Reference no: EM132088281

Question: In year 1, Diamond Construction Company contracts to build an apartment building. The contract will take two years to complete. The contract price is $1,000,000 and Diamond estimates total costs of $800,000. Actual costs are: $600,000 in year 1 and $250,000 in year 2. If Diamond uses the percentage of completion method to account for this long-term contract, what are Diamond's gross income and deductions for year 1?

Gross income: $0 Deductions: $0

Gross income: $1,000,000 Deductions: $800,000

Gross income: $750,000 Deductions: $600,000

Gross income: $750,000 Deductions: $637,500

2. Amanda is a cash basis, calendar year taxpayer that works for Speedy Corporation, an accrual basis, calendar year C Corporation. Speedy's president and sole owner is Martha (also a cash basis taxpayer). In December of year 1, Speedy accrued a $5,000 bonus to Amanda and $20,000 bonus to Martha. Martha's bonus was paid January 31, year 2 and Amanda's bonus was paid March 1, year 2. What is Speedy's compensation deduction for the bonuses in years 1 and 2.

Year 1: $5,000 and Year 2: $20,000

Year 1: $25,000 and Year 2: $0

Year 1: $0 and Year 2: $25,000

Year 1: $20,000 and Year 2: $5,000

3. Samuel works full-time as an architect for an employer. In addition, Samuel owns a sole proprietorship where he provides architecture services to his clients. In 2015, Samuel earned a $98,000 wage from his employer and had gross receipts of $62,000 and business expenses of $7,000 from the sole proprietorship. What is Samuel's self-employment tax for 2015?

4. Andrew and Marie and married taxpayers and file a joint return. In 2015, Andrew had a salary of $60,000 and Marie had a salary of $155,000. Andrew and Marie also had the following on their 2015 return: $3,000 interest from municipal bonds, $5,000 interest from corporate bonds, $20,000 dividend income, and $35,000 long-term capital gain. What is Andrew and Marie's Net Investment Income tax?