Ms. T. Potts, the treasurer of Ideal China, has a problem. The company has just ordered a new kiln for $560,000. Of this sum, $70,000 Is described by the supplier as an installation cost. Ms. Potts does not know whether the Internal Revenue Service (IRS) will permit the company to treat this cost as a tax-deductible current expense or as a capital investment In the latter case, the company could depreciate the $70,000 straight-line over 5 years. The tax rate is 30% and the opportunity cast of capital Is 5%. a. What is the present value of the cost of the kiln if the installation cost is treated as a separate current expense? b. What is the present value of the cost of the kiln if the installation cost is treated as a part of the capital Investment? (Round your answer to the nearest whole dollar amount.) a. Present value b. Present value

Sarah Keene, CPA, is the newly hired controller for Plexicon, Inc., which is a publicly traded corporation. Ms. Keene's first job with Plexicon was the review of the company's accounting practices on deferred income taxes. In doing her review, she noted differences between tax and book depreciation methods that permitted Plexicon to realize a sizable deferred tax liability on its balance sheet. As a result, Plexicon paid very little in income taxes at that time.\\n\\n Keene also discovered that Plexicon has an explicit policy of selling off plant assets before they reversed in the deferred tax liability account. This policy, coupled with the rapid expansion of its plant asset base, allowed Plexicon to "defer" all income taxes payable for several years, even though it always has reported positive earnings and an increasing EPS. Keene checked with the legal department and found the policy to be legal, but she's uncomfortable with the ethics of it.\\n\\nRequired:\\n\\nWhy would Plexicon…

Mr. Stanhope has an MBA degree from Stanford University and has successfully operated a business for 18 years. The revenue agent who audited Mr. Stanhope's Form 1040 discovered a glaring error resulting in a $17,500 underpayment of tax. When questioned by the revenue agent about the error, Mr. Stanhope just shrugged and offered no logical explanation. Required: a. If the error resulted from Mr. Stanhope's blatant disregard of a tax rule, compute the penalty for negligence. b. Is Mr. Stanhope's level of education and business experience likely to be a factor considered by the revenue agent in determining negligence? Complete this question by entering your answers in the tabs below. Required A Required B If the error resulted from Mr. Stanhope's blatant disregard of a tax rule, compute the penalty for negligence. Accuracy-related penalty

The revenue agent who audited Ms. Hsui's Form 1040 discovered a $15,500 deduction that wasn't allowed by the tax law. The improper deduction reduced Ms. Hsui's tax by $5,053. The total tax deficiency for the year under audit was $6,510. Required: a. Compute the maximum penalty if the agent concludes that the improper deduction was due to Ms. Hsui's negligence in preparing the tax return. b. Compute the maximum penalty if the agent concludes that the improper deduction represented Ms. Hsui's deliberate attempt to cheat the government by underpaying tax. Complete this question by entering your answers in the tabs below. Required A Required B Compute the maximum penalty if the agent concludes that the improper deduction was due to Ms. Hsui's negligence in preparing the tax return. Note: Round your answer to the nearest whole dollar amount. Negligence penalty s 291 Ⓡ Required A Required B >

The treasurer of New Semiconductor has a problem. The company has just ordered new assembly robotics for $3,500,000. The manufacturer would install the robotics for an additional $50,000. The treasurer does not know whether the Internal Revenue Service (IRS) will permit the company to treat this installation cost as a tax-deductible expense (end of Year 1) or view the installation as part of the capital investment. In the latter case, the company would capitalize the installation cost and depreciate the $50,000 along with the cost of the robotics according to the 5-year MACRS tax depreciation schedule: Year 1: 20% Year 2: 32% Year 3: 19.2% Year 4: 11.52% Year 5: 11.52% Year 6: 5.76% Assuming the tax rate is 35% and the discount rate is 5%, calculate: 1) the present value of the tax shields if the installation costs are expensed at the end of Year 1, and 2) the present value of the tax shields if the installation costs are capitalized and depreciated according to 5-year MACRS. a.…

Your new client, Ms. X, had her 2018 tax return audited last year and found the whole experience so painful that she never wants to take a chance on ever having to deal with the IRS again. (She should have hired you to help defend the audit, but didn’t.) Specifically, she lost a very big part of her research tax credit because the IRS reclassified a large category of expenses that she had included in calculating the credit as “not sufficiently research-related.” As to her 2019 return, you note that Ms. X has even more expenses in that same category, meaning that her tax credit would be much larger if they were included in the calculation. And, more importantly, you’re aware that a Tax Court decision from earlier this year held, in another taxpayer’s almost identical circumstances, that the very same category of expenses was properly included in the research credit calculation. Can you, or should you, advise Ms. X that her own expenses in this same category can be used to her benefit in…

One of the initiatives of the Federal government in recent years was to increase the taxation paid by high income earners, while at the same time, not instituting any “tax hikes”. One way this was accomplished was to reduce the basic personal tax credit for individuals with income greater than $151,978 up to an income level of $216,511. In the following situation, you the taxpayer have an income level of $200,709. calculate and present your reduced non-refundable personal tax credit amount below.

Calvin Corporation's office was burglarized. The thieves stole 10 laptop computers and other electronic equipment. The lost assets had an original cost of $35,000 and accumulated tax depreciation of $19,400. Calvin received an insurance reimbursement of $20,000 related to the theft loss and immediately purchased new replacement computer equipment. In each of the following cases: a. Determine Calvin's recognized gain, if any, and the tax basis of the replacement property. Assume that Calvin would elect to defer gain recognition when possible. The replacement property cost $27,000. b. Determine Calvin's recognized gain, if any, and the tax basis of the replacement property. Assume that Calvin would elect to defer gain recognition when possible. The replacement property cost $18,000.

The Sage Company has the opportunity to purchase a building located next to its office. Sage would use the building as a day care center for the children of its employees and an exercise facility for the employees. Occasionally, portions of the building could be used for employees' family events such as reunions, birthday parties, and anniversaries. The company would like to know if the planned uses of the building would fit into a beneficially taxed employee compensation plan. Complete the statement below regarding this potential employee fringe benefit. The planned use of the facility would result in income for the employees because child day care services and exercise facilities provided to the employees are specifically from employees' gross income. included excluded

Rick, who is single, has been offered a position as a city landscape consultant. The position pays $147,800 in cash wages. Assume Rick has no dependents. Rick deducts the standard deduction instead of itemized deductions and he is not eligible for the qualified business income deduction. (Use the tax rate schedules.)     b-1. Suppose Rick receives a competing job offer of $139,000 in cash compensation and nontaxable (excluded) benefits worth $8,800. What is the amount of Rick’s after-tax compensation for the competing offer?