(4 points) An individual taxpayer, Jackie, owns stock that has a current market value that is lower than what she originally paid for it (i.e., can generate a capital loss). The taxpayer believes that next year the stock’s value will go up to a value that exceeds what she originally paid (i.e., will produce a capital gain in the longer term). However, she doesn’t want to miss out on the benefit of a capital loss this year that could lower her tax bill. As a result, she decides she will sell the stock this year to be able to claim a capital loss and then buy the stock back the very next day at a similar price so that she can benefit from the appreciation of the stock’s value next year.What is the name of the tax rule that prevents the taxpayer from taking advantage of this type of strategy?

(4 points) Assume that estimated taxable income after adjusting for permanent and temporary differences is $128,000. What is the current income tax expense applying the appropriate current tax rate for corporations in Year 1 given the current corporate tax rate is a flat 21%?

(4 points) Gemini Auto Repair is a calendar year taxpayer. The repair shop purchased a light weight truck on March 15, 2023 for $39,000 that it used to drive customers back and forth to their cars while the shop worked on their cars (i.e. for business purposes). On August 21, 2024, the repair shop sold the truck for $34,000. Assume that the lightweight truck was the only asset Gemini purchased in 2023. Gemini Auto Repair opted out of Sec. 179 and bonus depreciation for 2023. Do not use any MACRS tables to calculate regular depreciation, instead just assume that the depreciation deductions Gemini actually took for the truck for 2023 and 2024 were $8,100 and $9,500, respectively. What was the total amount of gain (or loss) for Gemini in 2023 on the sale of the truck?

(1 point). For the following scenario, determine whether the related book-tax difference (if any) is temporary or permanent. Hilton Corporations is considering adding a new hotel location in Santa Fe, NM. It sends two employees to survey the area during the year. The company pays $1,000 for flights, no cost for lodging (uses one of its alternative local hotel locations to house them), and $300 for meals. The employees spent the entire trip doing work for the project (no personal use time).

(5 points) On January 1, Year 1, Marla, Jackson, and Helena started a partnership for a silk-screen t-shirt shop called Smar-Tees and are all active in the management of the company. The company uses a calendar year tax period. Marla, Jackson, and Helena’s initial outside tax bases in their partnership interests were $54,000, $35,000, and $17,000, respectively. These bases include all relevant property contributed and debt allocations from the date of initiation. On the date the partnership was initiated, the only debt for the partnership was a $9,000 loan the business took out directly (was not assumed from one of the partners) on January 1, Year 1. Helena had signed the loan document with the bank on behalf of the partnership, making herself the only partner personally liable for the debt should the business be unable to pay the debt with its profits alone. Marla, Jackson, and Helena’s profits interests were 30%, 30%, and 40%, respectively. Since January 1, Year 1 (the date establishing the different outside basis amounts above), the business has been operating throughout Year 1 and had the following occur during the year:   $94,000 in t-shirt sales revenue   $3,000 in cash distributions to each partner   $43,000 in wages (all to employees other than partners)   $7,500 in utilities   $2,750 in payments related to the loan: $2,000 of which was interest and $750 that reduced the remaining principal owed (ignore limitations on interest deductions)   $400 for employee business meals throughout the year paid for by the company In the above scenario, what is the adjusted (ending) outside tax basis for each partner at the end of Year 1 ignoring any role of each partner’s QBI deduction?

(2 points) Which parties must recognize a taxable gain (or loss) when a current partner sells her interest in the partnership to a new partner?

(1 point). For the following scenario, determine whether the related book-tax difference (if any) is favorable or unfavorable. Ramco Tooling purchased new equipment on January 1, Year 1 for $97,500. In Year 1, Ramco took $27,000 in Sec. 179 expense on the equipment and $15,000 in bonus depreciation on the equipment. In addition, it took $21,000 in regular MACRS depreciation on the equipment in Year 1. For book purposes, Ramco estimates the useful life of the equipment is 10 years and uses straight-line depreciation.

(2 points) Which of the following generally produces a taxable temporary difference in the year the activity occurs?

(4 points) Andrew invests $120,000 in a deposit account that pays out 8% interest annually (its pre-tax rate of return). If the taxpayer’s ordinary tax rate has a marginal tax rate of 24% and his long-term capital gains tax rate is 15%, what is his tax due on this investment this year?

(4 points) Green Bank Corporation claimed $250,000 in Sec. 179 expense and $250,000 in bonus depreciation in 2024 and the following is the remaining basis for each asset purchased in 2024 after applying Sec. 179 and bonus depreciation: Desks and chairs purchased on March 15, remaining basis: $175,000. Computers purchased on April 3, remaining basis: $165,000. What is the total depreciation expense for the taxpayer in 2024?