Strong Arm Steve, a cash basis calendar year taxpayer, runs an illegal protectionbusiness. Basically, small businesses in his neighborhood pay him money to gainprotection from theft. During the current year, a bill, H.R. 55, is introduced intothe state legislature which, if enacted, would legalize his protection racket.Strong Arm Steve had the following expenses for the year:Operating expenses in conducting his businessPayoffs to the cops to allow him to bully small businessesNewspaper ads supporting H.R. 55, no mention of his business inthe ad.Political contributions to legislators who support H.R. 55Of these expenditures, Strong Arm teve may deduct:O $100,000.O $120,000.$125,000.O $135,000.$100,00020,0005,00010,000

Let's break down the deductions for Strong Arm Steve's expenses:Operating expenses in conducting his…

Answered: Strong Arm Steve, a cash basis calendar…

SWFT Comprehensive Vol 2020

43rd Edition

ISBN:9780357391723

Author:Maloney

Publisher:Maloney

Chapter3: Computing The Tax

Section: Chapter Questions

Problem 1DQ

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Marvin is a state legislator. Bases on his belief that a certain infrastructure project in the public’s best interest, Marvin in favor of the project. Several weeks later, a contractor who financially benefited from the project approaches Marvin with an envelope full of cash and thanks him for his “public service.” If Marvin accepts the cash, which of the following best describes his violation? A. Official bribery. B. Commercial bribery. C. Illegal gratuity. D. Economic extortion.
Peter Marwick, an accountant and accrual basis taxpayer, performed accounting services in Year One for Ellie Vader. Peter gave Ellie a bill for $30,000 in Year One. Ellie paid Peter $5,000 in Year One, but Ellie disputes that she owes the other $25,000 because she thinks his work is shoddy. Ellie agreed to put $25,000 in escrow until she and Peter could resolve their legal dispute over Peter's fees. In Year Three after litigation, the dispute is resolved in Peter's favor and he gets the money out of escrow. How much income does Peter have and when? Question 9 options: Peter has $30,000 income in Year 1 because he is on the accrual method. Peter has no income in Year 1 because there is a contested liability. Ellie has $25,000 in cancellation of indebtedness income in Year 1. Peter has $5,000 income in Year 1 and $25,000 in Year 3 under the Claim of Right Doctrine.
Ryan incurred the following expenses this year: Criminal Restitution (fine paid) for DUI arrest Bribe paid for dock permit to the County Inspector Kickback paid to obtain University of Florida football tickets from Board of Regents Member Lobby costs to promote smoking among American Minors (Ryan sells cigarette machines for a living) Political contributions to union sponsored Federal Congressman for Tobacco Industry $27,000 $1,000 $5,000 $10,000 $1,500 O Ryan may deduct $14, 700 as itemized deductions. O More than one of the above are correct. O Ryan may deduct $11,500 on his sole proprietorship schedule C. O Nothing listed here is deductible anywhere on Ryan's personal return.
Vella owns and operates an illegal gambling establishment. In connection with this activity, he has the following expenses during the year: Rent Bribes Travel expenses Utilities Wages Payroll taxes Property insurance Illegal kickbacks $33,500 50,250 3,350 20,100 248,000 16,750 1,675 30,150 What are Vella's total deductible expenses for tax purposes?
For each of the following situations, indicate the nature and amount of the penalty that could be imposed. Description of the Penalty AND Penalty Amount $ a. Larry is a tax protester and files his tax return in the name of “Mickey Mouse.” b. Anne writes a check for $900 in payment of her taxes that she knows will not clear the bank due to insufficient funds in her account. c. Gerald understated his tax liability by $10,000. The total amount of tax that should have been shown on his return was $70,000.
Ned Naïve operated several franchise stores for a large company, and, at the home office’s suggestion, consolidated its payroll and accounting functions with Andy the Accountant. Andy is not a CPA. Last year, Andy began embezzling the taxpayer’s escrowed payroll tax withholdings and failed to remit required amounts for the four quarters. The IRS assessed penalties on Ned for failing to make the proper withholding deposits during the year. What are factual issues, legal issues and primary research questions on this case?
Jake is an IRS tax law - certified volunteer preparer at a VITA/TCE site. When preparing a return for Jill, Jake learns that Jill does not have a bank account to receive a direct deposit of her refund. Jill is distraught when Jake tells her the paper refund check will take three to four weeks longer than the refund being direct deposited. Jill asks Jake if he can deposit her refund in his bank account and then turn the money over to her when he gets it. What should Jake do?
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Tyrell has a tax service and accounting business in Redwood City. He decides to move to Center City, which is 150 miles away and sells his accounting practice to Able and Baker, a CPA firm. In the sales contract, he agrees that he will refrain from practicing accounting anywhere within a 20-mile radius of Redwood City for a period of two years. However, on weekends he returns to his house in Redwood City, and when clients call him, he meets with them in his home. The sales agreement: Ois being violated by Tyrell. O is invalid, because it is an illegal restraint of trade. O is illegal, because it is a violation of public policy. O will be divided into an enforceable, valid portion and an unenforceable, invalid portion, which is the time provision, because the two-year period is too long.
Carrie loaned her friend $4500 to buy a used car. She had her friend sign a note with repayment terms and set a reasonable interest rate on the note because the $4500 was most of her savings. Her friend left town with out a forwarding address, and nobody Carrie knows has heard from her in the last year. How should Carrie treat the bad loan for tax purpose? This is a ___________ bad debt. Assuming this is carries only capital gain or loss, she may claim $____________in the current year and __________any remaining amount.
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