Brittany started a law practice as a sole proprietor. She owned a computer, printer, desk, and file cabinet she purchased during law school (several years ago) that she is planning to use in her business. Asset Computer Printer Desk File cabinet Asset Purchase Price Computer Printer Desk File cabinet $ 6,600 4,400 5,300 4,300 FMV at Time Converted to Business Use Using the above information, what is the depreciable basis that Brittany should use in her business for each asset? $ 4,900 4,250 5,100 4,325 Depreciable Basis
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- Lew is a practicing CPA who decides to raise bonsai as a business. Lew engages in the activity and has the following revenue and expenses: Sales $ 5,000 Depreciation on greenhouse 10,000 Fertilizer, soil, pots 1,500 What are the factors that the IRS will consider when evaluating whether the activity is a business or a hobby? ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ If the activity is deemed to be a regular business, what is the amount of Lew's loss from the activity? $_____________ If the activity is deemed to be a hobby, what is the amount of Lew's expenses (if any) from the activity that may be deducted? $_____________Cindy operates a computerized engineering drawing business from her home. Cindy maintains a home office and properly allocates the following expenses to her office: Depreciation $1,500 Utilities 500 Real estate taxes 325 Mortgage interest (100 percent deductible) 500 Assume that Cindy earns income of $4,400 from her business for the year before deducting home office expenses. She has no other expenses associated with the business. Calculate Cindy's deduction for home office expenses. $__________ Assume that Cindy earns income of $2,600 from her business during the year before deducting home office expenses. Calculate Cindy's deduction for home office expenses. $__________Brittany started a law practice as a sole proprietor. She owned a computer, printer, desk, and file cabinet she purchased during law school (several years ago) that she is planning to use in her business. FMV at Time Purchase Converted to Asset Price Business Use Computer $ 6,900 $ 5,200 Printer 4,700 4,550 Desk 5,600 5,400 File cabinet 4,600 4,625 Using the above information, what is the depreciable basis that Brittany should use in her business for each asset? ASSET DEPRECIABLE BASIS Computer Printer Desk File Cabinet
- - Brittany started a law practice as a sole proprietor. She owned a computer, printer, desk, and file cabinet she purchased during law school (several years ago) that she is planning to use in her business. What is the depreciable basis that Brittany should use in her business for each asset, given the following information? Asset Purchase Price FMV at Time Converted to Business Use Computer $5,500 $3,800 Printer $3,300 $3,150 Desk $4,200 $4,000 File Cabinet $3,200 $3,225June Cleaver owns and operates a home goods store in Chicago, Illinois. She recently acquired a new building, which will allow space for her growing business. In addition to purchasing the land and building, she also has purchased new office furniture for her staff, a delivery van and a new computer to automate her operations. Now that she has the larger space, she acquired home goods to display and sell. A. From the information provided above, what property and equipment would June list on her books for her business? B. What distinguishes property and equipment from other assets June might have, such as inventory and accounts receivable? C. At what value are property and equipment recorded on the balance sheet?2. Fauzana owns a business that makes and sells pets clay. During the financial year ended 31 July 2020, she incurred the following items of expenditure. State whether each of the below is Capital Expenditure or Revenue Expenditure.a. Clay for making the pets toys.b. Wages of sales staffc. Purchase of potters wheel for use in the businessd. Installation costs for the potters wheele. Wages of staff operating the potters wheelf. Redecoration of store roomg. Payment of extra wages to own staff for fitting the alarm and cctvh. Payment of architect fees for designing the proposed new shopi. Purchase of new telephone system for the business
- Courney is a licensed architect who works part-time as an architectural consultant. One of Courtney’s clients was interested in building a shopping center on a tract of land she owned in Lincoln County. Courtney inherited the property from her uncle when he died on June 6, 1999. At that time, the land was valued at $40,000. It has since been rezoned for commercial use and has a current value of $200,000. On February 10, 2019, Courtney exchanged the Lincoln parcel for a similar tract in Minnehaha County worth $190,000 and cash of $10,000. How to report this problem on a tax return?This year, Amy purchased $2,780 of equipment for use in her business. However, the machine was damaged in a traffic accident while Amy was transporting the equipment to her business. Note that because Amy did not place the equipment into service during the year, she does not claim any depreciation or cost recovery expense for the equipment. Problem 9-57 Part-b (Algo)b. Suppose that after the accident, Amy repaired the equipment for $3,890. What amount can Amy deduct for the loss of the equipment? c. Suppose that after the accident, Amy could not replace the equipment so she had the equipment repaired for $3,800. What amount can Amy deduct for the loss of the equipment?Leticia and Stephanie Sims purchased a home in Spokane, Washington, for $400,000. They moved intothe home on February 1 of year 1. They lived in the home as their primary residence until June 30 ofyear 5, when they sold the home for $700,000. a. Assume the same facts as in part (b), except that the Sims live in the home until January of year4, when they purchase a new home and rent out the first home. What amount of realized gainon the sale of the home will the Sims include in taxable income if they sell the first home onJune 30 of year 5 for $700,000? b. Assume the original facts, except that Stephanie moves in with Leticia on March 1 of year 3 andthe couple is married on March 1 of year 4. Under state law, the couple jointly owns Leticia'shome beginning on the date they are married. On December 1 of year 3, Stephanie sells herhome that she lived in before she moved in with Leticia. She excludes the entire $50,000 gain onthe sale on her individual year 3 tax return. What…
- Sergio operates a sole proprietorship. He has a home office that functions as his principal place of business. He uses the home office regularly and exclusively for his business. The home office is 150 sq. ft. Which of the following are accurate? Select all that apply. a. Sergio can deduct $750/year under the safe harbor method b. Sergio can deduct a portion of his utility bills if he uses the actual cost method c. Sergio can depreciate a portion of his home if he uses the actual cost method d. As of 2018, Sergio is no longer entitled to a home office deduction because of recent changes to the tax laws e. If Sergio uses the safe harbor method, he can deduct a portion of his mortgage payments each yearRita owns a sole proprietorship in which she works as a management consultant. She maintains an office in her home (500 square feet) where she meets with clients, prepares bills, and performs other work-related tasks. Her business expenses, other than home office expenses, total $5,600. The following home-related expenses have been allocated to her home office under the actual expense method for calculating home office expenses. Real property taxes $ 1,600 Interest on home mortgage 5,100 Operating expenses of home 800 Depreciation 1,600 Also, assume that, not counting the sole proprietorship, Rita's AGI is $60,000. Rita itemizes deductions, and her itemized deduction for non-home business taxes is less than $10,000 by more than the real property taxes allocated to business use of the home.Assume Rita’s consulting business generated $15,000 in gross income. (Leave no answer blank. Enter zero if applicable.) a. What is Rita’s home office deduction for the current…Rita owns a sole proprietorship in which she works as a management consultant. She maintains an office in her home (500 square feet) where she meets with clients, prepares bills, and performs other work-related tasks. Her business expenses, other than home office expenses, total $5,600. The following home-related expenses have been allocated to her home office under the actual expense method for calculating home office expenses. Real property taxes $ 1,600 Interest on home mortgage 5,100 Operating expenses of home 800 Depreciation 1,600 Also, assume that, not counting the sole proprietorship, Rita's AGI is $60,000. Rita itemizes deductions, and her itemized deduction for non-home business taxes is less than $10,000 by more than the real property taxes allocated to business use of the home. Assume Rita’s consulting business generated $13,000 in gross income for the current year. Further, assume Rita uses the actual expense method for computing her home office expense…