C237 Taxation 1 Review master quiz
Amy's employer provides her with several fringe benefits. Which of the following are included in her taxable income?
Christmas bonus check
Which of the following taxes is regressive?
Federal Insurance Contributions Act (FICA)
How long must a capital asset be held to qualify for long-term treatment?
one year and one day
Wang, a licensed architect employed by Skye Architects, incurred the following unreimbursed expenses this year: Subscription to architectural journals $800 Dues to Professional Architecture Society 400 Tax return preparation 600 Investment advice 500 Wang's AGI is $75,000. What is his net deduction for miscellaneous itemized deductions?
$800 Misc itemized deductions 2% of AGI = $1500 this means I can only deduct anything past 1500 Total misc expenses 800 + 400+ 600 + 500= $2300 Miscellaneous itemized deductions are deductible only when the total exceeds 2% of AGI. $2300 - $1500AGI floor for misc expense= $800 excess over floor so this is the deductible amount
On July 25, 2014, Karen gives stock with a FMV of $7,500 and a basis of $8,000 to her nephew Bill. Karen had purchased the stock on March 18, 2014. Bill sold the stock on April 18, 2015 for $6,000. As a result of the sale, what must Bill report on his 2014 tax return?
($1,500) STCL
You may choose married filing jointly as your filing status if you are married and both you and your spouse agree to file a joint return. Which of the following facts would prevent you from being considered married for filing purposes?
You were married for several years, but your divorce became final in December.
Examples of income which are constructively received include all of the following except
a paycheck received from employer, when employer does not have funds in the bank to cover the check.
Arthur pays tax of $5,000 on taxable income of $50,000 while taxpayer Barbara pays tax of $12,000 on $120,000. The tax is a
proportional tax.
All of the following items are deductions for (not from) adjusted gross income except
qualifying contributions to individual retirement accounts. moving expenses. one-half of self-employment taxes paid. Exception: unreimbursed employee business expenses.
In 2012, Leo's wife died. Leo has two small children, ages 2 and 4, living at home whom he supports entirely. Leo does not remarry and is not claimed as a dependent on another's return during any of this period. In 2013, 2014, and 2015, Leo's most advantageous filing status is, respectively
surviving spouse, surviving spouse, head of household.
Taj operates a sole proprietorship, maintaining the business records under the cash-basis method of accounting. Taj performs services for a client and sends the client a bill for $12,000. Six months later, before payment is received by Taj, the client files bankruptcy, with no assets available for unsecured creditors such as Taj. Taj will deduct
$0 bad debts are only for accrual basis taxpayers that have previously recognized income and therefore have a basis in the receivable.
Mike, a dealer in securities and calendar-year taxpayer, purchased a security for inventory on November 18, 2014 for $15,000. The FMV on December 31, 2014 was $16,000. The security was sold on December 19, 2015 for $16,500. These transactions result in
$1,000 ordinary income in 2014; $500 ordinary income in 2015. 16 000- 15 000= 1000 unrealized gain= include in taxable income 16 500 - 16 000= 500 unrealized gain= taxable income
Terra Corp. purchased a new enterprise software system and incurred the following costs: Cost of the system $800,000 Installation of system 5,000 Testing of system 6,000 Initial training of employees 9,000 What is Terra Corp.'s basis in the software system?
$820,000 800 000+ 5000+ 6000 +9000= 820 000
Sarah contributes $25,000 to a church. Sarah's marginal tax rate is 35% while her average tax rate is 25%. After considering her tax savings, Sarah's contribution costs
$16,250. 25 000 x 35% marginal rate= $8750 savings 25 000 - 8750 = 16 250 contribution cost The marginal tax rate is of greater significance in measuring the tax effect for sarah's decision. The marginal tax rate is the percentage that is applied to an incremental amount of taxable income that is added to or subtracted from the tax base. If her marginal tax rate is 35%, she will save 35 cents for every $1 contributed to her church. The average tax rate is simply the total tax liability divided by taxable income. a- marginal tax rate is the tax rate applied to an incremental amount of taxable income that is added to the tax base. The marginal tax rate concept is useful for planning because it measures the tax effect of a proposed transaction. b- The average tax rate is computed by dividing the total tax liability by the amount of taxable income. This represents the average rate of tax for each dollar of taxable income. c- The effective tax rate is the total tax liability divided by total economic income.
Jordan paid $30,000 for equipment two years ago and has claimed total depreciation deductions of $15,600 for the two years. The cost of repairs during the same time period was $2,000 while a major overhaul which extended the life of the equipment cost $7,000. What is Jordan's adjusted basis in the equipment at the end of the two-year period?
$21,400 adjusted basis: cost of asset + liabilities + expenses - depreciation + capital improvement= adjusted basis: 30 000cost asset-15 600deprec + 7000capital improve= 21 400
In 2015, Sean, who is single and age 44, received $55,000 of gross income and had $5,000 of deductions for AGI and $4,600 of itemized deductions. Sean's taxable income is
$39 700 gross income 55 000 minus deduction for AGI 5000 minus standard deduction 2015 $6300 personal exemption 4000 -------------------------------------------------------- 39 700 NOTE: standard deduction 6300> itemized deduction 4600= use standard
Richard exchanges a building with a basis of $35,000, and subject to a liability of $25,000, for land with a FMV of $50,000 owned by Bill. Bill takes the building subject to the liability. What is the amount of Richard's realized gain?
$40,000 realized gain= amount realized - adjusted basis realized gain = (cash + FMV + liabilities assumed by buyer) - (cost of asset - depreciation + capital improvement realized gain= (50 000 + 25 000) - 35 000= 40 000
In 2015, Venkat, who is single and age 37, received $60,000 of gross income and had $6,800 of itemized deductions. Venkat's taxable income is
$49,200. gross income 60 000 itemized deduction 6800 personal exemption 4000 -------------------------------- taxable income 49 200
Frank and Marion, husband and wife, file separate returns. Frank and Marion live in a common law state. Frank's salary is $42,000 and Marion's salary is $46,000. Marion receives dividend income of $4,000 from stock inherited from her parents. Frank receives interest income of $1,000 from bonds purchased with his salary after marriage. Frank and Marion receive $3,200 dividend income from stock they purchased jointly. Marion's income would be
$51,600. MARION: Salary 46 000 dividend income 4000 dividend income from joint stock 1600 ---------------------------------------------- 51 600
During the current year, Tony purchased new car wash equipment for use in his service station business. Tony's costs in connection with the new equipment this year were as follows: Cost of the equipment $45,000 Sales tax on the equipment 4,000 Delivery charges 600 Installation and testing charges 3,000 Expenses of operating the equipment 2,000 What is Tony's basis in the car wash equipment?
$52,600 basis= 45 000+ 4000+600+3000= 52 600 not included expenses of operating equipment
Liz, who is single, lives in a single family home and owns a second single family home that she rented for the entire year at a fair rental rate. Liz had the following items of income and expense during the current year. Income: Gross salary and commissions from Ace Corporation $50,000 Rent received from tenant in Liz's rental house 13,000 Dividends received on her portfolio of stocks 5,000 Expenses: Unreimbursed professional dues 200 Subscriptions to newsletters recommending stocks 900 Taxes, interest and repair expenses on rental house 3,500 Depreciation expense on rental house 2,300 What is her adjusted gross income for the year?
$62,200 salary 50 000 rent 13 000 dividends 5000 ------------------------------ gross income 68 000 minus: *misc other espenses 2% : 0 taxes and interest 3500 depreciation 2300 ------------------------------------- 62 200 *misc expenses 2% 2 % AGI= 1360 total mis exp: 200 + 900=1100 it doesn't go over 2 % AGI so I can't deduct any of these expenses
A single taxpayer provided the following information for 2015: Salary $80,000 Interest on local government bonds (qualifies as a tax exclusion) 4,000 Allowable itemized deductions 13,000 What is taxable income?
$63,000 Salary:80 000 minus 4000 interest on goverment bonds minus 13 000 itemized deductions ---------------------------------------- taxable income 63 000
Ms. Marple's books and records for 2015 reflect the following information: Salary earned this year $65,000 Interest on savings account (credited to her account in 2015, withdrawn in 2016) 1,000 Interest on county bonds earned and collected in 2015 2,000 What is the amount Ms. Marple should include in her gross income in 2015?
$66,000 gross income 2015: 65 000 1000 ------------------- 66 000 interest on county bonds is an exclusion of income
Matt paid the following taxes in 2015: Real estate taxes on rental property he owns $4,000 Real estate taxes on his own residence 3,600 Federal income taxes 8,000 State income taxes 3,400 Local city income taxes 500 State sales taxes 700 What amount can Matt deduct as an itemized deduction on his tax return?
$7,500 deductible taxes: Real state taxes on hi own residence 3600 state income tax 3400 local city income taxes 500 total 7500 chose state income tax instead of sale tax because income tax is bigger deduction
Doug pays a county personal property tax on his automobile of $1,500. The $1,500 includes $800 based on the weight of the car and $700 based on the value of the car. How much of the tax can Doug deduct on his tax return?
$700 personal property taxes based on the value of the property(ad valorem) can be deducted. It tax is a combination of ordinary and ad valorem then de ad valorem part is deductible
If an individual with a marginal tax rate of 15% has a long-term capital gain, it is taxed at (CH 5)
0% individual tax rate ordinary income ---> regular long term rate 10% ---0% 15%---0% 25%----15% 28%-----15% 33%----15% 35%-----15% 39%----20%
If an individual with a marginal tax rate of 39.6% has a long-term capital gain, it is taxed at (CH 5)
20% individual tax rate ordinary income ---> regular long term rate 10% ---0% 15%---0% 25%----15% 28%-----15% 33%----15% 35%-----15% 39%----20%
Carter dies on January 1, 2014. A joint return election is made in 2014 and Marjorie properly qualifies as a surviving spouse for the two following years. Marjorie has one child that she claims as a dependent for this same period. The number of personal and dependency exemptions allowed Marjorie in 2014 and in 2015 is, respectively
3 and 2.
Taxable income for an individual is defined as
AGI reduced by deductions from AGI and personal and dependency exemptions.
Which tax service is usually deemed to be the most authoritative? (Tax Services: annotated: is organized by IRC section. and attopical :is organized by broad topic, including income taxes, estate and gift taxes, and excise taxes. The topically arranged subdivisions of this service are likely to encompass several IRC sections.)
All are equally authoritative.: -United States Tax Reporter: annotated -Standard Federal Tax Reporter:annottated - Federal Tax Coordinator 2d: topical NOTE: - Bloomberg BNA's Tax Management Portfolios: because the published portfolios do not cover all areas of the tax law, another service may be necessary to supplement the gaps in a portfolio's coverage
Alan files his 2015 tax return on April 1, 2016. His return contains no misstatements or omissions of income. The statute of limitations for changes to the return expires
April 15, 2019. NOTE: statute of limitations: limited time period in which to make such corrections. This time period is called the and prevents either the taxpayer or the IRS from changing a filed tax return after the time period has expired. - The general rule for the statute of limitations is three years from the later of the date the tax return was actually filed or its due date. - a six-year statute of limitations applies if the taxpayer omits items of gross income that in total exceed 25% of the gross income reported on the return. The statute of limitations remains open indefinitely if a fraudulent return is filed or if no return is filed.
tax research database
CHECKPOINT and INTELLICONNECT libraries and databases can be searched in four basic ways: By keyword By index By citation By content Differences: CHECKPOINT indicates how the case in question was cited, when INTELLICONNECT only lists the case for the researcher to read themselves. CHECKPOINT lists all citing cases, however INTELLICONNECT which just lists those that the editors believe will serve as precedent.
Which of the following individuals is most likely to be audited?
Correct: Marvella has a $145,000 net loss from her unincorporated business (a horse farm). She also received $950,000 salary as a CEO of a corporation. NOT: Jerry is a school teacher with two children earning $55,000 a year. He also receives $200 in interest income on a bank account. Lola has AGI of $35,000 from wages and uses the standard deduction. Melvin is retired and receives Social Security benefits. NOTE:Some examples of situations where individuals are more likely to be audited include the following: -Individuals who are sole proprietors and claim expenses in connection with their trade or businesses, especially if significant tax losses are incurred. -Itemized deductions exceeding an average amount for the person's income level -Filing of a refund claim by a taxpayer who has been previously audited, where substantial tax deficiencies have been assessed -Individuals who are self-employed with substantial business income or income from a profession (e.g., a medical doctor)
When returns are processed, they are scored to determine their potential for yielding additional tax revenues. This program is called
Discriminant Function System Selection of Returns for Audit The U.S. tax system is based on self-assessment and voluntary compliance. However, enforcement by the IRS is essential to maintain the integrity of the tax system. The IRS uses both computers and experienced personnel to select returns for examination. With respect to the use of the computer, a Discriminant Function System (DIF) is used to classify returns to be selected for audit. The DIF system generates a "score" for a return based on the potential for the return to generate additional tax revenue. After returns are scored under the DIF system, the returns are manually screened by experienced IRS personnel who decide which returns warrant further examination. In the aggregate, less than 1% of all individual returns are selected for examination each y
All of the following items are included in gross income except
Except: child support payments received. included: rent income interest earned on a bank account. alimony received.
The following taxes are deductible as itemized deductions with the exception of
Exception: federal income taxes. state income taxes.. local personal property taxes. foreign real property taxes.
Which of the following serves as the highest authority for tax research, planning, and compliance activities?
Internal Revenue Code
During the current year, Ivan begins construction of an office building and a hotel. He incurs $10,000 in property taxes during the construction of the office building and $15,000 for the hotel. Which of the following statements is true of the property taxes during the construction period?
Ivan may elect to capitalize the property taxes on one of the properties while deducting the property taxes on the other for each year.
All of the following statements are true except
LLCs are generally taxed as partnerships. the net income of C corporation is subject to double taxation because it is taxed at the entity level and dividends paid from the C corporation to individual shareholders is also taxed. the net income earned by a sole proprietorship is reported on the owner's individual income tax return. Not ture: the net income of an S corporation is subject to double taxation because it is taxed at the entity level and dividends paid from the S corporation to individual shareholders are also taxed.
Rita died on January 1, 2015 owning an asset with a FMV of $730,000 that she purchased in 2010 for $600,000. Bert inherited the asset from Rita. When Bert sells the asset for $800,000 on August 20, 2015, he must recognize a
LTCG of $70,000 inheritance: basis to beneficiary: FMV at date of death 730 000 730 000- 800 000= 70 000
All of the following items are deductions for adjusted gross income except
alimony paid. rent and royalty expenses. trade or business expenses. Exception: state and local income taxes
All of the following items are generally excluded from income except
Not Excluded: interest on corporate bonds. Excluded life insurance proceeds paid by reason of death. child support payments. interest on state and local government bonds. NOTE: List of mayor exclusions: -Gifts and inheritances -Life insurance proceeds -Welfare and certain other transfer payments -Certain scholarships and fellowships -Certain payments for injury and sickness - Personal physical injury settlements -Worker's compensation -Medical expense reimbursements -Certain employee fringe benefits -Health plan premiums -Group term life insurance premiums (limited) -Meals and lodging -Employee discounts -Dependent care -Certain foreign-earned income -Interest on state and local government bonds -Certain interest of Series EE bonds -Certain improvements by lessee to lessor's property -Child support payments -Property settlements pursuant to a divorce -Gain from the sale of a personal residence (limited) -Distributions from Roth retirement plans
Which of the following best describes the weight of a revenue ruling?
Regulations carry more weight than revenue rulings. " Final Treasury Regulations are presumed to be valid and have almost the same authoritative weight as the IRC." " revenue rulings, the IRS indicates the tax consequences of specific transactions encountered in practice. These rulings do not rank as high in the hierarchy of authorities as do Treasury Regulations or federal court cases. They simply represent the IRS's view of the tax law."
All of the following are executive (administrative) sources of tax law except
Revenue Rulings. Income Tax Regulations. Revenue Procedures. Not: Internal Revenue Code.---> legislative
Identify which of the following statements is true.
Tax planning is an integral part of both closed-fact situations and open-fact situations......................" TAx research for closed-fact situations and Tax planning for open fact situatios" This is the correct answer The Statements on Standards for Tax Services recommend that only written tax advice be provided to the client in all situations..................."Many firms require that a researcher's conclusions be communicated to the client in writing. Members or employees of such firms may answer questions orally, but their oral conclusions should be followed by a written communication. According to the AICPA's Statements on Standards for Tax Services" The first step in conducting tax research is to clearly understand the issues involved.........."Steps in tax research:1-Determine the facts. 2-Identify the issues (questions). 3-Locate the applicable authorities. 4-Evaluate the authorities and choose those to follow where the authorities conflict. 5-Analyze the facts in terms of the applicable authorities. 6-Communicate conclusions and recommendations to the client.
Which of the following factors is important in distinguishing between capital and revenue expenditures?
The expenditure restores the property. The expenditure improves the property, adding to the value of the property. The expenditure provides a betterment, adding to the value of the property.
Married couples will normally file jointly. Identify a situation where a married couple may prefer to file separately.
The spouse with lower income has substantial medical expenses. A couple is separated and contemplating divorce. One spouse can be held responsible for the entire tax liability
tax law
The term tax law as used by most tax advisors encompasses administrative and judicial interpretations in addition to the IRC. It also includes the meaning conveyed in reports issued by Congressional committees involved in the legislative process.
Tom and Alice were married on December 31 of last year. What is their filing status for last year?
They file as married joint or married separate
Which of the following bonds do not generate tax-exempt Federal income?
U.S. Treasury bonds
Speak Corporation, a calendar year cash basis taxpayer, sells packages of foreign language lessons to individuals planning to work overseas. In December 2015, it sold and received payment for $600,000 of 24-month lesson packages to be provided evenly through 2016 and 2017. Speak Corporation will recognize the $600,000 of income
all in 2015 when using cash basis income is reported in the year the taxpayer actually constructively receives the income rather than when it is earned
Which one of the following is a capital asset?
automobile used for personal purposes
During 2015 and 2016, Danny pays property taxes of $3,500 each year on a piece of land. During 2015, the land is vacant and unproductive. In 2016, Danny uses the land as a parking lot and generates $16,000 in income. Which of the following is true regarding the property taxes?
both acceptable: Deduct $3,500 each year. Capitalize $3,500 in 2015 and deduct $3,500 in 2016. NOTE: Capitalized costs are added to the property's basis. § 266 allows the taxpayer to elect to capitalize items that normally would be deductible: Interest and taxes incurred for personal property until it is placed in service ("PIS"). Property taxes, interest, and carrying charges on unimproved and unproductive real estate. Taxes, interest, and other expenses in the development of real property.
Assume Congress wishes to encourage healthy eating and is considering a deduction for broccoli purchases. In order to maximize the value of this tax deduction for taxpayers, Congress should provide for a
deduction for AGI.
Which of the following credits is considered a refundable credit?
earned income credit NOTE: Refundable -Withholding from wages and back-up withholding - Estimated tax payments - Overpayment of prior year's tax - Excess Social Security taxes paid - Earned income credit - Regulated investment company credit - Payments made with extension request - Child credit (in some cases) -------------------------------------------------------- Nonrefundable - Adoption expense credit - Credit for the elderly and disabled - Foreign tax credit - Child and dependent care credit - Business energy credit - Research and experimentation credit - Building rehabilitation credit - American opportunity and lifetime learning credits
Which of the following dependent relatives does not have to live in the same household as the taxpayer who is claiming head of household filing status?
father
Edward, a widower whose wife died in 2012, maintains a household for himself and his daughter who qualifies as his dependent. Edward's most favorable filing status for 2015 is
head of household.
The largest source of revenues for the federal government comes from
individual income taxes.
A Technical Advice Memorandum is usually
issued by the national office in response to an audit request.
The term "tax law" includes
judicial decisions. Treasury Regulations. Internal Revenue Code.
Which of the following documents is issued by the IRS to a specific taxpayer?
letter ruling
Courtney sells a cottage at the lake that the family had used for their summer vacations. The purchaser paid Courtney $100,000 and assumed the mortgage which had a principal balance of $50,000. Courtney had purchased the cottage five years ago for $$170,000. Courtney will recognize
no gain or loss. amount realized - adjusted basis= 100 000 + 50 000 -170 000= -20 000 loss losses from sale of personal use asset are not recognized
All of the following payments for medical items are deductible with the exception of the payment for
nonprescription medicine for treatment of a specific medical condition.
Deductions for AGI may be located
on the front page of Form 1040. on Schedule C as a deduction. on Schedule E as a deduction. NOTE : deductions from AGI are on schedule A on the back
All of the following are capital assets with the exception of
personal residence. corporate stock held for investment. a Rembrandt painting held in a private collection. Except: equipment used in a trade or busines
Final regulations can take effect on any of the following dates except
the effective date of the statutory language they interpret, provided they are issued within 18 months of the date of the change to the statute.
In order to shift the taxation of dividend income from a parent to a child,
the parent must transfer ownership of the stock to the child.
All of the following losses are deductible except
total worthlessness of securities. B. destruction of personal use property by fire, storm, or casualty. C. sale or exchange of business property. Except: decline in value of securities.
All of the following are deductible as medical expenses except
vitamins and health foods that improve a taxpayer's general health
Norah, who gives music lessons, is a calendar year taxpayer using the cash basis method of accounting. On October 1 of this year, she received $1,200 for a one-year contract beginning on that date to provide 10 lessons. She gave 6 lessons this year. How much should Norah include in income this year?
$1,200 when using cash basis income is reportedin the year the taxpayer actually constructively receives the income rather than when it is earned
In 2015, Carlos filed his 2014 state income tax return and paid taxes of $800. Also in 2015, Carlos's employer withheld state income tax of $750 from Carlos's salary. In 2016, Carlos filed his 2015 state income tax return and paid an additional $600 of state income tax due for 2015. How much state income tax can Carlos deduct on his 2015 federal income tax return for state income tax?
$1,550 in 2015: state income tax paid 800 state income tax whitheld 750 total in 2015= 1550 ignore 2016 payments
On July 25, 2014, Marilyn gives stock with a FMV of $7,500 and a basis of $5,000 to her nephew Darryl. Marilyn had purchased the stock on March 18, 2014. Darryl sold the stock on April 18, 2015 for $7,800. As a result of the sale, what will Darryl report on his 2014 tax return?
$2,800 LTCG gift : Tax payer donee basis is: gain basis :adjusted basis of donor= 5000 loss basis: lower of FMV at date of gift or adjusted basis of donor 7500> 5000 donor basis compute realized gain or loss realized gain/loss= FMV property received - basis donor basis 5000 - 7800= 2800 long term gain
Tasneem, a single taxpayer has paid the following amounts in 2015: State income taxes $10,000 Property taxes on home 4,000 Mortgage interest on home 12,000 Charitable contributions 14,000 Tasneem's AGI is $360,250. What is her net itemized deduction allowed?
$36,940 state taxes = 10 000 property taxes= 4000 Mortage interest = 12 000 charities= 14 000 total= 40 000 - 3060 phase out deduction total= 36 940 -Itemized deductions are phased out if AGI is too high -The reduction is the lower of: 1) 3% (AGI - threshold) or 2) 80 % (taxes +home mortage interest + charitable contributions + 2% misc deductions)* * medical is not included 1) 0.03 x (360 250 - 258 250) = 3060 2) 0.8 x ( 40 000) = 32 000 3060 < 32 000 => use $3060 For 2015 this threshold amount is AGI of: $309,900 for individuals filing married filing jointly and surviving spouses, $258,250 for single taxpayers, $284,050 for heads of households, and $154,950 for individuals filing married filing separately. Explanation: This overall reduction applies to all itemized deductions other than medical expenses, investment interest, casualty losses, and wagering losses. The amount of the reduction is the lesser of (1) 3% of the amount the individual's AGI for the year exceeds the threshold level, or (2) 80% of the amount of the taxpayer's itemized deductions other than medical expenses, investment interest, casualty losses, and wagering losses. Furthermore, the reduction is applied after taking into account the other limitations on itemized deductions (e.g., the 2% of AGI limitation on miscellaneous itemized deductions).
Dennis purchased a machine for use in his business. Mr. Dennis' costs in connection with this purchase were as follows: Note to seller $33,000 Cash paid to seller 5,000 State sales tax 2,400 Freight to place of business 1,500 Wages paid to workers to install machine 4,200 What is the amount of Mr. Dennis' basis in the machine?
$46,100 basis= 33 000 + 5000 + 2400 + 1500 + 4200= 46 100
Erin's records reflect the following information: 1. Paid $200 dues to a fraternal organization (such as the Elks Club) 2. Donated stock having a fair market value of $3,500 to a qualified charitable organization. She purchased the stock 2 years earlier for $3,000. 3. Paid $1,600 cash to qualified public charitable organizations Erin's adjusted gross income for this year was $50,000. What is the amount of her charitable contribution deduction for the year?
$5,100 Charitable deductions: Stock at FMV 3500 Public organization 1600 total deduction 5100
Allison buys equipment and pays cash of $50,000, signs a note of $10,000 and assumes a liability on the property for $3,000. In addition, Allison pays an installation cost of $500 and a delivery cost of $800. Allison's basis in the asset is
$64,300. basis= cost of asset + liabilities + acquisition expenses - depreciation + capital improvements= basis= 50 000+ 10 000+3000 + 500+800 = 64 300
During the year Jason and Kristi, cash basis taxpayers, paid the following taxes: State gift tax $1,000 Property tax on home in the United States 4,100 State income tax (withholdings) 3,000 Estimated federal income tax 4,500 Estimated state income tax (paid by check) 800 Special assessment by city for sidewalks and street lighting on their street 2,000 What amount can Kristi and Jason claim as an itemized deduction for taxes on their federal income tax return in the current year?
$7,900 deductible taxes: propety tax on home 4100 state income tax whitholdings 3000 estimated income tax 800 total deductible 7900
Todd and Hillary, husband and wife, file separate returns. Todd and Hillary live in a community property state that considers separate property income to be community income. Todd's salary is $82,000 and Hillary's salary is $80,000. Hillary receives dividend income of $7,000 from stock inherited from her parents. Todd receives interest income of $5,000 from bonds purchased with his salary after marriage. Todd and Hillary receive $10,000 dividend income from stock they purchased jointly. Todd's income would be
$92,000. TODD: 80 000 salary 5000 interest income 5000 from joint stock ------------------------------------------- $92 000
On July 25, 2014, Karen gives stock with a FMV of $7,500 and a basis of $8,000 to her nephew Bill. Karen had purchased the stock on March 18, 2014. Bill sold the stock on April 18, 2015 for $6,000. As a result of the sale, what must Bill report on his 2014 tax return?
($1,500) STCL Tax payer donee basis is: gain basis :adjusted basis of donor=7500 loss basis: lower of FMV at date of gift or adjusted basis of donor 8000> 7500 donor basis . Sold for 6000 - 7500 basis= 1500
Last year, Abby loaned Pat $10,000 as a gesture of their friendship. Although Pat had signed a note payable that contained interest payments and a maturity date, the loan had not been repaid this year when Pat died insolvent. For this year, assuming that the loan was bona fide, Abby should account for nonpayment of the loan as a(n)
short-term capital loss. NON business bad debt include debts provided by a lender that is not in the business of lending (loans tor friends and family), they are always treated as a short term capital loss, no deduction is allowed.
