SWFT Corp Partner Estates Trusts
42nd Edition
ISBN: 9780357161548
Author: Raabe
Publisher: Cengage
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Craig commits fraud on his tax return. It is found that he was $40,000 deficient in his tax because of the fraud. What would his penalty be? Please show all calculations to demonstrate how you arrived at your answer.
In your response, please make sure to take all of the facts above into consideration. You can refer back to the text, lecture videos, and the IRS website.
Statement 1: Pedro died giving Juan the power to appoint a person who will inherit
his house and lot. Juan however, can only choose among Ana, Lorna or
Fe. Juan decided to transfer the property to Fe through the former
decedent’s will. The transfer from Juan to Fe is subject to estate tax.
Statement 2: During Peter’s lifetime, he decided to give John as a gift his car subject to
the condition that if John does not become a CPA within 3 years, Peter
shall revoke the transfer. In the second year however, Peter died. The
car should form part of Peter’s gross estate.
Only statement 1 is correct Both statements are correct
Only statement 2 is correct Both statements are incorrect
Knowledge Booster
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- Determine whether the taxpayer has income that is subject to taxation in each of the following situations: a. Capital Motor Company is going out of business. As a result, June is able to purchase a car for 12,000; its original sticker price was 25,000. b. Chuck is the sole owner of Ransom, Inc., a corporation. He purchases a machine from Ransom for 10,000. Ransom had paid 50,000 for the machine, which was worth 30,000 at the time of the sale to Chuck. c. Gerry is an elementary school teacher. She receives the Teacher of the Month Award for February. As part of the award, she gets to drive a new car supplied by a local dealer for a month. The rental value of the car is 400 per month. d. Payne has worked for Stewart Company for the last 25 years. On the 25th anniversary of his employment with Stewart, he receives a set of golf clubs worth 1,200 as a reward for his years of loyal service to the company. e. Anna enters a sweepstakes contest that was advertised on the back of a cereal box, and wins 30,000. The prize will be paid out in 30 annual installments of 1,000. She receives her first check this year. f. Terry buys an antique vase at an estate auction for 780. Upon returning home, she accidentally drops the vase and finds that a 100 bill had been taped inside it.arrow_forwardLew is a practicing CPA who decides to raise bonsai as a business. Lew engages in the activity and has the following revenue and expenses: Sales $ 5,000 Depreciation on greenhouse 10,000 Fertilizer, soil, pots 1,500 What are the factors that the IRS will consider when evaluating whether the activity is a business or a hobby? ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ If the activity is deemed to be a regular business, what is the amount of Lew's loss from the activity? $_____________ If the activity is deemed to be a hobby, what is the amount of Lew's expenses (if any) from the activity that may be deducted? $_____________arrow_forward
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