Practice Questions on Taxes Based on US Law

Please answer questions in the attachments. You do not need to have US tax code in the answers. The questions based on U.S. law

Practice Questions:

Question 1: Chad comes to you asking for advice. He'd like to avoid gain on his 1,000 shares in Goop,which he invested in because he liked their skin care products. Chad, like the rest of the world,was surprised that the company went up in value. He'd also like to benefit his young son, and gift the shares to his 18-year-old son before he goes to college, hoping his son can sell the shares and pay for college and graduate school free of tax. The Goop shares are now worth $1,000 but Chad purchased the shares at $10 per share. You ask Chad if there are any other assets he wants to give away. Chad also ownsshares in Caterpillar, which he bought at $100a share and is now worth $80per share. However, Chad still thinks Goop would be a better choiceto give his son. When you are discussing facts, he mentions that he is currently going through a rough patch with his spouse, Emmerson. Chad wants to know would happen if he and Emmersonseparated to their RV, New York City house (purchased for $1M but now worth $10M andhas been their primary residence forthe last 3 years), and if one of them moves far away and has primary custody of their minor son.Assume that the primary custody parent would receive child support payments. While married, Chad and Emmerson had obtained 2vacationhomes, 1 in Boise, Idaho and 1 in San Diego, California. Can they swap houses free of tax? The Boise, Idaho house was purchased for $1M with a $500K mortgage,and is now worth $1M.The San Diego house was purchased for $700K with a $500Kmortgage, and is now worth $1M.

Question 2: Todd owns and develops a club house for a golf course for $5M, it is now worth $9M. Todd had taken out a loan of$4M to build it. The golf course has an option to take ownership of the property and Todd doesn't want to pay taxwhen the option is exercised. John owns a small office building in Hartfordthat he built for $12M andis currently worth $10M. John has debt of $7M on the building. Both Todd and John came to speak with you separately over the course of a day, and the Todd asked if any way to avoidtaxes on the gain when the golf course exercises its right to buy the club house. John is asking you what his basis in the building was. John wants to get rid of the property and stick to what he knows best, which is developing restaurants in West Hartford. To build this new property, he used relatively new equipment had originally purchased to build in West Hartfordworth $400K. To make the deal better for Todd, John is willing to throw in the featured piece of art hanging in the lobby of his office building which he purchased for $500K.

Question 3: Colin Kaepernick received a ring for winning the 2012 conference championships and shows up and asks you if he owes any taxes. 5 years later, Colin wins the Nobel Peace Prize, and comes back to you beforehandfor advice. 12300569/12. While in your office, Colin mentions starting new shoe company called Kaeper Kicks and wishes to plan for a 5 year exist. Colin intends on doing the manufacturing himself, build a factory, buy materials for a total investment of $30M. Based on marketability, Colin believes that he will be able to sell the company for more than that in 5 years. 5 years later, Colin comes back and says he was right. Someone offered him $100M amount, 70% of which is payment for goodwill. To ensure brand doesn't collapse, he sells the buyer the bulk of the sale proceeds (70% of the annual sale proceeds, total sales proceeds each year is approximately $30M) for 10 years contingent on the success of the company. In the lobby, to inspire his employees, he puts the first pair of Kaeper Kicks in a glass case with one of the first pair of Air Jordans which he purchased on e-bay for $15K when he was 18 years old. Also, because he believes in building up his partners and employees, Kaeper Kicks provides liberal education reimbursement and will pay for business, legal, and science degrees that have anything to do with making sneakers. He wants to know if that's a good employee benefit. The partners in Kaeper Knick stated that one wants to go to law school and help his cause, another wants to go to business school, and the last wants to get a computer science degree.

Question 4:  You're sitting in your own office and your litigation and labor law partners come into talk about their clients. They want to discuss Nice Nancy who was working as a Physician's A at the local mental hospital. She has been distracted lately and had received some bad reviews as a result. About a month ago she was trying to restrain a patient and was knocked down and injured. Her employer then let her go. She has sued to recover 3 years worth of salary and punitive damages from being let go. She believes she was unfairly let go because she was pregnant at the time of the incident and does not believe that her performance was otherwise insufficient. Nice Nancy is still experiencing lower back pain from her injury from the patient. She would also like reputational damages as she went to seek a new job and believes that the mental hospital in the next town had been told she was a disgruntled employee by her prior employer. Assume she receives a recovery; how would the recovery be taxed. Since she has been injured, Anne's partner has said that her family is substantially better off because they could let the cleaning service, cook, and nanny go. She is wondering if she should go back to worth and is tempted because she has received an offer where they will pay her children's tuition for local private school through college. In good years, they have promised to make her a gift to her family of $20K a year and matching gift to a charity of her choice. They have also generally agreed to pay half of her taxes for her every year. Question 5: John wants to purchase an annuity so that he has a guaranteed stream of income after retirement. John is currently 45 years old The cost of the annuity is $15K a year for 20 years The annuity is to pay $20K a year for life What if John dies at age 65 after receiving the $20K payment?          12300569/13. John also wishes to purchase a life insurance policy on his life. The face value of the policy is $500K. However, when John turned 65 he realized that he needs cash and decides to sell the policy to his child in exchange for $100K in cash. John believes that taxes are unconstitutional as he isnot a citizen of the United States but instead is a sovereign citizen of the state of Connecticut. John asserts that the income tax is illegal because his income was not received in the form of gold or silver and not "legal tender." You run into John ata family reunion and John asks what his tax liability might be if income tax was legal. He also asks you what you think about his stance about taxes.