Area 1: Individual Tax

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?