(4 points) A new vintage clothing store began operating within 2024. Its is organized as a corporation, operates over a calendar year tax period, and opened its doors (began business) on April 1, 2024. Assume the total amount of start-up costs for the company was $25,000 and for organizational expenditures was $20,000. What amount of the start-up costs can be immediately expensed in 2024? Of the portion of these start-up costs that could not be immediately expensed, how much amortization expense can the business claim for 2024?

(5 points) Marla is one of three partners in a partnership for a silk-screen t-shirt shop called Smar-Tees and all partners are active in the management of the company. The company uses a calendar year tax period. During Year 1, the partnership had an ordinary loss where the amount of loss allocated to Marla based on her profits interest percentage is $45,000. Assume that Marla’s adjusted (ending) outside basis incorporating everything relevant for her basis from Year 1 except this loss allocated to her is $38,000. Using only the information available in the above scenario and ignoring any role of the QBI deduction (if applicable) for this calculation, what will Marla’s adjusted (ending) outside basis be after incorporating the loss and how much of the partnership loss will she get to use on her individual tax return for Year 1?

(1 point) For the following scenario, determine whether the book-tax difference (if any) in 2016 is favorable or unfavorable. On January 1, 2015, Landmark Corporation offered its CFO 2,800 NQOs options to purchase the company’s at the same price offered by the public market on that day, $8/share, at any date in the future after the CFO vests. The CFO will vest 25% of its options in 2015, 25% in 2016, and vest the remaining portion in 2017. The CFO promptly exercised all of his options on December 31, 2017 when he was 100% vested and turned around and sold all the shares for $15/share on the public market. Assume that on the grant date, Landmark Corporation estimated the value of the options would be $7/share. The company uses a calendar year tax period.

(4 points) Tribal Corporation had the following activity that produced differences in book and tax treatment occur during the year. Classify whether each book-tax difference is generally favorable or unfavorable (F or U), temporary or permanent (T or P).  Bad debt expense recognized for book but the certainty that it will be paid is not yet high enough to get a bad debt deduction (Tribal is an accrual basis taxpayer)

(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?