On September 1, 2014, David purchased manufacturing equipment for use in his business

2. On September 1, 2014, David purchased manufacturing equipment for use in his business. The equipment cost $13,000 and has an estimated useful life and MACRS class life of 7 years. No election to expense or use bonus depreciation is made.a. Calculate the amount of depreciation on the manufacturing equipment for 2014 using conventional (financial accounting, not MACRS) straight-line depreciation.b. Calculate the amount of depreciation on the manufacturing equipment for 2014 using the straight-line MACRS optional method.c. Calculate the amount of depreciation on the manufacturing equipment for 2014 using the accelerated MACRS method.3. Calculate the following amounts:a. The first year of depreciation on a residential rental building costing $100,000, purchased on August 30.b. The first year of depreciation on an auto used 100 percent in business, costing $30,000, purchased in May, 2014. (No bonus depreciation deducted).c. The second year of depreciation on a computer used exclusively for business, costing $8,000, purchased May 2013.d. The third year of depreciation on business furniture costing $1,000, purchased in July 2012, using the half-year convention and accelerated depreciation.4. Eva purchased office equipment (7-year property) for use in her business. She paid $126,000 for the equipment on July 1, 2014. Eva did not purchase any other property during the year. For 2014, her business had net income of $26,000, before depreciation and before considering the election to expense.a. What is the maximum amount that Eva can elect to expense in 2014 under Section 179 (before factoring in any limitations)?b. What is the total depreciation (regular depreciation and the amount allowed as a 2014 deduction under the election to expense) on the office equipment for 2014, assuming Eva uses the accelerated method under MACRS and claims the maximum amount allowable under the election to expense?c. Assuming that Eva elected to expense the equipment in 2014 and that her business has net income in 2015 of $200,000, before depreciation and before considering the election to expense, what is Eva’s total depreciation deduction (regular depreciation and the amount allowed under the election to expense) for the equipment for 2015?9. Stewart, age 44, sells his personal residence of 4 years on June 14, 2014, for $185,000. The expenses of sale are $15,000 and he has paid for capital improvements of $3,000. Stewart purchased the residence for $100,000. On February 2, 2015, Stewart purchases and occupies a new residence at a cost of $200,000.a. Calculate the gain realized on the sale of Stewart’s residence.b. How much gain must be recognized on the sale of Stewart’s residence?c. Calculate Stewart’s basis in the new residence.10. Janet is single and claims two allowances on her Form W-4. Her salary is $1,800 per month.a. Use the percentage method to calculate the amount of Janet’s withholding for a monthly pay period.b. Use the withholding tables to determine the amount of Janet’s withholding for a monthly pay period.11. In 2014, Lew earned wages of $384,828.a. What is the amount of Social Security tax withheld from his salary?b. What is the amount of Medicare tax withheld from his salary?12. Provide answers to the following questions:a. What form does an employer use to report wages to an employee?b. When must the employer give this form to the employee?c. What form does an employer use to report wages to the Social Security Administration?d. When must the employer file the form with the Social Security Administration?13. Cooke and Thatcher form the C&T Partnership. Cooke contributes equipment with a fair market value of $80,000 and a basis of $35,000, in exchange for an 80 percent interest in the partnership capital and profits. Thatcher performs services worth $20,000 for the partnership in exchange for a 20 percent interest in capital and profits.a. What is the amount of Cooke’s recognized gain or loss (if any) as a result of the contribution to the partnership in exchange for the partnership interest?b. What is Cooke’s basis in his partnership interest immediately after the contribution?c. What is the amount of Thatcher’s recognized income or loss (if any) on the contribution to the partnership?d. What is Thatcher’s basis in her partnership interest immediately after the contribution?e. What is C&T Partnership’s basis in the equipment received from Cooke?14. Please answer the following questions:a. What form is used to report income and expenses from a partnership?b. If a partner’s basis at the beginning of the year is $1,000 and the partnership allocates $7,000 of loss to the partner: how much of the loss is deductible in the current year; what is his new basis in the partnership; and what happens to any excess loss not deducted?15. Jerry receives cash of $15,000 and a building with a fair market value of $50,000 (adjusted basis of $30,000) in a current distribution.a. Assuming his basis in his partnership interest was $50,000, what amount of gain must Jerry recognize as a result of the current distribution?b. Assuming his basis in his partnership interest was $10,000, what amount of gain must Jerry recognize as a result of the current distribution?16. During 2014, Jay is a partner in an automobile dealership. Jay’s amount at risk at the beginning of the year is $90,000, and during 2014 Jay’s share of the dealership’s ordinary loss is $120,000.a. What is the amount of the loss from the automobile dealership that Jay may deduct in 2014?b. If the dealership has a profit of $63,000 in 2015, how much of the 2015 income is taxable to Jay?17. Calculate the corporate tax liability in each of the following circumstances:a. X Corporation has taxable income of $250,000 for its 2014 calendar tax year.b. Y Corporation has $1,500,000 in taxable income for 2014.18. Fran, George, and Helen form FGH Corporation. In exchange for 300 shares of stock of the corporation, Fran contributes property with a basis of $15,000, fair market value of $50,000 and subject to a liability of $20,000 which the corporation assumed. George contributes property with a basis of $20,000, fair market value of $30,000 in exchange for 250 shares of stock of the corporation with a value of $25,000 plus $5,000 cash. Helen performs services for the corporation and receives $2,000 worth of stock (20 shares) in exchange for the services.a. What is the amount of Fran’s recognized gain or loss on the transaction?b. What is Fran’s basis in the stock of the corporation?c. What is the corporation’s basis in the property received from Fran?d. What is the amount of George’s recognized gain or loss on the transaction?e. What is George’s basis in the stock of the corporation?19. The Great Gumball Corporation is a gumball producer. The corporation has accumulated earnings of $425,000 and it can establish a reasonable need for $360,000. Calculate the amount of the accumulated earnings tax, if any, that will be imposed on the corporation.20. What type of audit (office, field or correspondence) is demonstrated in the following examples?a. An IRS agent views Microsoft’s books and records at the Microsoft headquarters.b. Susie receives a letter from the IRS asking her to provide documentation to support her charitable contributions on her tax return filed in the prior year.c. Mr. and Mrs. John Doe are asked to bring their supporting documents to the downtown IRS office so that an IRS agent may review their tax return which was filed 2 years ago.21. Linda filed her individual income tax return on its due date, but failed to pay $1,000 in taxes that were due with the return. Linda promptly paid the taxes upon receipt of a notice and demand for payment. If Linda pays the taxes exactly 4 months late, calculate the amount of her failure-to-pay penalty.22. The IRS determined that John underpaid his 2012 tax liability by $7,000 due to negligence. In 2014, John pays $1,000 of interest related to the underpayment and the full amount of any penalties assessed by the IRS.a. Calculate the amount of the accuracy-related penalty that could be assessed by the IRS in this situation.b. What part of the deficiency, income taxes, interest and penalty, is deductible by John on his current tax return? Explain.