Individual Taxes Exam 2 revised

During 2023, William Clark was assessed a deficiency on his 2022 federal income tax return. As a result of this assessment, he was required to pay $1,120, determined as follows: Additional tax $900 Late filing penalty 60 Negligence penalty 90 Interest 70 What portion of the $1,120 qualifies as itemized deductions for 2023?

$0

In June of the current year, Susan's mother gave her 100 shares of a listed stock. The donor's basis for this stock, which she bought 10 years ago, was $4,000, and market value on the date of the gift was $3,000. Susan sold this stock in July of the current year for $3,500. The donor paid no gift tax. What was Susan's reportable gain or loss in the current year on the sale of the 100 shares of stock gifted to her?

$0 Gain Loss Amount realized $3,500 $3,500 Less: Basis (4,000) (3,000) No gain No loss

Mr. Anderson, a sole proprietor, purchased $12,000 worth of office equipment and furniture in 2023 for use in his business. He elected to take the maximum Sec. 179 deduction. What is Mr. Anderson's basis for the MACRS computation?

$0 Original cost $12,000 Less: Sec. 179 deduction (12,000) Depreciable basis $ 0

Sol and Julia Crane, both age 48, are married and filed a joint return for 2023. Sol received a distribution of $80,000 from his employer's pension plan. In addition, Sol and Julia earned interest of $3,000 in 2023 on their joint savings account. Julia is not employed, and the couple had no other income. On January 15, 2023, Sol contributed $3,000 to an IRA for himself and $3,250 to an IRA for his spouse. The allowable IRA deduction in the Cranes' 2023 joint return is

$0 The allowable deduction for contributions to an IRA is limited to the lesser of $6,500 or compensation. since compensation is $0, the allowable IRA deduction is limited to $0

Browne, a self-employed taxpayer, had 2023 business taxable income of $1,100,000 prior to any expense deduction for equipment purchases. In 2023, Browne purchased and placed into service, for business use, office machinery costing $1,175,000. This was Browne's only 2023 capital expenditure. Browne's business establishment was not in an economically distressed area. Browne made a proper and timely expense election to deduct the maximum amount. Browne was not a member of any pass-through entity. What is Browne's deduction under the election?

$1,100,000

Jim and Carolyn, who are married, establish a Coverdell Education Savings Account to pay for the future college expenses of their infant son. They file jointly and have a modified AGI of $100,000. What is the maximum contribution they can make to a CESA in the current year?

$2,000 Joint filers with modified AGI below $190,000 may contribute up to $2,000 per beneficiary (child) per year.

In 2023, Cole earned $3,000 in wages, incurred $1,000 in unreimbursed employee business expenses, paid $400 as interest on a student loan, and contributed $100 to his church. What is Cole's minimum adjusted gross income?

$2,600 ($3,000 wages - $400 student loan interest deduction).

In 2023, Moore, a single taxpayer, had $50,000 in adjusted gross income. During 2023, she contributed $23,000 in cash to her church. She had a $10,000 charitable contribution carryover from her 2022 church contribution. What was the maximum amount of properly substantiated charitable contributions that Moore could claim as an itemized deduction for 2023?

$30,000 (50,000 x 60%)

Bluff purchased equipment for business use for $35,000 and made $1,000 of improvements to the equipment. After deducting depreciation of $5,000, Bluff gave the equipment to Russett for business use. At the time the gift was made, the equipment had a fair market value of $32,000. Ignoring gift tax consequences, what is Russett's basis in the equipment?

$31,000 ($35,000 cost + $1,000 improvements - $5,000 depreciation). Thus, Russett's basis is equal to Bluff's adjusted basis of $31,000.)

ustin Peter earned a salary of $30,000 during 2023. During the year, he was required by his employer to take several overnight business trips, and he received an expense allowance of $1,500 for travel and lodging. In the course of these trips, he incurred the following expenses which were either adjustments to income or deductions from adjusted gross income. Travel $1,100 Lodging 500 Entertainment of customers 400 What is Justin's adjusted gross income if he does not account to his employer for the expenses?

$31,500 ($30,000 salary + $1,500 expense allowance)

Surendra's personal residence originally cost $340 000 (ignoring the value of the land). After living in the house for five years, he converts it to rental property. At the date of conversion, the fair market value of the house is $320,000 b. Depreciation.

$320,000, the same as the basis for loss.

In 2023, a self-employed taxpayer had gross income of $57,000. The taxpayer paid self-employment tax of $8,000, health insurance of $6,000, and $5,000 of alimony per a 2018 divorce agreement. The taxpayer also contributed $2,000 to a traditional IRA. What is the taxpayer's adjusted gross income?

$40,000 [$57,000 GI - $4,000 SE tax paid - $6,000 health insurance - $5,000 alimony (paid pursuant to a pre-2019 divorce) - $2,000 contribution to IRA]

Emil Gow owns a two-family house that has two identical apartments. Gow lives in one apartment and rents out the other. In 2023, the rental apartment was fully occupied, and Gow received $7,200 in rent. During the year ended December 31, 2023, Gow paid the following: Real estate taxes $6,400 Painting of rental apartment 800 Annual fire insurance premium 600 In 2023, depreciation for the entire house was determined to be $5,000. What amount should Gow include in his adjusted gross income for 2023?

$400 Gross rental income $ 7,200 Less: Rental expense Maintenance and repair $ 800 Depreciation ($5,000 × 1/2) 2,500 Real estate tax ($6,400 × 1/2) 3,200 Insurance ($600 × 1/2) 300 (6,800) Net rental income $ 400

Greller owns 100 shares of Arden Corp., a publicly traded company, which Greller purchased on January 1, Year 1, for $10,000. On January 1, Year 3, Arden declared a 2-for-1 stock split when the fair market value (FMV) of the stock was $120 share. Immediately following the split, the FMV of Arden stock was $62 per share. On February 1, Year 3, Greller had his broker specifically sell the 100 shares of Arden stock received in the split when the FMV of the stock was $65 per share. What is the basis of the 100 shares of stock Greller sold?

$5,000 (100 shares × $50)

Smith paid the following unreimbursed medical expenses: Dentist and eye doctor fees $ 5,000 Contact lenses 500 Facial cosmetic surgery to improve Smith's personal appearance (surgery is unrelated to personal injury or congenital deformity) 10,000 Premium on disability insurance policy to pay him if he is injured and unable to work 2,000 What is the total amount of Smith's tax-deductible medical expenses before the adjusted gross income limitation?

$5,500 ($5,000 dentist and eye doctor fees + $500 contact lenses)

Jamal and Ronee Smith, both age 49, are married and filed a joint return for 2023. Jamal earned a salary of $100,000 in 2023 from his job at Sunshine Corporation. Ronee earned $7,500 from her part-time job at Rain Corporation. On March 1, 2023, Jamal contributed $6,500 to a Roth IRA for himself. What is the maximum contribution Ronee may make in 2023 to her Roth IRA?

$6,500 Since the Smiths' AGI does not exceed $218,000, Ronee is permitted her maximum contribution of $6,500 (for taxpayers under the age of 50) for a total yearly IRA contribution of $13,000 for the married couple.

Ms. Willow operated a small manufacturing plant. She took delivery on a new plastic mold stamping machine. Her costs included the following: Cost of machine $88,000 Sales tax 4,000 Freight charges to deliver property to her 1,500 Excise taxes 2,000 What is Ms. Willow's basis in the machine?

$95,500 (Purchase price $88,000 Sales tax 4,000 Freight charges 1,500 Excise taxes 2,000 Basis in equipment $95,500)

On January 1, Fast, Inc., entered into a covenant not to compete with Swift, Inc., for a period of 5 years, with an option by Swift to extend it to 7 years. What is the amortization period of the covenant for tax purposes?

15 years

A calendar-year individual is eligible to contribute to a deductible IRA. The taxpayer obtained a 4-month extension to file until August 15 but did not file the return until November 1. What is the latest date that an IRA contribution can be made in order to qualify as a deduction on the prior year's return?

April 15

In the current year, an unmarried individual with modified adjusted gross income of $25,000 paid $1,000 interest on a qualified education loan entered into on July 1. How may the individual treat the interest for income tax purposes?

As a $1,000 deduction to arrive at AGI for the year.

How may taxes paid by an individual to a foreign country be treated?

As a credit against federal income taxes due.

Powerful Partnership purchased real property in Year 1. In Year 4, the city where the property is located assessed taxes for sidewalks. How should Powerful Partnership treat the accrued taxes for this local improvement?

Capitalize the taxes by adding them to the property's adjusted basis.

Charitable contributions subject to the 50% limit that are not fully deductible in the year made may be

Carried forward 5 years.

Nichole, who is single and uses the cash method of accounting, lives in a state that imposes an income tax. In April 2023, she files her state income tax return for 2022 and pays an additional $1,000 in state income taxes. During 2023, her withholdings for state income tax purposes amount to $7,400, and she pays estimated state income tax of $700. In April 2024, she files her state income tax return for 2023, claiming a refund of $1,800. Nichole receives the refund in August 2024. Nichole has no other state or local tax expenses. a. Assuming that Nichole itemized deductions in 2023, how much may she claim as a deduction for state income taxes on her Federal return for calendar year 2023 (filed April 2024)? b. Assuming that Nichole itemized deductions in 2023 (which totaled $20,000), how will the refund of $1,800 that she received in 2024 be treated for Federal income tax purposes? c. Assume that Nichole itemized dedu

Cash basis taxpayers deduct state income taxes in the year paid, regardless of the year to which the payment relates, and include refunds as income in the year received (subject to the tax benefit rule). a. $9,100 ($1,000+$7,400+$700) b. $1,800 included in income in 2024 because of the tax benefit rule c. $1,800 included in income in 2024 but also show a state income tax payment in 2024d. $0 included in income in 2024 because she received no tax benefit in 2023

In January of Year 1, Joan Hill bought one share of Orban Corp. stock for $300. On March 1, Year 4, Orban distributed one share of a new class of preferred stock for each share of common stock held. This distribution was nontaxable. On March 1, Year 4, Joan's one share of common stock had a fair market value of $450, while the preferred stock had a fair market value of $150. After the distribution of the preferred stock, Joan's bases for her Orban stocks are

Common $225 ($450 ÷ $600) × $300 Preferred $75 ($150 ÷ $600) × $300

Emma Doyle is employed as a corporate attorney. For calendar year 2023, she had AGI of $75,000 and paid the following medical expenses: Medical insurance premiums $3,700 Doctor and dentist bills for Bob and April (Emma's parents) 6,800 Doctor and dentist bills for Emma 5,200 Prescription medicines for Emma 400 Nonprescription insulin for Emma 350 Bob and April would qualify as Emma's dependents except that they file a joint return. Emma's medical insurance policy does not cover them. Emma filed a claim for reimbursement of $2,800 of her own expenses with her insurance company in December 2023 and received the reimbursement in January 2024. What is Emma's maximum allowable medical expense deduction for 2023? Prepare a memo for your firm's tax files in which you document your conclusions.

Emma can a claim medical expense deduction for the current year as follows: Medical insurance premiums $3,700 Doctor and dentist bills for Bob and April 6,800 Doctor and dentist bills for Emma 5,200 Prescription medicine for Emma 400 Nonprescription insulin for Emma 350 Total medical expenses $16,450 Minus $75,000 AGI X 7.5% ($5,625) Deductible portion of medical expenses $10,825 Although Bob and April cannot be claimed as Emma's dependents, they could have been had they not filed a joint return. Therefore, medical expenses incurred on their behalf qualify for the medical expense deduction. Insulin is an exception to the rule that nonprescription drugs do not qualify as medical expenses. The insurance recovery was not received until 2024. Therefore, it has no effect on the medical expense deduction for 2023.

Which of the following is not an itemized deduction?

Employee business expenses.

In Year 1, Farb, a cash-basis individual taxpayer, received an $8,000 invoice for personal property taxes. Believing the amount to be overstated by $5,000, Farb paid the invoiced amount under protest and immediately started legal action to recover the overstatement. In November Year 2, the matter was resolved in Farb's favor, and he received a $5,000 refund. Farb itemizes deductions on his tax returns. Which of the following statements is true regarding the deductibility of the property taxes?

Farb should deduct $8,000 in his Year 1 income tax return and report the $5,000 refund as income in his Year 2 income tax return.

This year, Nadia donates $4,000 to Eastern University's athletic department. The payment guarantees that Nadia will have preferred seating at football games near the 50-yard line. Assume that Nadia subsequently buys four $100 game tickets. How much can she deduct as a charitable contribution to the university's athletic department?

Generally, when a donor derives a tangible benefit from a contribution, he or she cannot deduct the value of the benefit. That is the case here. Nadia cannot deduct any portion of the $4,000donation since it relates to getting preferred seating at an athletic event(here, football games).

The 2023 deduction by an individual taxpayer for interest on investment indebtedness is

Limited to the taxpayer's 2023 net investment income.

During 2023, Danny, a calendar-year taxpayer, acquired and placed in service the following business assets: January: Delivery trucks $ 50,000 March: Warehouse building 150,000 June: Computer system 30,000 September: Automobile 30,000 November: Office equipment 90,000 Which convention(s) is used to figure Danny's depreciation for 2023?

Mid-quarter for all assets except the warehouse building, which uses the mid-month.

Paul suffers from emphysema and severe allergies and, upon the recommendation of his physician, has a dust elimination system installed in his personal residence. In connection with the system, Paul incurs and pays the following amounts during 2023: Doctor and hospital bills $ 4,500 Dust elimination system 10,000 Increase in utility bills due to the system 450 Cost of certified appraisal 300 In addition, Paul pays $750 for prescribed medicines. The system has an estimated useful life of 20 years. The appraisal was to determine the value of Paul's residence with and without the system. The appraisal states that his residence was worth $350,000 before the system was installed and $356,000 after the installation. Paul's AGI for the year was $50,000. How much is Paul's medical expense deduction in 2023?

Only $4,000 qualifies since $6,000 of the $10,000of the dust elimination system increased the value of Paul's residence. The total medical expense is $9,700 ($4,000 + $450 additional operating costs +$4,500 doctor and hospital bills + $750 prescriptions). The $300 appraisal fee is not deductible. Paul's medical expense deduction is $5,950 [$9,700 - 7.5% X $50,000AGI].

Alicia sold her personal residence to Rick on June 30 for $300,000. Before the sale, Alicia paid the real estate tax of $4,380 for the calendar year. For income tax purposes, the deduction is apportioned as follows: $2,160 to Alicia and $2,220 to Rick. What is Rick's basis in the residence?

Purchase price of the house $300,000 Taxes paid by Alicia but deductible by Rick 2,220 Rick's basis $297,780

Under the modified accelerated cost recovery system (MACRS) of depreciation for property placed in service after 1986,

Salvage value is ignored for purposes of computing the MACRS deduction.

Liz had AGI of $130,000 in 2023. She donated Bluebird Corporation stock with a basis of $10,000 to a qualified charitable organization on July 5, 2023. a. What is the amount of Liz's deduction assuming that she purchased the stock on December 3, 2022, and the stock had a fair market value of $17,000 when she made the donation? b. Assume the same facts as in part (a), except that Liz purchased the stock on July 1, 2020. c. Assume the same facts as in part (a), except that the stock had a fair market value of $7,500 (rather than $17,000) when Liz donated it to the charity.

The deduction for a contribution of long-term capital gain property is based upon fair market value, while the deduction for a contribution of ordinary income property is equal to the lesser of the adjusted basis or the fair market value. a. Because Liz did not hold the stock for the long-term holding period, it is short-term capital gain property that is subject to the rules for ordinary income property. Therefore, her deduction is limited to $10,000. b. Liz held the stock for the long-term holding period, so it is long-term capital gain property. Therefore, her deduction is equal to the fair market value of the stock, $17,000. c. The deduction for a contribution of ordinary income property is the lower of fair market value or adjusted basis. Therefore, Liz's deduction is$7,500.

The basis in property inherited from a decedent may be determined as follows:

The fair market value at the date of death or the fair market value at an alternative valuation date.

Which one of the following expenditures qualifies as a deductible medical expense for tax purposes?

Transportation to physician's office for required medical care.

Which of the following types of costs are required to be capitalized under the Uniform Capitalization Rules of Code Sec. 263A?

Warehousing

Liam owns a personal use boat that has a fair market value of $35,000 and an adjusted basis of $45,000. Liam's AGI is $100,000. Calculate the realized and recognized gain or loss if: a. Liam sells the boat for $35,000. b. Liam exchanges the boat for another boat worth $35,000.

a. Amount realized $35,000 Less: adjusted basis (45,000) Realized loss $(10,000) Recognized loss $ 0 Realized losses on the sale or exchange of personal use assets are not deductible. b. Same result as in part (a) above.

Roberto has received various gifts over the years and has decided to dispose of several of these assets. What is the recognized gain or loss from each of the following transactions, assuming that no Federal gift tax was paid when the gifts were made? a. In 1988, he received land worth $32,000. The donor's adjusted basis was $35,000. Roberto sells the land for $95,000 in 2023.

a. Basis for gain = $35,000; $95,000 - $35,000 adjusted basis = $60,000recognized gain.

On December 28, 2023, Kramer sells 150 shares of Lavender, Inc. stock for $77,000. On January 10, 2024, he purchases 100 shares of the same stock for $82,000. a. Assuming that Kramer's adjusted basis for the stock sold is $65,000, what is his recognized gain or loss? What is his basis for the new shares?

a. Kramer has a $12,000 ($77,000 - $65,000adjusted basis) recognized taxable capital gain. The adjusted basis for the stock purchased on January 10, 2024, is $82,000.

As sole heir, Nadia receives all of Mary's property (adjusted basis of $11,400,000 and fair market value of $13,820,000). Six months after Mary's death, the fair market value is $13,835,000. a. Can the executor of Mary's estate elect the alternate valuation date and amount? Explain.

a. No, the executor cannot elect the alternate valuation date and amount. To do so, the following requirements must be satisfied: The election must result in the reduction of the value of the gross estate. The election must result in the reduction of the state tax liability.

Kareem bought a rental house in March 2018 for $300,000, of which $50,000 is allocated to the land and $250,000 to the building. Early in 2020, he had a tennis court built in the backyard at a cost of $7,500. Kareem has deducted $30,900 for depreciation on the house and $1,300 for depreciation on the court. In January 2023, he sells the house and tennis court for $330,000 cash. a. What is Kareem's realized gain or loss? b. If an original mortgage of $80,000 is still outstanding and the buyer assumes the mortgage in addition to the cash payment, what is Kareem's realized gain or loss? c. If the buyer takes the property subject to the $80 000 mortgage rather than assuming it, what is Kareem's realized gain or loss?

a. Original basis of land $ 50,000 Original basis of building 250,000 Less: Depreciation (30,900) Adjusted basis of building and land $269,100 Original basis of tennis court $ 7,500 Less: Depreciation (1,300) Adjusted basis of tennis court $ 6,200 Amount realized $330,000 Less: Adjusted basis (275,300) Realized gain $ 54,700 b. Amount realized [$330,000(cash) + $80,000(mortgage)] $410,000 Less: Adjusted basis (275,300) Realized gain $134,700 c. Same answer as in part b.

Louis owns three pieces of land with an adjusted basis as follows: parcel A, $75,000; parcel B, $125,000; and parcel C, $175,000. Louis sells parcel A to his uncle for $50,000, parcel B to his partner for $120,000, and parcel C to his mother for $150,000. a. What is the recognized gain or loss from the sale of each parcel? b. If Louis's uncle eventually sells his land for $90,000, what is his recognized gain or loss? c. If Louis's partner eventually sells his land for $130,000, what is his recognized gain or loss?

a. Parcel A: $50,000-$75,000 =$25,000 recognized loss Parcel B: $120,000-$125,000 =$5,000 recognized loss Parcel C: $150,000 - $175,000 =$25,000 realized loss Not recognized loss under Section 267

Surendra's personal residence originally cost $340 000 (ignoring the value of the land). After living in the house for five years, he converts it to rental property. At the date of conversion, the fair market value of the house is $320,000. As to the rental property, calculate Surendra's basis for: a. Loss.

a. Surendra's basis for loss is $320,000, the lower of the adjusted basis of $340,000or the fair market value at the date of the conversion of $320,000.

Ricky owns stock in Dove Corporation. His adjusted basis for the stock is $90,000. During the year, he receives a distribution from the corporation of $75,000 that is a return of capital (i.e., Dove has no earnings and profits). a. Determine the tax consequences to Ricky

a. The $75,000 distribution is labeled are turn of capital because Dove has no earnings and profits. Ricky reduces the basis of his stock by $75,000 to $15,000($90,000 adjusted basis - $75,000 return of capital distribution)

Ramon had AGI of $180,000 in 2023. He is considering making a charitable contribution this year to the American Heart Association, a qualified chari- table organization. Determine the current allowable charitable contribution deduction in each of the following independent situations, and indicate the treatment for any amount that is not deductible currently. Identify any planning ideas to minimize Ramon's tax liability. a. A cash gift of $95,000. b. A gift of OakCo stock worth $95,000 on the contribution date. Ramon had acquired the stock as an investment two years ago at a cost of $84 000. c. A gift of a painting worth $95,000 that Ramon purchased three years ago for I $60 000. The charity has indicated that it would sell the painting to generate cash to fund medical research.

a. The cash gift of $95,000 is fully deductible as a charitable contribution. His deduction is limited to $108,000(60% of $180,000 AGI). Thus, the entire amount is deductible. b. Ramon's value for the contribution is $95,000, the fair market value of the stock. However, the30 percent ceiling applies to contributions of appreciated capital gain property to a public charity. As a result, the deduction is limited to$54,000 (30% of $180,000 AGI). The remaining$41,000 ($95,000 − $54,000) can be carried forward for five years and deducted in those years, subject to the same percentage limitations. c. In making a gift of capital gain property that also is tangible personalty, which is put to an unrelated use by the charity, the charitable contribution deduction is limited to the adjusted basis. Therefore, the contribution is valued at $60,000. The amount is fully deductible in the current year because the gift is below the applicable 50% of AGI limitation.

Donna owns 800 shares of common stock in Macaw Corporation (adjusted basis of $40 000). She receives a 5% stock dividend when the stock is selling for $60 per share. a. How much gross income must Donna recognize because of the stock dividend?

a. Unless shareholders have the option to receive cash, the stock dividend is nontaxable. Therefore, Donna has no gross income from the receipt of the stock dividend.

Ricky owns stock in Dove Corporation. His adjusted basis for the stock is $90,000. During the year, he receives a distribution from the corporation of $75,000 that is a return of capital (i.e., Dove has no earnings and profits). b. Assume instead that the amount of the distribution is $150,000. Determine the tax consequences to Ricky.

b. As in (a), the $150,000 distribution is treated as a return of capital because Dove has no earnings and profits. Ricky has a capital gain calculated as follows: Amount realized $150,000Less: Adjusted basis (90,000) Realized gain $60,000Recognized gain $60,000The basis in the stock is reduced to $0.

Roberto has received various gifts over the years and has decided to dispose of several of these assets. What is the recognized gain or loss from each of the following transactions, assuming that no Federal gift tax was paid when the gifts were made? b. In 1993, he received stock in Gold Company. The donor's adjusted basis was $19,000. The fair market value on the date of the gift was $34,000. Roberto sells the stock for $40,000 in 2023.

b. Basis for gain = $19,000; $40,000 - $19,000 adjusted basis = $21,000recognized gain.

Donna owns 800 shares of common stock in Macaw Corporation (adjusted basis of $40 000). She receives a 5% stock dividend when the stock is selling for $60 per share. b. What is Donna's basis for her 840 shares of stock?

b. Donna must allocate the $40,000 basis for her original 800 shares of common stock to the 840 shares owned after the dividend to calculate the basis per share. $40,000/840 shares = $47.62 per share of common stock

Jose bought new office equipment for $30,000 on October 3, 2022. The office equipment is seven-year property. Jose did not purchase any other personalty for use in his business in 2022. Jose's business is located in Houston. Jose does not take any Section 179 deduction or bonus depreciation. What depreciation table should he use to calculate depreciation for the equipment in 2022? a. Exhibit 8-3 MACRS Accelerated Depreciation for Personal Property Assuming Half-Year Convention b. Exhibit 8-4 MACRS Accelerated Depreciation for Personal Property Assuming Mid-Quarter Convention c. Exhibit 8-5 MACRS Straight-Line Depreciation for Personal Property Assuming Half-Year Convention d. Exhibit 8-7 ADS Straight-Line Depreciation for Personal Property Assuming Half-Year Convention

b. Exhibit 8-4 MACRS Accelerated Depreciation for Personal Property Assuming Mid-Quarter Convention

As sole heir, Nadia receives all of Mary's property (adjusted basis of $11,400,000 and fair market value of $13,820,000). Six months after Mary's death, the fair market value is $13,835,000. b. What is Nadia's basis for the property?

b. Nadia's basis for the property is the fair market value on the date of Mary's death (primary valuation date) of $13,820,000.

On December 28, 2023, Kramer sells 150 shares of Lavender, Inc. stock for $77,000. On January 10, 2024, he purchases 100 shares of the same stock for $82,000.b. Assuming that Kramer's adjusted basis for the stock sold is $89,000, what is his recognized gain or loss? What is his basis for the new shares?

b. To the extent of the substantially identical shares purchased during the 60-day period (beginning 30 days before December 28 and ending 30 days after December28), the transaction is a wash sale. The realized loss is$12,000 ($77,000-$89,000 adjusted basis). Because Kramer acquired 100 new shares on January 10 of the following year, $8,000[(100/150)*$12,000] of the realized loss is disallowed. The disallowed loss is added to the basis of the new shares purchased. The basis of the new shares purchased is $90,000 ($82,000 +$8,000). The recognized loss is $4,000.

Roberto has received various gifts over the years and has decided to dispose of several of these assets. What is the recognized gain or loss from each of the following transactions, assuming that no Federal gift tax was paid when the gifts were made? c. In 1999, he received land worth $15,000. The donor's adjusted basis was $20,000. Roberto sells the land for $9,000 in 2023.

c. Basis for loss = $15,000; $9,000 - $15,000 adjusted basis = $6,000recognized loss.

As sole heir, Nadia receives all of Mary's property (adjusted basis of $11,400,000 and fair market value of $13,820,000). Six months after Mary's death, the fair market value is $13,835,000. c. Assume instead that the fair market value six months after Mary's death is $13,800,000. Respond to parts (a) and (b).

c. In this case, the fair market value at the alternate valuation date is less than it is at the primary valuation date. Assuming the election also results in the reduction of the estate tax liability, it can be made. So, Nadia's basis for the property now becomes $13,800,000.

Liam owns a personal use boat that has a fair market value of $35,000 and an adjusted basis of $45,000. Liam's AGI is $100,000. Calculate the realized and recognized gain or loss if: c. The boat is stolen and Liam receives insurance proceeds of $35,000.

c. Liam's realized loss is $0. Since the form of the transaction is a theft, the realized loss is the lesser of the adjusted basis or the fair market value of the asset, reduced by the insurance proceeds that he received (Chapter 7). Therefore, the opportunity for the theft loss deduction on personal use property is not present in this case because the insurance proceeds received of$35,000 equal the fair market value of $35,000.

On December 28, 2023, Kramer sells 150 shares of Lavender, Inc. stock for $77,000. On January 10, 2024, he purchases 100 shares of the same stock for $82,000.b. Assuming that Kramer's adjusted basis for the stock sold is $89,000, what is his recognized gain or loss? What is his basis for the new shares? c. Advise Kramer on how he can avoid any negative tax consequences encountered in part (b).

c. Purchase the new stock outside the 60 day window.

Ricky owns stock in Dove Corporation. His adjusted basis for the stock is $90,000. During the year, he receives a distribution from the corporation of $75,000 that is a return of capital (i.e., Dove has no earnings and profits). c. the $75,000 distribution is labeled a taxable dividend (i.e., Dove has earnings and profits of at least $75,000).

c. Since the $75,000 distribution is a taxable dividend, Ricky's adjusted basis for his Dove stock remains at $90,000.

Roberto has received various gifts over the years and has decided to dispose of several of these assets. What is the recognized gain or loss from each of the following transactions, assuming that no Federal gift tax was paid when the gifts were made? d. In 2020, he received stock worth $30,000. The donor's adjusted basis was $42,000. Roberto sells the stock for $38,000 in 2023.

d. $0. The proceeds of $38,000 are between the gain basis of $42,000 and the loss basis of $30,000. Therefore, neither gain or loss is recognized.

Louis owns three pieces of land with an adjusted basis as follows: parcel A, $75,000; parcel B, $125,000; and parcel C, $175,000. Louis sells parcel A to his uncle for $50,000, parcel B to his partner for $120,000, and parcel C to his mother for $150,000. d. If Louis's mother eventually sells her land for $165,000, what is her recognized gain or loss?

d. $165,000 - $150,000 = $15,000 realized gain, less $15,000 of previously disallowed loss = $0 recognized gain.

Anita bought a new luxury automobile for $70,000 on May 5, 2022. The luxury automobile is five-year property. Anita bought no other personalty that was used in her business or for production of income. The luxury automobile is used 40% for business, 30% for production of income, and 30% for personal use. What depreciation table should she use to calculate depreciation for the luxury automobile in 2022? a. Exhibit 8-3 MACRS Accelerated Depreciation for Personal Property Assuming Half-Year Convention b. Exhibit 8-5 MACRS Straight-Line Depreciation for Personal Property Assuming Half-Year Convention c. Exhibit 8-6 Alternative Minimum Tax 150% Declining Balance Assuming Half-Year Convention d. Exhibit 8-7 ADS Straight-Line for Personal Property Assuming Half-Year Convention

d. Exhibit 8-7 ADS Straight-Line for Personal Property Assuming Half-Year Convention

Jose bought an office building on July 3, 2022. The price of the building was $700,000, and the price of the land was $200,000. The office building is located in Juarez, Mexico. What depreciation table should he use to calculate depreciation for the building in 2022? a. Exhibit 8-3 MACRS Accelerated Depreciation for Personal Property Assuming Half-Year Convention b. Exhibit 8-7 ADS Straight-Line Depreciation for Personal Property Assuming Half-Year Convention c. Exhibit 8-8 MACRS Straight-Line Depreciation for Real Property Assuming Mid-Month Convention d. Exhibit 8-9 ADS Straight-Line for Real Property Assuming the Mid-Month Convention

d. Exhibit 8-9 ADS Straight-Line for Real Property Assuming the Mid-Month Convention

Liam owns a personal use boat that has a fair market value of $35,000 and an adjusted basis of $45,000. Liam's AGI is $100,000. Calculate the realized and recognized gain or loss if: the fair market value and the selling price of the boat is $48,000?

d. Liam's realized and recognized gain is $3,000($48,000 - $45,000). Even though the boat is a personal use asset, the realized gain is recognized.