Solution manual for Income Tax Fundamentals 2019 37th Edition by Michael Brumbach, Steven Gill 1337703079 9781337703079

Chapter 1. The Individual Income Tax Return

1-1. History and Objectives of the Tax System

1-1a. Tax Law History and Objectives

1-1b. The Tax Cuts and Jobs Act of 2017

1-2. Reporting and Taxable Entities

1-2a. The Individual

1-2b. The Corporation

1-2c. The Partnership

1-3. The Tax Formula for Individuals

1-3a. Gross Income

1-3b. Deductions for Adjusted Gross Income

1-3c. Adjusted Gross Income (AGI)

1-3d. Standard Deduction or Itemized Deductions

1-3e. Exemptions

1-3f. The Gross Tax Liability

1-4. Who Must File

1-5. Filing Status and Tax Computation

1-5a. Single Filing Status

1-5b. Married Filing Jointly

1-5c. Married Filing Separately

1-5d. Head of Household

1-5e. Qualifying Widow(er) with Dependent Child

1-5f. Tax Computation

1-6. Qualifying Dependents

1-6a. Dependents

1-6b. Qualifying Child

1-6c. Qualifying Relative

1-6d. Credits for Dependents

1-7. The Standard Deduction

1-7a. Additional Amounts for Old Age and Blindness

1-7b. Individuals Not Eligible for the Standard Deduction

1-7c. Special Limitations for Dependents

1-8. A Brief Overview of Capital Gains and Losses

1-8a. Capital Gains and Losses

1-9. Tax and the Internet

1-10a. The IRS Website, www.irs.gov

1-10b. Intuit’s ProConnect Tax Online

1-10. Electronic Filing (E-Filing)

Key Terms

Key Points

Group 1: Multiple Choice Questions

Group 2: Problems

Group 3: Writing Assignments

Group 4: Comprehensive Problems

Group 5: Cumulative Software Problem

Key Number Tax Return Summary

Chapter 2. Gross Income and Exclusions

2-1. The Nature of Gross Income

2-2. Salaries and Wages

2-3. Accident and Health Insurance

2-4. Meals and Lodging

2-5. Employee Fringe Benefits

2-5a. Flexible Spending Accounts

2-5b. Group Term Life Insurance

2-5c. Education Assistance Plans

2-5d. No-Additional-Cost Services

2-5e. Qualified Employee Discounts

2-5f. Working Condition Fringe Benefits

2-5g. De Minimis Fringe Benefits

2-5h. Tuition Reduction

2-5i. Athletic Facilities

2-5j. Retirement Planning Fringe Benefit

2-6. Prizes and Awards

2-7. Annuities

2-7a. The Simplified Method

2-7b. The General Rule

2-7c. Employee Annuities

2-8. Life Insurance

2-9. Interest and Dividend Income

2-9a. U.S. Savings Bonds

2-9b. Dividends

2-9c. Current Tax Rates for Dividends

2-9d. Reporting Interest and Dividend Income

2-10. Municipal Bond Interest

2-11. Gifts and Inheritances

2-12. Scholarships

2-13. Alimony

2-13a. Property Transfers

2-13b. Child Support

2-14. Educational Incentives

2-14a. Qualified Tuition Programs (QTP)

5-8b. Educational Savings Accounts

2-14c. Higher Education Expenses Deduction

2-15. Unemployment Compensation

2-16. Social Security Benefits

2-17. Community Property

2-17a. Spouses Living Apart

Key Terms

Key Points

Group 1: Multiple Choice Questions

Group 2: Problems

Group 3: Writing Assignment

Group 4: Comprehensive Problems

Group 5: Cumulative Software Problem

Key Number Tax Return Summary

Chapter 3. Business Income and Expenses

3-1. Schedule C

3-1a. Trade or Business

3-1b. Tests for Deductibility

3-1c. Schedule C-EZ

3-1d. Schedule C

3-1e. Schedule C Income (Part I)

3-1f. Schedule C Expenses (Part II)

3-1g. Schedule C Cost of Goods Sold (Part III)

3-1h. Schedule C Vehicle Information (Part IV)

3-1i. Schedule C Other Expenses (Part V)

3-1j. Self-Employment Tax

3-2. Inventories

3-3. Transportation

3-4. Travel Expenses

3-4a. Per Diem Substantiation

3-5. Meals and Entertainment

3-6. Educational Expenses

3-6a. Education Required by Employer or Law

3-6b. Maintaining or Improving Existing Skills

3-6c. Expenses of Travel for Educational Purposes

3-7. Dues, Subscriptions, and Publications

3-8. Special Clothing and Uniforms

3-9. Business Gifts

3-9a. Substantiation Requirement

3-10. Bad Debts

3-10a. Business and Nonbusiness Bad Debts

3-11. Office in the Home

3-11a. The Income Limitation

3-11b. The Home Office Allocation

3-11c. Optional Safe Harbor Method

3-11d. Home Office Deduction for an Employee

3-12. Hobby Losses

3-12a. Operational Rules

3-12b. Loss Limitations

Key Terms

Key Points

Group 1: Multiple Choice Questions

Group 2: Problems

Group 3: Writing Assignment

Group 4: Comprehensive Problems

Group 5: Cumulative Software Problem

Key Number Tax Return Summary

Chapter 4. Additional Income and the Qualified Business Income Deduction

4-1. What Is a Capital Asset?

4-2. Holding Period

4-3. Calculation of Gain or Loss

4-3a. Sale or Exchange

4-3b. Amount Realized

4-3c. Adjusted Basis

4-4. Net Capital Gains

4-4a. Ordering Rules for Capital Gains

4-4b. Calculation of a Net Capital Position

4-5. Net Capital Losses

4-5a. Calculation of Net Capital Losses

4-5b. Treatment of Net Capital Losses

4-5c. Personal Capital Losses

4-5d. Ordering Rules for Capital Losses

4-6. Sale of a Personal Residence

4-6a. Sales After May 6, 1997

4-6b. Married Taxpayers

4-6c. Sales Before May 7, 1997

4-7. Rental Income and Expenses

4-7a. Vacation Homes

4-8. Passive Loss Limitations

4-8a. Real Estate Rental as Trade or Business

4-9. Net Operating Losses

4-9a. NOL 80 percent Limitation

4-9b. Overall Business Loss Limitation

4-10. Qualified Business Income (QBI) Deduction

4-10a. Definition of Qualified Business Income

4-10b. QBI Deduction Taxable Income Limitation

4-10c. Wage Limitation

4-10d. Service Business Limitation

Key Terms

Key Points

Questions and Problems: Group 1: Multiple Choice Questions

Group 2: Problems

Group 3: Writing Assignment

Group 4: Comprehensive Problems

Group 5: Cumulative Software Problem

Key Number Tax Return Summary

Chapter 5. Deductions For and From AGI

5-1. Health Savings Accounts

5-1a. Deductions for Contributions to HSAs

5-1b. Distributions

5-1c. Guidance

5-2. Self-Employed Health Insurance Deduction

5-2a. Special Rules

5-3. Individual Retirement Accounts

5-3a. IRA Annual Contributions

5-3b. Roth IRA Conversions

5-3c. Traditional IRA Distributions

5-3d. Roth IRA Distributions

5-4. Small Business and Self-Employed Retirement Plans

5-4a. Self-Employed and Small Business Retirement Plan Options

5-4b. SEP or SEP IRA, SIMPLE IRA, and Payroll Deduction IRA

5-4c. Self-Employed 401(k), Solo 401(k), Safeharbor, and Traditional 401(k) Plans

5-5. Other for AGI Deductions

5-5a. Educator Expenses

5-5b. Unreimbursed Business Expenses for Performing Artists and Others

5-5c. Moving Expenses

5-6. Medical Expenses

5-6a. What Qualifies as a Medical Expense?

5-6b. Medical Insurance

5-6c. Medicines and Drugs

5-6d. Capital Expenditures

5-6e. Transportation

5-6f. Lodging for Medical Care

5-7. Taxes

5-7a. Income Taxes and Sales Taxes

5-7b. Property Taxes

5-7c. Personal Property Taxes

5-8. Interest

5-8a. Taxpayer’s Obligation

5-8b. Prepaid Interest

5-8c. Qualified Residence, Home Equity, and Consumer Interest

5-8d. Education Loan Interest

5-8e. Investment Interest

5-9. Charitable Contributions

5-9a. Percentage Limitations

5-9b. Substantiation Rules

5-10. Other Itemized Deductions

5-10a. Casualty and Theft Losses

5-10b. Measuring the Loss

5-10c. Deduction Limitations

5-10d. Miscellaneous Expenses

5-10e. Phase-out of Itemized Deductions

Key Terms

Key Points

Group 1: Multiple Choice Questions

Group 2: Problems

Group 3: Writing Assignment

Group 4: Comprehensive Problems

Group 5: Cumulative Software Problem

Key Number Tax Return Summary

Chapter 6. Accounting Periods and Other Taxes

6-1. Accounting Periods

6-1a. Individual Tax Years

6-1b. Partnership and Corporation Tax Years

6-1c. Short-Period Taxable Income

6-2. Accounting Methods

6-2a. Restrictions on the Use of the Cash Method

6-3. Related Parties (Section 267)

6-3a. Losses

6-3b. Unpaid Expenses and Interest

6-3c. Relationships

6-4. Unearned Income of Minor Children and certain Students

6-4a. Election to Include a Child’s Unearned Income on Parents’ Return

6-5. The Individual Alternative Minimum Tax (AMT)

6-5a. Common AMT Adjustments and Preferences

6-5b. AMT Exemption Allowance

6-5c. Alternative Minimum Tax Rates

6-6. Self-Employment Tax

6-7. The Nanny Tax

6-8. Special Taxes for High-Income Taxpayers

6-8a. The 3.8 Percent Medicare Tax on Net Investment Income

6-8b. The 0.9 Percent Additional Medicare Tax on Earned Income

6-8c. Employees

6-8d. Self-Employed Taxpayers

Key Terms

Key Points

Group 1: Multiple Choice Questions

Group 2: Problems

Group 3: Writing Assignment

Group 4: Comprehensive Problems

Group 5: Cumulative Software Problem

Key Number Tax Return Summary

Chapter 7. Tax Credits

7-1. Child Tax Credit

7-2. Earned Income Credit

7-2a. Does the Taxpayer Qualify?

7-2b. Does the Taxpayer Have a Qualifying Child?

7-2c. Taxpayer with No Qualifying Child

7-2d. Taxpayer with a Qualifying Child

7-2e. What Is the Amount of the EIC?

7-3. Child and Dependent Care Credit

7-3a. Qualified Expenses

7-3b. Allowable Credit

7-4. The Affordable Care Act

7-4a. Individual Shared Responsibility

7-4b. Premium Tax Credit

7-5. Education Tax Credits

7-5a. American Opportunity Tax Credit

7-5b. Lifetime Learning Credit

7-5c. Using Both Credits

7-6. Foreign Exclusion and Tax Credit

7-6a. Foreign Income Exclusion

7-6b. Foreign Tax Credit

7-7. Adoption Expenses

7-7a. Adoption Credit

7-7b. Domestic Multiyear Adoptions

7-7c. Foreign Multiyear Adoptions

7-7d. Employer-Provided Adoption Assistance

7-8. Energy Credits

7-8a. Plug-In Electric Vehicle Credits

7-8b. Credits for Residential Energy-Efficient Property (REEP Credit)

Key Terms

Key Points

Group 1: Multiple Choice Questions

Group 2: Problems

Group 3: Writing Assignment

Group 4: Comprehensive Problems

Group 5: Cumulative Software Problem

Key Number Tax Return Summary

Chapter 8. Depreciation and Sale of Business Property

8-1. Depreciation

8-2. Modified Accelerated Cost Recovery System (MACRS)

8-2a. Mid-Quarter Convention

8-2b. Bonus Depreciation

8-2c. Real Estate

8-2d. Mid-Month Convention

8-2e. Reporting Depreciation Expense

8-3. Election to Expense (Section 179)

8-4. Listed Property

8-5. Limitation on Depreciation of Luxury Automobiles

8-6. Intangibles

8-6a. Exclusions

8-7. Section 1231 Gains and Losses

8-8. Depreciation Recapture

8-8a. Section 1245 Recapture

8-8b. Section 1250 Recapture

8-8c. “Unrecaptured Depreciation” on Real Estate—25 Percent Rate

8-9. Business Casualty Gains and Losses

8-10. Installment Sales

8-10a. The Contract Price

8-11. Like-Kind Exchanges

8-11a. Like-Kind Property

8-12. Involuntary Conversions

Key Terms

Key Points

Group 1: Multiple Choice Questions

Group 2: Problems

Group 3: Writing Assignment

Group 4: Comprehensive Problems

Group 5: Cumulative Software Problem

Key Number Tax Return Summary

Chapter 9. Payroll, Estimated Payments, and Retirement Plans

9-1. Withholding Methods

9-1a. Computing Income Tax Withholding

9-1b. Pension and Deferred Income

9-1c. Tip Reporting

9-1d. Backup Withholding

9-2. Estimated Payments

9-3. The FICA Tax

9-3a. Overpayment of Social Security Taxes

9-4. Federal Tax Deposit System

9-5. Employer Reporting Requirements

9-5a. Form W-2G

9-5b. Information Returns

9-6. The FUTA Tax

9-7. Qualified Retirement Plans

9-7a. Qualified Plans

9-7b. Types of Qualified Plans

9-7c. Limitations on Contributions to and Benefits from Qualified Plans

9-7d. Low Income Retirement Plan Contribution Credit

9-8. Rollovers

9-8a. Direct Transfers

9-8b. Distribution Rollovers

Key Terms

Key Points

Group 1: Multiple Choice Questions

Group 2: Problems

Group 3: Writing Assignment

Chapter 10. Partnership Taxation

10-1. Nature of Partnership Taxation

10-1a. What Is a Partnership?

10-2. Partnership Formation

10-3. Partnership Income Reporting

10-3a. Form 1099-K Reporting Merchant Card and Third-Party Payments

10-4. Current Distributions and Guaranteed Payments

10-4a. Guaranteed Payments

10-5. Tax Years

10-6. Transactions between Partners and the Partnership

10-7. Qualified Business Income Deduction for partners

10-8. The At-Risk Rule

10-9. Limited Liability Companies

Key Terms

Key Points

Group 1: Multiple Choice Questions

Group 2: Problems

Group 3: Comprehensive Problem

Key Number Tax Return Summary

Chapter 11. The Corporate Income Tax

11-1. Corporate Tax Rates

11-2. Corporate Gains and Losses

11-2a. Capital Losses

11-2b. Net Operating Losses

11-3. Special Deductions and Limitations

11-3a. Dividends Received Deduction

11-3b. Organizational Expenditures and Start-Up Costs

11-3c. Charitable Contributions

11-4. Schedule M-1

11-5. Filing Requirements and Estimated Tax

11-6. S Corporations

11-6a. Reporting Income

11-6b. S Corporation Losses

11-6c. Pass-Through Items

11-6d. Qualified Business Income Deduction

11-6e. Special Taxes

11-7. Corporate Formation

11-7a. Liabilities

11-7b. Shareholder’s Stock Basis

11-7c. Corporation’s Basis in Property Contributed

11-8. Corporate Accumulations

11-8a. Accumulated Earnings Tax

11-8b. Personal Holding Company Tax

11-9. The Corporate Alternative Minimum Tax

Key Terms

Key Points

Group 1: Multiple Choice Questions

Group 2: Problems

Group 3: Comprehensive Problems

Key Number Tax Return Summary

Chapter 12. Tax Administration and Tax Planning

12-1. The Internal Revenue Service

12-1a. IRS Campus Processing Sites

12-1b. The IRS Organizational Structure

12-1c. Small Business/Self-Employed (SB/SE) Division

12-1d. Wage and Investment (W&I) Division

12-1e. Examination of Records

12-1f. Collections

12-2. The Audit Process

12-2a. Selection of Returns for Audits

12-2b. The Appeals Process

12-3. Interest and Penalties

12-3a. The Failure-to-File and Failure-to-Pay Penalties

12-3b. Accuracy-Related Penalty

12-3c. Fraud Penalty

12-3d. Miscellaneous Penalties

12-4. Statute of Limitations

12-4a. Exceptions

12-5. Preparers, Proof, and Privilege

12-5a. Tax Practitioners

12-5b. Annual Filing Season Program

12-5c. Preparer Penalties

12-5d. Burden of Proof

12-5e. Tax Confidentiality Privilege

12-6. The Taxpayer Bill of Rights

12-7. Tax Planning

12-7a. Tax Rate Terminology

12-7b. Examples of Tax Planning

12-7c. Timing

12-7d. Jurisdiction

12-7e. Entity

12-7f. Character