Solved by verified expert :117. Taylor, a
widow, makes cash gifts to her five married children (including their spouses)
and to her seven grandchildren. What is the maximum amount Taylor can give for
calendar year 2014 without using her unified transfer tax credit?

118. Without
obtaining an extension, Pam files her income tax return 55 days after the due
date. With her return, she pays an additional tax of $60,000. Disregarding any
interest element, what is Pam’s penalty for failure to pay and to file?

119. On his 2014
income tax return, Andrew omitted income and overstated deductions to the
extent that his income tax was understated by $500,000. Disregarding any
interest element, what is Andrew’s penalty if the understatement was due to:
a. Negligence.
b. Civil
c. Criminal

120. Several
years ago, Logan purchased extra grazing land for his ranch at a cost of $240,000.
In 2014, the land is condemned by the state for development as a highway
maintenance depot. Under the condemnation award, Logan receives $600,000 for
the land. Within the same year, he replaces the property with other grazing
land. What is Logan’s tax situation if the replacement land cost:
a. $210,000?

b. $360,000?

c. $630,000?

d. Why?

121. For the tax
year 2014, Noah reported gross income of $300,000 on his timely filed Federal
income tax return.

a. Presuming
the general rule applies, when does the statute of limitations on assessments
normally expire?
b. Suppose
Noah inadvertently omitted gross income of $76,000. When does the statute of
limitations on assessments expire?
c. Suppose
the omission was deliberate and not inadvertent. When does the statute of
limitations on assessments expire?
122. Paige is
the sole shareholder of Citron Corporation. During the year, Paige leases a
building to Citron for a monthly rental of $80,000. If the fair rental value of
the building is $60,000, what are the income tax consequences to the parties

123. In 1985,
Roy leased real estate to Drab Corporation for 20 years. Drab Corporation made
significant capital improvements to the property. In 2005, Drab decides not to
renew the lease and vacates the property. At that time, the value of the
improvements is $800,000. Roy sells the real estate in 2014 for $1,200,000 of
which $900,000 is attributable to the improvements. When is Roy taxed on the
improvements made by Drab Corporation?
124. The Federal
income tax is based on a pay­as­you­go system and has become a “mass tax.”
Explain this statement.
pay-as-you-go system is present in the wage and other withholding procedures.
In the case of self- employed persons, it is manifested in the required
quarterly payments for estimated taxes. The income tax became a mass tax during
World War II when its coverage was extended to 74% of the population (from less
than 6% in 1939).
125. In terms of
Adam Smith’s canons of taxation, how does the Federal income tax fare as far as
economy is concerned?
126. Due to the
population change, the Goose Creek School District has decided to close one of
its high schools. Since it has no further need of the property, the school is
listed for sale. The two bids it receives are as follows:

United Methodist Church $1,700,000
Planet Motors 1,600,000

The United Methodist Church would use the property to
establish a sectarian middle school. Planet, a well-known car dealership, would
revamp the property and operate it as a branch location.

If you were a member of the School District board, what
factors would you consider in evaluating the two bids?
127. Morgan
inherits her father’s personal residence including all of the furnishings. She
plans to add a swimming pool and sauna to the property and rent it as a
furnished house. What are some of the ad valorem property tax problems Morgan
can anticipate?
128. In 2012,
Deborah became 65 years old. In 2013 she added a swimming pool, and in 2014 she
converted the residence to rental property and moved into an assisted living
facility. Since 2011, Deborah’s ad valorem property taxes have decreased once
and increased twice. Explain.

129. A lack of
compliance in the payment of use taxes can be resolved by several means. In
this regard, comment on the following:
a. Registration
of automobiles.
b. Reporting
of Internet purchases on state income tax returns.

130. What are
the pros and cons of the following state and local tax provisions?
a. An ad
valorem property tax holiday made available to a manufacturing plant that is
b. Hotel
occupancy tax and a rental car surcharge.
c. A
back-to-school sales tax holiday.

131. What is a
severance tax? How productive can it be in terms of generating revenue?
132. What is the
difference between an inheritance tax and an estate tax? Who imposes these
133. Logan dies
with an estate worth $20 million. Under his will, $10 million passes to his
wife while $10 million goes to his church. What is Logan’s Federal estate tax

134. With regard
to state income taxes, explain what is meant by the “jock tax”?

135. Virtually
all state income tax returns contain checkoff boxes for donations to various
causes. On what grounds has this procedure been criticized?

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