University Taxation Assignment: Financial Analysis and Calculations

This taxation assignment solution covers a range of financial calculations and tax implications. It includes calculations for Medicare, self-employment tax, and partnership basis. The assignment explores topics such as taxable income, tax deductions, and adjusted gross income. Solutions are provided for various scenarios, including individual and corporate tax liabilities, and the impact of different filing statuses. The document also calculates tax savings from income transfers and after-tax cash received from interest, providing a comprehensive overview of taxation principles and practical applications. The assignment uses examples to illustrate tax calculations related to business income, operating losses, and estimated tax payments. Finally, the assignment includes calculations for adjusted gross income and taxable income based on provided financial data.

Running head: TAXATION
Taxation
Name of the Student:
Name of the University:
Authors Note:

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TAXATION
Contents
Answer 1:.........................................................................................................................................2
Answer 2:.........................................................................................................................................2
Answer 3:.........................................................................................................................................2
Answer 4:.........................................................................................................................................2
Answer 5:.........................................................................................................................................2
Answer 6:.........................................................................................................................................3
Answer 7:.........................................................................................................................................3
Answer 8:.........................................................................................................................................4
Answer 9:.........................................................................................................................................5
Answer 10:.......................................................................................................................................5
Answer 11:.......................................................................................................................................6
Answer 12:.......................................................................................................................................6
Answer 13:.......................................................................................................................................6
Answer 14:.......................................................................................................................................7
Answer 15:.......................................................................................................................................7
Answer 16:.......................................................................................................................................7
Answer 17:.......................................................................................................................................7
Answer 18:.......................................................................................................................................8
Answer 19:.......................................................................................................................................8

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Answer 20:.......................................................................................................................................8
Answer 21:.......................................................................................................................................9
Answer 22:.......................................................................................................................................9
Answer 23:.......................................................................................................................................9
Answer 24:.......................................................................................................................................9
References:....................................................................................................................................11

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Answer 1:
Amount of Medicare for Mr. A with 2.9% of wages is $1,740, i.e. (60,000 x 2.9%).
Answer 2:
Self-employment tax in this case $3,749.
Answer 3:
Social security on annual income of $175,000 will be $16,480, i.e. 12.4% on first $132,900 and
Medicare of $4,687 @2.9% on income of $175,000 are responsibility of Mr. C.
Answer 4:
Calculation of basis in the partnership is shown below:
Basis in the partnership
Mr D Mr E
Contribution 5,000.00 5,000.00
Borrowed capital 30,000.00 30,000.00
Basis in the partnership 35,000.00 35,000.00
Answer 5:
Particulars Amount ($)
Contribution 60,000.00

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Add:
Ordinary income share (200000 x 50%) 100,000.00
160,000.00
Less:
Share of charitable contribution (20000 x 50%) 10,000.00
Share of distribution 25,000.00
35,000.00
Basis of Mr F in the partnership 125,000.00
Total tax basis in the partnership (125000 x 100/50) 250,000.00
Answer 6:
A general partners is responsible to pay self-employment tax on earnings from partnership thus,
only on the amount of business income received by Mr. G, i.e. $22,000 shall be subjected to self-
employment tax.
Answer 7:
Tax cost is calculated below:
Parents -
Father
Parents-
mother
Child 1 Child 2 Total tax
cost

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TAXATION
Share of income 10,000.
00
10,000.
00
10,000.
00
10,000.
00
Tax cost 3,500
.00
3,500
.00
3,200.
00
2,400.
00
12,600.
00
Thus, tax cost is $12,600.
Answer 8:
Allowable deduction is calculated below:
Allowable deduction
Particulars Amount
($)
Mortgage interest (12000 x
500/2500)
2,40
0.00
Home owner insurance (2500 x
500/2500)
50
0.00
Utilities (assuming fully for
busienss)
2,20
0.00
Property tax (4000 x 500/2500) 80
0.00

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Depreciation 1,10
0.00
Allowable deduction 7,00
0.00
Answer 9:
Co J, Co K, Co L and Co M are the members of affiliated group as all these have significant
amount of holding between themselves in each other’s equity share capital.
Answer 10:
Taxable income in year 2 is calculated below.
Taxable income in year 2
Particulars Amount ($)
Operating income 350,000.00
Less: Loss from previous year written off 200,000.00
150,000.00
Less: Donation 20,000.00
Taxable income in year 2 130,000.00

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Answer 11:
Taxable income of Company P is $70,000 (50000 +20000).
Answer 12:
Particulars Amount ($)
Amount of income transferred to three children (100000 x 45%) 45,000.00
Tax rate of Ms Q 37%
Tax rate of children 12%
Savings in tax 11,250.00
Answer 13:
After tax cash received from interest
Particulars Amount ($)
Interest received 48,000.00
Less: Tax on interest earned (48000 x 21%) 10,080.00
After tax cash received from interest 37,920.00
Answer 14:
Individual tax is $0 and corporation tax is $21,000, i.e. (100,000 x 21%).

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TAXATION
Answer 15:
Assuming rate of tax for the company is 30% then the increase in tax due to disallowance of
salary of $550,000 as excess salary will be (550000 x 30%) = $165,000.
Answer 16:
The operation loss of $180,000 can be declared by Mrs V, i.e. 60% of $300,000.
Answer 17:
Income for tax purposes is calculated below:
Particulars Amount ($)
Income before adjustment 1,200,000.00
Less: tax exempt income included 10,000.00
1,190,000.00
Add: Meals and entertainment expenses
disallowed
150,000.00
Taxable income 1,340,000.00
Thus, income for tax purposes is $1,340,000.
Answer 18:
21% of the estimated taxable income of the tax year must be paid as estimated tax on or before
September 17, 2018.

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Answer 19:
Particulars Amount ($)
Ordinary income 41,000.00
Less: Loss carried forward from previous year 7,000.00
Tax basis of the partnership for the current year 34,000.00
Tax basis for the partnership is $34,000 for the current year (Huesecken and Overesch, 2018).
Answer 20:
Tax basis at the end year is calculated below:
Particulars Amount ($)
Share at the opening basis 20,000.00
Add: Share of ordinary income 60,000.00
80,000.00
Less: Increase in share of debt 5,000.00
Tax basis at the end of the year 75,000.00
Answer 21:
Taxable income is calculated below:
Particulars Amount ($)

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Gross income 50,000.00
Less: Standard deduction 12,000.00
Taxable income 38,000.00
Answer 22:
The filing status of Mrs. B is head of the household in 2016, 2017, 2018 and 2019.
Answer 23:
In case Ms files as an individual then the tax liability would be $35,756 and in case she files as
head of the household the tax would be $32,370
Answer 24:
Particulars Amount ($)
Wages 163,000.00
Interest deduction 1,900.00
164,900.00
Less: Above line deduction 6,200.00
Adjusted gross income 158,700.00
Less: Itemized deduction 26,200.00

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Taxable income 132,500.00
Thus, adjusted gross income and tax income are $158,700 and $132,500 respectively (IRS
releases updated Form 1040, 2018).