Individual income
Taxes
Tax research
Tax Research
I. FACTS 6-4
Walter Hodges wanted to begin to invest in the field of real estate. In spring 2009,he completed a plan for his business. During this time, he also attended a skill-improved class by paying $25,000. On December 30,2009, he purchased the property which is rented on March 2010.On his form of 1040 for 2009,he asked for a deduction of $29,000. But unfortunately, IRS declined the requisition of deduction for the reason that he wasn’t in a trade of business in 2009.he received the license for the business on November.
II. ISSUES
The issue for decision is whether IRS should allow the deduction of $29,000 which include the cost of the training classes, automobile expenses,
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So in 2009,IRS didn’t allow the money Mr., Walter Hodges spends for the property included in the business deductions.
Notably, “mere purchase of property was insufficient to show existence of trade or business during subject year where property wasn’t held out for rent until the following year, and, in any event, all disputed expenses, including expenditure for workshops and training, were before purchase date and thus by definition were pre-operational startup expenses” .In 2009 Mr. Walter Hodges spent in the classes designed to provide real estate investment skills, which was before the purchase date of the property, and the property which was purchased on the 31,December, 2009 and listed on the account in 2010 wasn’t successfully rented out until March, 2010. So he can just calculate the expenses as pre-operational startup expenses. The startup expenses may be deducted only over time under Section195(c)(1)(A)(iii).
I refer to the case WOODY v. COMM,the court declines Mr. WOODY’s requisition. And in Mr. Walter Hodges’ case, all the expense incurred from January 1 through December 30,2009 would be start-up expenses which are considered by section 195.since all the expenses at issue in the case were incurred in 2009,they wouldn’t be deductible for 2009 under section162 because their timing makes them subject to the provisions of section 195,and section 1095 start-up expenditures are
Mrs. Tschetschot works as a database project manager, and was also a professional tournament poker player in 2000. She then claimed a net loss from her tournament poker activity as business losses on her Schedule C. The commissioner determined that this deduction related to the tournament poker should be subject to the limitation provided in Code §165(d) as an itemized deduction, to the extent of the Mrs. Tschetschot’s winnings. Based on that, the commissioner assessed a deficiency of income tax as well as an accuracy-related penalty under Code §6662(a).
From the information that was provided, the income was derived from the business and this gross income is taxable pursuant to Code§1.61-3(a). He is subject to self-employment tax, since the total amount of income that will come through to his personal tax income of half of the self-employment tax liability.
Taxable income includes a deduction for $40,000 of depreciation that exceeds the depreciation allowed for E&P purposes.
In 2013 Marianne sold land, building and equipment with a combined basis of $150,000 to an unrelated third party and in return received an installment note of $80,000 per year for five years. Of the $250,000 gain on sale, $150,000 was classified as Section 1245 gain and the remaining $100,000 was Section 1231 gain. In 2013, Marianne had a capital loss carryover of $60,000, $50,000 of which she used to offset her Section 1231 gain; she recognized no Section 1245 gain. The following year she recognized $40,000 of 1245 gain and $10,000 of Section 1231 gain which she promptly offset with the last $10,000 of the capital loss carryover. In 2015, she recognized $50,000 Section 1245 gain and no Section 1231 gain.
Sale of rental property does not qualify for exclusion 121 because the two year resident occupation limit cannot be satisfied in income producing business property. The sale will fall under section 1231 which encompasses transactions of sales or exchanges of business property held for longer than one year. In order to determine treatment of section 1231 you must combine all section 1231 gains and losses for the year. A net loss is an ordinary loss. A net gain is ordinary income up to the amount of your non-recaptured section 1231 losses from previous years. Any remaining balance becomes a long-term capital gain. The formula for calculating gain or loss involves subtracting the cost basis from the selling price. If you have taken depreciation on the property in the past and are
Thank you for requesting my advice on the new rules and regulations for the tax treatment of deducting business expenses and capitalizing acquisition costs of tangible properties. I am writing you this letter to summarize the new regulations that became effective on January 1, 2014, to identify the areas that Patriot might not be in compliance with the new regulations and to correct any deficiencies.
Michala Smith is a single taxpayer, who was gifted a house and 10 acres in the rural area outside of Whitewater. She built a building and started a small country store/bakery on the property. She has made enough income from the store to support herself and save. Michala does not like the idea of paying taxes. She would like to know the best way to structure her sale to meet her goals, which include avoiding taxation and moving on to a different business, such as a bed and breakfast. We recommend that Michala take advantage of Section 121 when selling her home, so that can exclude $250,000 of the gain on the sale. We also recommend that she defers the gain on the sale of her business and land by exchanging it for a bed and breakfast, using
“Ordinary” and “necessary” imply that an expense must be customary and helpful, respectively. Because these terms are subjective, the tests are ambiguous. However, ordinary is interpreted by the courts as including expenses which may be unusual for a specific taxpayer (but not for that type of business) and necessary is not interpreted as only essential expenses. These limits can be contrasted with the reasonable limit on amounts and the bona fide requirement for profit motivation.
Because the court had determined that the repayment can be claimed under section 1341 in Van Cleave v. U.S., and the IRS had taken a similar position in Rev. 69-115 1969-1 C.B. 50. Dan and Patrick can claim the repayments to Osprey Corporation as either a credit under Section 1341 or a deduction under section 162(a).
If, at year end, 2 months have elapsed, what adjusting entry do you record? 2,000 A. Prepaid Legal Expense Legal Expense 2,000 2,000 B. Legal Expense Prepaid Legal Expense 2,000 Legal Expense 3,000 C. Prepaid Legal Expense 3,000 12,000 D. Prepaid Legal Expense Cash 12,000 [10]BASIC BANK10 - COAE 010 On September 1, your firm incurs a routine $82 expense, mistakenly recording it as follows: Office Expense Accounts Payable 28 28
The data for this research was collected from secondary data sources and then organized by research questions posed. The informational articles provided the legislative policies of §280A as well as guidance in applying the associated rules and conditions when considering its use. Providing the policy differences between an employee and an entrepreneur was necessary in order to illustrate the tax treatment of each when considering the deductibility of expenses incurred in business use of the home. This background information was then enhanced by qualitative resources that were collected, which consisted of the review of case law that highlighted the distinctions and issues relative to the application of the code section. This analysis,
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