pay)?

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