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Exam 6: Accounting Methods and Taxes

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Question 41

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In 2018, household employers are not required to pay FICA taxes on cash payments of less than $2,100 paid to any household employee in a calendar year.

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Question 42

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Assume Alan's parents make gifts of $10,000 to him every year starting at age one, Alan's parents are in the 35 percent income tax bracket, and Alan is now 15 years old and has $11,700 of interest income for 2018.​ a.Calculate the tax on Alan's interest income if his income is not included on his parents' return. b.Explain why the "kiddie tax" rules are in the law.

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a.Alan's taxable income is $10,650 ($11,...

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Question 43

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Kate is an accrual basis, calendar-year taxpayer.On November 1, 2018, Kate leased out a building for $4,500 a month.On that day Kate received 7 months rental income on the building, a total of $31,500 ($4,500 × 7 months) .How much income must Kate include on her 2018 tax return as a result of this transaction?

The Affordable Care Act (ACA)added a Medicare tax of 3.8 percent on net investment income

If a corporation has a short tax year, other than their first or last year of operation, explain how the corporation calculates the tax for the short period.

The Dot Corporation has changed its year-end from a calendar year-end to August 31.The income for its short period from January 1 to August 31 is $54,000.The tax for this short period is:

Sales of property at a gain may be restricted under the related party rules of the Internal Revenue Code.

Vernon is a cash basis taxpayer with a calendar tax year.On October 1, 2018, Vernon entered into a lease to rent a building for use in his business at $3,000 a month.On that day Vernon paid 18 months' rent on the building, a total of $54,000 ($3,000 × 18 months) .How much may Vernon deduct for rent expense on his 2018 tax return?