Which of the following taxpayers may use the cash method of accounting for tax purposes?
a. Partnership that is designated as a tax shelter.
b. Retail store with $2 million inventory, and $9 million average annual gross receipts.
c. An international accounting firm.
d. C corporation manufacturing exercise equipment with average annual gross receipts of $8 million.
Answer: C
Tax
- The uniform capitalization method must be used by I. Manufacturers of tangible personal property. II. Retailers of personal property with $2 million dollars in average annual gross receipts for the three preceding years.
- Dr. Berger, a physician, reports on the cash basis. The following items pertain to Dr. Berger's medical practice in 2014: - Cash received from patients in 2014: $200,000 - Cash received in 2014 from third-party reimburser for services provided by Dr. Berger in 2013: $30,000 - Salaries paid to employees in 2014 : $20,000 - Year-end 2014 bonuses paid to employees in 2015: $1,000 - Other expenses paid in 2014: $24,000 What is Dr. Berger's net inocme for 2014 from his medical practice?
- Alex Burg, a cash-basis taxpayer, earned an annual salary of $80,000 at Ace Corp. In 2014, but elected to take only $50,000. Ace, which was financially able to pay Burg's full salary, credited the unpaid balance of $30,000 to Burg's account on the corporate books in 2014, and actually paid this $30,000 to Burg on January 30, 2015. How much of the salary is taxable to Burg in 2014?
- Unless the Internal Revenue Service consents to a change of method, the accrual method of tax reporting is generally mandatory for a sole proprietor when they are Accounts receivable for services rendered / Year-end merchandise inventories.
- On December 1, 2014, Michaels, a self-employed cash-basic calendar-year taxpayer, borrowed $100,000 to use in her business. The loan was to be repaid on November 30, 2015. Michaels paid the entire interest of $12,000 on December 1, 2014. What amount of interest is deductible on Michael's 2015 income tax return?
- Axis Corp. is an accrual-basis calendar-year corporation. On December 13, 2014, the Board of Directors declared a 2% of profits bonus to all employees for services rendered during 2014 and notified them in writing. None of the employees own stock in Axis. The mount represents reasonable compensation for services rendered and was paid on March 13, 2015. Axis' bonus expense may
- Which of the following taxpayers may use the cash method of accounting?
- Royce Rentals, Inc., an accrual-basis taxpayer, reported rent receivable of $25,000 and $35,000 in its 2015 and 2014. balance sheets, respectively. During 2015, Royce received $50,000 in rent payments and $5,000 in nonrefundable rent deposits. In Royce's 2015 corporate income tax return, what amount should Royce include as rent revenue?
- Amy Finch had the following cash receipts during 2015: - Net rent on vacant lot used by a car dealer (lessee pays all taxes, insurance, and other expenses on the lot) - $6,000 - Advance rent from lessee of above vacant lot, such advance to be applied against rent for the last two months of the five-year lease in 2019. - $1,000 How much should Amy include in her 2015 taxable income for rent?
- Emil Gow owns a two-family house that has two identical apartments. Gow lives in one apartment and rents out the other. In 2015, the rental apartment was fully occupied and Gow received $7,200 in rent. During the year ended December 31, 2015, Gow paid the following. - Real estate taxes - $6,400 - Painting of rental apartment - $800 Annual fire insurance premium - $600 In 2015, depreciation for the entire house was determined to be $5,000. What amount should Gow include in his adjusted gross income for 2015?
- Lake Corp., an accrual basis calendar-year corporation, had the following 2015 receipts. Advanced Rental payments where the lease ends in 2017 : $125,000 Lease cancellation payment from a five-year lease tenant $50, 000 Lake had no restrictions on the use of the advanced rental payments and renders no services. What amount of income should Lake report on its 2015 tax return?
- In 2015, Emil Gow won $5,000 in a state lottery. Also in 2015, Emil spent $400 for the purchase of lottery tickets. Emil elected the standard deduction on his 2015 income tax return. The amount of lottery winning that should be included in Emil's 2015 taxable income is
- Pierre, a headwaiter, received tips totaling $2,000 in December 2014. On January 5, 2015, Pierre reported this tip income to his employer in the required written statement. At what amount, and in which year, should this tip income be included in Pierre's gross income?
- Mr. and Mrs. Alvin Charak took a foster child, Robert, into their home in 2015. A state welfare agency paid the Charaks $3,900 during the year for related expenses. Actual expenses incurred by the Charaks during 2015 in caring for Robert amounted to $3,000. The remaining $900 was spent by the Charaks in 2015 towards their own personal expenses. How much of the foster child payments is taxable income to the Charaks in 2015?
- Income in respect of a cash-basis decedent
- Ed and Ann Ross were divorced in January of the current year. In accordance with the divorce decree, Ed transferred the title in their home to Ann. The home, which had a fair market value of $150,000, was subject to a $50,000 mortgage that had twenty more years to run. Monthly mortgage payments amount to $1,000. Under the terms of settlement, Ed is obligated to make the mortgage payments on the home for the full remaining twenty-year term of the indebtedness, regardless of how long Ann lives. Ed made twelve mortgage payments during the current year. What amount is taxable as alimony in Ann's current year return?
- In 2010, Ross was granted an incentive stock option (ISO) by her employer as part of an executive compensation package. Ross exercised the ISO in 2013 and sold the stock in 2015 at a gain. Ross was subject to regular tax for the year in which the
- Darr. an employee of Sorce C corporation, is not a shareholder. Which of the following would be included in a taxpayer's gross income?
- Bob and Sue Stewart were divorced in 2013. Under the term of their divorce decree, Bob paid alimony to Sue at the rate of $50,000 in 2013, $20,000 in 2014, and nothing in 2015. What amount of alimony recapture must be included in Bob's gross income for 2015?
- In July 1996, Dan Farley leased a building to Robert Shelter for a period of fifteen years at a monthly rental of $1,000 with no option to renew. At that time the building had a remaining estimated useful life of twenty years. Prior to taking possession of the building, shelter made improvements at a cost of $18,000. These improvements had an estimated useful life of twenty years at the commencement of the lease period. The lease expired on June 30, 2015, at which point the improvement had a fair market value of $2,000. The amount that Farley, the landlord, should include in his gross income for 2015 is
- Daniel Kelly received interest income from the following sources during the current year - New York Port Authority Bonds : $1,000 - Puerto Rico Commonwealth bonds : $1,800 What portion of such interest is tax exempt?
- Charles and Marcia are married cash-basis taxpayers. In 2015, they had interest income as follows: - $500 interest on federal income tax refund - $600 interest on state income tax refund - $800 interest on federal government obligations. - $1,000 interest on state government obligations. What amount of interest income is taxable on Charles and Marcia's 2015 joint income tax return?
- During the current year Hal Leff sustained a serious injury in the course of his employment. As a result of this injury, Hal received the following payments during the year: Worker's compensation ------------ $2,400 Reimbursement from his employer's accident and health plan for medical expenses paid by Hal and not deducted by him --------------------$1,800 Damages for physical injuries ----------------------$8,000 The amount to be included in Hal's gross income for the current year should be
- Silo Corp. was organized on March 1, 2015, began doing business on September 1, 2015, and elected to file its income tax return on a calendar-year basis. The following qualifying organizational expenditures were incurred in organizing the corporation: July 1, 2015 : $3,000 September 3, 2015: $5,600 The maximum allowable deduction for organizational expenditures for 2015 is