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Assessees are eligible for a deduction for definite interest incurred or paid throughout the fiscal year (tax). The amount and kind of deduction are determined by the purpose for which the money is lent. For adjusted gross income, interest on loans for rent, royalties, and commercial operations is deducted.
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- LO.4 Elizabeth made the following interest-free loans during the year. Assume that tax avoidance is not a principal purpose of any of the loans. Assume that the relevant Federal rate is 5% and that the loans were outstanding for the last six months of the year. What are the effects of the imputed interest rules on these transactions? Compute Elizabeths gross income from each loan: a. Richard b. Woody c. IreneProblem 5-56 (LO. 4) Vic, who was experiencing financial difficulties, was able to adjust his debts as follows: a. Vic is an attorney. Vic owed his uncle $25,000. The uncle told Vic that if he serves as the executor of the uncle's estate, Vic's debt will be canceled in the uncle's will. The $25,000 debt cancellation is Vic's gross income when the uncle dies. b. Vic borrowed $80,000 from First Bank. The debt was secured by land that Vic purchased for $100,000. Vic was unable to pay, and the bank foreclosed when the liability was $80,000, which was also the fair market value of the property. Vic has a $fill in the blank 564552fca057f99_1 as a result of the foreclosure. c. The Land Company, which had sold land to Vic for $80,000, reduced the mortgage on the land by $12,000. The $12,000 reduction in the debt is Vic's gross income and Vic must his basis in the property.Problem 5-25Interest (LO 5.8) Helen paid the following amounts of interest during the 2019 tax year: Mortgage interest on Dallas residence (loan balance $50,000) $1,600 Automobile loan interest (personal use only) 440 Mortgage interest on Vail residence (loan balance $50,000) 3,100 Visa and Mastercard interest 165 Calculate the amount of Helen's itemized deduction for interest (after limitations) for 2019
- Problem 7-46 (LO. 1, 2, 3, 4, 7) Jed is married with no children. Both he and his wife are age 55. During 2020, Jed had the following income and expense items: a. Three years ago, Jed loaned a friend $10,000 to help him purchase a new car. In June of the current year, Jed learned that his friend had been declared bankrupt and had left the country. There is no possibility that Jed will ever collect any of the $10,000. b. In April of last year, Jed purchased some stock for $5,000. In March of the current year, the company was declared bankrupt, and Jed was notified that his shares of stock were worthless. c. Several years ago, Jed purchased some § 1244 stock for $120,000. This year, he sold the stock for $30,000. d. In July of this year, Jed sold some land that he had held for two years for $60,000. He had originally paid $42,000 for the land. e. Jed received $40,000 of interest income from State of Minnesota bonds. f. In September, Jed's home was damaged by an earthquake; Jed's county…MN.38. Levi brings in four Forms 1098 with mortgage interest for the following properties: First mortgage on his home: $157,350 balance with interest paid of $6,294. Equity debt on his home: highest balance for year of $47,000 (all used for home improvements) with interest paid of $1,880. Mortgage on his vacation home: $99,000 balance with interest of paid of $4,455. Mortgage on his rental property: $142,300 balance with interest paid of $6,403. How much is he able to deduct on Schedule A (Form 1040), Itemized Deductions, for interest reported on these forms? $8,174 $10,749 $12,629 $19,032 please don't choose 8,174 wrongProblem 8-73 (LO 8-4) (Algo) In 2021, Laureen is currently single. She paid $2,740 of qualified tuition and related expenses for each of her twin daughters Sheri and Meri to attend State University as freshmen ($2,740 each for a total of $5,480). Sheri and Meri qualify as Laureen’s dependents. Laureen also paid $1,920 for her son Ryan’s (also Laureen’s dependent) tuition and related expenses to attend his junior year at State University. Finally, Laureen paid $1,420 for herself to attend seminars at a community college to help her improve her job skills.What is the maximum amount of education credits Laureen can claim for these expenditures in each of the following alternative scenarios? (Leave no answer blank. Enter zero if applicable.) a. Laureen's AGI is $45,000. Answer is complete but not entirely correct. Description Credits American opportunity tax credit $ Lifetime learning credit $284
- incorrect, 1.3.51 A mother wants to invest $6 comma 000.00 for her son's future education. She invests a portion of the money in a bank certificate of deposit (CD account) which earns 4% and the remainder in a savings bond that earns 7%. If the total interest earned after one year is $ 360.00 comma how much money was invested in the CD account? The total interest earned after one year is $360.00 . How much money was invested in the CD account? $Problem 10-38 (LO. 2, 3, 4, 5, 6, 7) Evan is single and has AGI of $277,300 in 2020. His potential itemized deductions before any limitations for the year total $52,300 and consist of the following: Medical expenses (before the AGI limitation) $29,000 Interest on home mortgage 8,700 State income taxes 9,500 Real estate taxes 3,600 Charitable contributions 2,500 After all necessary adjustments are made, what is the amount of itemized deductions Evan may claim? Do not round intermediate calculations. Round medical deduction and final answer to the nearest dollar. Evan's total itemized deduction is $fill in the blank 1.Problem 7-19Education Tax Credits (LO 7.5) Janie graduates from high school in 2021 and enrolls in college in the fall. Her parents (who file a joint return) pay $4,000 for her tuition and fees. Question Content Area a. Assuming Janie's parents have AGI of $172,000, what is the American Opportunity tax credit they can claim for Janie?$fill in the blank a7afe900d02b00c_1 Question Content Area b. Assuming Janie's parents have AGI of $75,000, what is the American Opportunity tax credit they can claim for Janie?$fill in the blank 827b93f69fa7ff5_1
- 2. A couple borrowed P 4,000 from a lending company for 6 years at 12%. At the end of 6 years, it renews the loan for the amount due plus P 4,000 more for 3 years at 12%. What is the lump sum due? ANSWER: 16,382.60OLA#9.2: Hannah purchased a house for $475,000. She made a downpayment of 25% of the value of the house and received a mortgage for the rest of the amount at 5.50% compounded semi-annually for 25 years. The interest rate was fixed for a 5-year term. a. Calculate the size of the monthly payments. b. Calculate the principal balance at the end of the 5-year term. c. Calculate the size of the monthly payments if after the first 5-year term the mortgage was renewed for another 5-year term at 5.25% compounded semi-annually?Problem 6-50 (LO. 1, 3) Chee, single, age 40, had the following income and expenses during 2021: Income Salary $43,000 Rental of vacation home (rented 60 days, used personally 60 days, vacant 245 days) 4,000 Municipal bond interest 2,000 Dividend from General Electric 400 Expenses Interest on home mortgage 8,400 Interest on vacation home 4,758 Interest on loan used to buy municipal bonds 3,100 Property tax on home 2,200 Property tax on vacation home 1,098 State income tax 3,300 State sales tax 900 Charitable contributions 1,100 Tax return preparation fee 300 Utilities and maintenance on vacation home 2,600 Depreciation on rental portion of vacation home 3,500 Calculate Chee's net income from the vacation home, itemized deductions and taxable income for the year. If Chee has any options, choose the method that maximizes his deductions. In your computations, round any fractions to four decimal places. Then, round any amounts to the…
