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Conrad and Anita (a college student with no income) plan to marry on December 21, 2012. Filing jointly, they expect to have $180,000 of taxable income for the year. If they wait until January 2013 to marry, Conrad will file as a single person and report the $180,000 of taxable income on his separate return. Will it be to their advantage to marry before the end of 2012 or should they wait until 2013? How much in tax will they save or have to pay extra of they marry in 2012? How would your answers change of Conrad and Anita each expect $90,000 of taxable income in 2012?

John has taxable income of $30,000. William has taxable income of $60,000. Determine their 2012 income taxes of they both file single individuals. Compare their incomes and their income taxes. What does this illustrate?

Hunter Corporation has $25,000 in gross income, $125,000 in deductible business expenses and a $12,000 business tax credit. Determine the corporation’s net tax liability?

Carolyn has a 50% interest in a partnership that has a $14,000 has for the year. She materially participates in the partnership, but she also has salary from other employment of $46,000. If she is single with no dependents, what is her taxable income in 2012 and what is her tax liability?

William, age 25, left his studies for the priesthood and moved back into his parents’ home and has lived there this entire year. He has only $4,000 in income from a part-time job that he used to purchase a used auto. His parents provided all of the other money necessary for his support.

Jeremy is setting up a service business. He can either operate the business as a sole proprietorship or he can incorporate as a regular C corporation. He expects that the business will have gross income of $60,000 in the first year with expenses of $12,000 excluding the following: He plans to take $30,000 from the business for living expenses as a salary.

Compare his tax costs for 2012 considering only income taxes if he is single and he has no other income. Which option do you recommend based solely on these tax costs?

Refer to the information in Chapter 4 on employment taxes for employees and self-employed individuals. Complete the analysis of this problem considering both income and employment taxes.

Monico Corporation, a cash basis calendar-year taxpayer, is in the 25% marginal tax bracket this year. If it bills its customers at the beginning of December, it will receive $5,000 of income prior to year-end. If it bills its customers at the end of December, it will not receive the $5,000 until January of next year.

If It expects its marginal tax rate to remain 25% next year, when should it bill its customers? Use a a 6% discount factor to explain your answer.

How would your answer change if Monico’s marginal tax rate next year is only 15%?

How would your answer change if Monico’s marginal tax rate next year is 34%?
Kevin deliberately omitted $40,000 of gross income from the restaurant he owned from his 2012 tax return. The return indicates gross income of $200,000 when he files it on April 14, 2013. As of what date can the IRS no longer pursue Kevin with the threat of collection of the related tax, interest, and penalties?

Thomas received $30,000 in a legal settlement in 2012. The tax treatment of the item is not certain. Thomas’s research results were ambiguous so he is not sure if the income is taxable. Because some doubt remained and because he did not think he would be audited, Thomas took the position that the income was not table and did not include it on his tax return filed on April 14, 2013. His gross income, excluding the $30,000 in question, is $50,000.

When does the statute of limitations expire for Tom’s 2012 tax return?

Would your answer change if Thomas were certain the amount was taxable but decided to exclude it from his return anyway?

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