TCP — Tax Compliance & Planning

An individual taxpayer, filing single, exercised 1,000 Incentive Stock Options (ISOs) in Year 1 when the fair market value was $50 per share. The exercise price was $10 per share. The taxpayer did not sell the stock in Year 1. For regular tax purposes, no income was recognized. The taxpayer's regular taxable income is $120,000. Assuming the AMT exemption is $81,300 and the phase-out threshold is $578,150, and the taxpayer has no other AMT adjustments, what is the taxpayer's Alternative Minimum Tax (AMT) liability for Year 1 (rounded to the nearest dollar)?<br/><br/>Note: The AMT rate is 26% on the first $220,700 of the AMT base and 28% on the excess.

A taxpayer has the following income and losses for Year 1:<br/>- Salary: $200,000<br/>- Interest Income: $5,000<br/>- Loss from Partnership A (Material Participant): ($30,000)<br/>- Loss from Partnership B (Passive Activity): ($40,000)<br/>- Income from Partnership C (Passive Activity): $15,000<br/>- Active Rental Real Estate Loss: ($28,000)<br/><br/>The taxpayer's Modified Adjusted Gross Income (MAGI) before passive losses is $140,000. What is the total amount of losses deductible against the taxpayer's ordinary income (Salary and Interest) for Year 1?

In Year 1, a taxpayer donates a piece of artwork to a public charity (50% limit organization). The artwork has a fair market value (FMV) of $100,000 and an adjusted basis of $20,000. The taxpayer has held the artwork for 5 years. The charity uses the artwork for its exempt purpose (related use). The taxpayer's AGI is $200,000. What is the maximum charitable contribution deduction the taxpayer can claim in Year 1?

A taxpayer has $10,000 of investment interest expense in Year 1. They have the following income items:<br/>- Salary: $150,000<br/>- Interest Income: $2,000<br/>- Non-qualified Dividends: $1,000<br/>- Qualified Dividends: $3,000<br/>- Long-term Capital Gains: $4,000<br/><br/>The taxpayer wants to minimize their tax liability for Year 1 and future years combined. They do NOT make any special elections regarding the taxation of capital gains or qualified dividends. What is the maximum investment interest expense deduction allowed in Year 1?

A single taxpayer has the following financial profile for Year 1:<br/>- Wages: $180,000<br/>- Net Investment Income (Interest, Dividends, Capital Gains): $40,000<br/>- Modified Adjusted Gross Income (MAGI): $220,000<br/><br/>What is the taxpayer's Net Investment Income Tax (NIIT) liability for Year 1?

A taxpayer had a Year 1 tax liability of $100,000 and Adjusted Gross Income (AGI) of $160,000. In Year 2, the taxpayer expects a tax liability of $140,000. To avoid the underpayment penalty for Year 2 estimated taxes, what is the minimum total amount of withholding and estimated payments required under the Safe Harbor rules?

A taxpayer holds Qualified Small Business Stock (QSBS) acquired on January 1, 2012, for $500,000. In Year 1 (current year), the taxpayer sells the stock for $6,000,000. The stock meets all requirements of Section 1202. What is the amount of gain subject to federal income tax in Year 1?

A taxpayer has a $50,000 loss from a 'hobby' activity in Year 1. The activity generated $20,000 of gross income. The taxpayer has $10,000 of expenses that would be deductible regardless of the activity (e.g., property taxes) and $40,000 of other operating expenses. Under the current tax law (TCJA), what is the net effect on the taxpayer's taxable income?

A taxpayer purchased a home for $1,000,000 in Year 1 (post-2017), taking out a $900,000 mortgage secured by the home. In Year 2, the taxpayer took out a $50,000 Home Equity Line of Credit (HELOC) to pay for a vacation. The interest paid in Year 2 was $36,000 on the mortgage and $2,500 on the HELOC. What is the deductible qualified residence interest for Year 2?

A US citizen working abroad qualifies for the Foreign Earned Income Exclusion (FEIE). In Year 1, they earned $140,000 in salary and had $15,000 in foreign taxes withheld. The FEIE limit for Year 1 is $120,000. The taxpayer also has $10,000 of U.S. source interest income. If the taxpayer elects the FEIE, how is the tax on the remaining income calculated?

A taxpayer has a Net Operating Loss (NOL) of $50,000 generated in Year 2 (post-2017). In Year 3, the taxpayer has taxable income of $40,000 before the NOL deduction. What is the maximum NOL deduction allowed in Year 3 and the carryforward amount?

A taxpayer invests $100,000 in a partnership activity. The debt structure of the partnership allocates $50,000 of nonrecourse debt to the taxpayer. The taxpayer is not personally liable for this debt, and it is not qualified nonrecourse financing. In Year 1, the partnership allocates a loss of $130,000 to the taxpayer. What is the taxpayer's deductible loss under the At-Risk rules?

A taxpayer receives 1,000 Restricted Stock Units (RSUs) from their employer. The RSUs vest in Year 1 when the stock price is $20. The taxpayer does not make an 83(b) election (not applicable to RSUs usually, but assuming standard RSU treatment). In Year 2, the taxpayer sells the stock for $30. What is the tax treatment?

A taxpayer pays $15,000 in state income taxes and $8,000 in real estate taxes in Year 1. They are married filing jointly. What is their allowable SALT (State and Local Tax) deduction for Year 1?

A taxpayer installs solar electric property in their home in Year 1 for $20,000. The Residential Clean Energy Credit rate is 30%. The taxpayer's tax liability before credits is $4,000. What is the credit amount and treatment of any excess?

A taxpayer has $10,000 of short-term capital losses and $5,000 of long-term capital gains in Year 1. They also have $100,000 of ordinary income. What is the effect on their taxable income?

A taxpayer exercises Non-Qualified Stock Options (NQSOs). The grant price was $10, and the FMV at exercise is $50. They exercise 1,000 shares. What is the tax impact in the year of exercise?

A taxpayer has a passive activity credit of $5,000 from a rental real estate activity. They have no passive income in the current year. They sell the entire rental activity in a fully taxable transaction in the current year. How is the suspended credit treated?

A 50-year-old taxpayer converts $100,000 from a Traditional IRA to a Roth IRA in Year 1. The Traditional IRA was funded entirely with deductible contributions. The taxpayer pays the tax from a separate savings account. Five years later (Year 6), the taxpayer withdraws $120,000 (the original conversion + $20,000 growth) from the Roth IRA. The taxpayer is 55 years old. What is the tax consequence of the withdrawal?

A taxpayer holds a bond with a face value of $1,000 and a coupon rate of 5%. They purchased the bond for $1,050 (premium). They elect to amortize the bond premium. In Year 1, the amortization amount is $5. How is this reported?

Grandparent contributes $100,000 to a 529 plan for their grandchild in Year 1. The annual gift tax exclusion is $18,000. The grandparent elects to treat the contribution as being made ratably over 5 years. Grandparent dies in Year 3. What amount is included in the Grandparent's gross estate?

A taxpayer sells stock for a loss of $5,000 on December 20, Year 1. On January 10, Year 2 (21 days later), the taxpayer purchases substantially identical stock. How is the loss treated?

An individual owns a life insurance policy on their own life with a face value of $500,000. They have paid $40,000 in premiums. The cash surrender value is $60,000. They surrender the policy for cash. What is the taxable amount?

A wealthy taxpayer wants to freeze the value of their estate. They transfer $5 million of assets to a Grantor Retained Annuity Trust (GRAT) with a 2-year term. The annuity payout is set such that the present value of the annuity equals $5 million (Zeroed-out GRAT). If the assets in the trust grow at 10% annually and the Section 7520 hurdle rate is 4%, what is the gift tax consequence at inception and the estate tax consequence if they survive the term?

A taxpayer gifts a house to their child. The taxpayer's basis is $200,000. The FMV at the date of gift is $150,000. No gift tax is paid. The child sells the house later for $180,000. What is the child's recognized gain or loss?

A married couple lives in a community property state. They purchased stock for $100,000 using community funds. When the first spouse dies, the stock is worth $500,000. The surviving spouse sells the stock shortly after for $510,000. What is the surviving spouse's capital gain?

A taxpayer has a traditional 401(k) balance of $2,000,000. They turn 73 in Year 1. The Uniform Lifetime Table factor for age 73 is 26.5. What is the Required Minimum Distribution (RMD) for Year 1?

A taxpayer owns a diversified portfolio. They want to optimize 'asset location' for tax efficiency. Which asset is BEST suited for a Roth IRA?

A taxpayer contributes $50,000 to a Charitable Remainder Annuity Trust (CRAT). The trust pays the taxpayer an annuity for life, with the remainder going to charity. The present value of the remainder interest is calculated to be $4,000. Does this trust qualify as a CRAT?

A taxpayer has an Incentive Stock Option (ISO) grant. They exercise the options and hold the stock. Two years later, they sell the stock. The sale price is lower than the exercise price. What is the tax treatment?