For an S corporation, shareholders are taxed on their pro-rata share of the corporation’s income, which passes through to them annually. This income is taxable in the year the S corporation earns it, irrespective of any actual cash distributions (making option B incorrect). The inherited basis is generally the fair market value at the date of the decedent’s death, not book value (C is wrong). The S election is made at the corporate level, not by individual shareholders (D is incorrect).

For 2023, Section 179 allows immediate expensing of the full $2,200 cost of the laptop (subject to limits not exceeded here), which is more advantageous than the first-year MACRS deduction under regular depreciation (option C). The standard mileage rate (65.5 cents per mile for 2023) typically yields a larger deduction than the actual expense method for a newer, efficient car unless the car has exceptionally high actual operating costs. Therefore, combining the immediate expensing of the asset (Section 179) with the standard mileage rate provides the optimal current-year deduction for this scenario.

A CP2000 is not a bill but a proposed adjustment. Since the client acknowledges the income was omitted, the correct professional advice is to respond to the notice agreeing with the changes. This resolves the matter efficiently without the need to file a separate amended return (option B is less direct). Option A is incorrect as the statute is generally three years from the filing date, which likely hasn’t passed for a return from two years ago, and ignoring an IRS notice is never advisable. Option D is for disputing the notice, which is not applicable here as the client agrees with the finding.

For 2023, the Lifetime Learning Credit (LLC) phases out for single filers between $80,000 and $90,000 of MAGI. At $180,000 AGI, Jordan is well above this limit and cannot claim the LLC (and the American Opportunity Credit phases out even lower). The student loan interest deduction phases out for single filers between $75,000 and $90,000 of MAGI. At $180,000 AGI, Jordan is also completely phased out of this deduction. Therefore, Jordan receives no tax benefit for either expense, making the maximum combined benefit $0.

Under the law enacted in 2017 (and subsequent amendments), for NOLs arising in tax years beginning after December 31, 2020, the carryback is generally eliminated (with exceptions for certain farming losses). These NOLs can be carried forward indefinitely. However, when used, they are limited to offsetting up to 80% of taxable income (computed without regard to the NOL deduction) in any given year. This 80% limit is a key current rule distinguishing post-2020 NOLs from pre-2018 NOLs.

For a child under 18 employed by a parent in a sole proprietorship (or a partnership owned solely by the parents), the wages are deductible as a legitimate business expense. A key advantage is that these wages are exempt from Social Security and Medicare (FICA) taxes, and also from federal unemployment (FUTA) taxes until the child turns 21. The son would still owe income tax on wages over his standard deduction. Option B is incorrect regarding FICA. Option C describes a gift, not wages for services, which would not be deductible. Option D is wrong as family members generally do not qualify for the WOTC.

A SIMPLE IRA is designed for small businesses (100 or fewer employees). It requires employer contributions each year, but the employer has a choice: either a 2% non-elective contribution for all eligible employees or a dollar-for-dollar match up to 3% of compensation. It is easy to set up and administer, has no complex nondiscrimination testing, and allows owner contributions. Critically, it provides more predictability than a SEP IRA (option B), where any contribution made for owners must be made proportionally for all employees, creating an obligation in years contributions are made. A safe harbor 401(k) (option A) requires mandatory employer contributions. A defined benefit plan (D) is complex and requires annual funding.

IRC Section 2503(e) provides an unlimited exclusion from gift tax for amounts paid on behalf of an individual directly to an educational institution for tuition or to a medical care provider for medical expenses. These payments are not considered gifts and do not count against the annual exclusion ($17,000 for 2023) or the lifetime exemption. Therefore, the $50,000 payment is entirely excluded, requires no gift tax return (Form 709) for this purpose, and incurs no gift tax, even with a depleted lifetime exemption. Option B is incorrect because the annual exclusion is not used for such direct payments. Option A is wrong as the payment is excluded from tax.

Under current tax law (post-TCJA), the deduction for business meals is generally limited to 50% of the cost. Therefore, the $12,000 in client meals is deductible as $6,000 ($12,000 * 50%). The cost of entertainment, amusement, or recreation (like tickets to events) is generally not deductible at all. Therefore, the $8,000 for client entertainment is $0 deductible. The total deductible amount is $6,000 (meals) + $0 (entertainment) = $6,000. However, a special rule allows a 50% deduction for business meals that are furnished as part of an entertainment activity if purchased separately from the entertainment. The question states the $12,000 is for “meals with clients” and the $8,000 is separately for “client entertainment,” implying they are distinct. Thus, the total is $6,000. If the meals were part of the entertainment event and not separately stated, they would also be nondeductible. Given the phrasing, the best answer is $6,000. (Note: The provided options and the calculation based on a strict reading of common exam questions yield $6,000. Some practitioners might argue for a different interpretation if meals and entertainment were combined, but the question lists them separately.)

For an S corporation, shareholders are taxed on their pro-rata share of the corporation’s income, which passes through to them annually. This income is taxable in the year the S corporation earns it, irrespective of any actual cash distributions (making option B incorrect). The inherited basis is generally the fair market value at the date of the decedent’s death, not book value (C is wrong). The S election is made at the corporate level, not by individual shareholders (D is incorrect).0