Problem 8-14 Intangibles (LO 8.6) Derek purchases a small business from Art on July 30, 2021. He paid the following amounts for the business: Fixed assets $180,000 Goodwill 40,000 Covenant not to compete 30,000 Total $250,000 a. How much of the $250,000 purchase price is for Section 197 intangible assets? b. What amount can Derek deduct on his 2021 tax return as Section 197 intangible amortization? Use months, not days, in your computations. Round your answer to the nearest dollar.

Problem 8-14 Intangibles (LO 8.6) Derek purchases a small business from Art on July 30, 2021. He paid the following amounts for the business: Fixed assets $180,000 Goodwill 40,000 Covenant not to compete 30,000 Total $250,000 a. How much of the $250,000 purchase price is for Section 197 intangible assets? b. What amount can Derek deduct on his 2021 tax return as Section 197 intangible amortization? Use months, not days, in your computations. Round your answer to the nearest dollar.

SWFT Individual Income Taxes

43rd Edition

ISBN:9780357391365

Author:YOUNG

Publisher:YOUNG

Chapter7: Deductions And Losses: Certain Business Expenses And Losses

Section: Chapter Questions

Problem 40P

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LO.1 Anne sold her home for 290,000 in 2019. Selling expenses were 17,400. She purchased it in 2013 for 200,000. During the period of ownership, Anne did the following. Deducted 50,500 office-in-home expenses, which included 4,500 in depreciation. (Refer to text Section 9-6a). Deducted a casualty loss in 2015 for residential trees destroyed by a hurricane (her county was declared a Federal disaster area). The total loss was 19,000 (after the 100 floor and the 10%-of-AGI floor), and Annes insurance company reimbursed her for 13,500. (Refer to text Section 7-3.) Raid street paving assessment of 7,000 and added sidewalks for 8,000. Installed an elevator for medical reasons. The total cost was 20,000, and Anne deducted 13,000 as medical expenses. (Refer to text Section 10-lb.) What is Annes realized gain?
LO.3 Howards roadside vegetable stand (adjusted basis of 275,000) is destroyed by a tractor-trailer accident. He receives insurance proceeds of 240,000 (300,000 fair market value 60,000 coinsurance). Howard immediately uses the proceeds plus additional cash of 45,000 to build another roadside vegetable stand at the same location. What are the tax consequences to Howard?
Answer only 13 and 14 th question not whole 11) Jill purchased a printing press for her business on 6/15/21 costing $60,000. The installation cost $2,000 and the sales tax was $5,000. What is Jill's basis in the equipment? 12) Using the info in question 11, what is the amount of depreciation for 2021? 13) Using the info from questions 11 and 12, if Jill sells the printing press on 7/2/22 , what is the adjusted basis on the date of the sale ? 14) Using the info from questions 11,12 and13 What is the gain or loss on the sale of the printing press if she sells it for $40,000?
Exercise 13-37 (LO. 7) On June 5, 2020, Brown, Inc., a calendar year taxpayer, receives cash of $750,000 from the county upon condemnation of its warehouse building (adjusted basis of $500,000 and fair market value of $750,000). Complete the statements below regarding what must Brown do to qualify for § 1033 postponement if the adjusted basis was instead $795,000. Because Brown has a realized loss on the condemnation of business property, it is automatically recognized . In this case, §1033 does not modify the normal rules of recognition. Therefore, Brown has a realized loss of $fill in the blank of which $fill in the blank is recognized. Feedback
Problem 8-15 Intangibles (LO 8.6) Annie develops a successful tax practice. She sells the practice to her friend Carol for $54,000 and moves to Florida to retire. The tax practice has no assets except intangible benefits such as the goodwill and going-concern value Annie has developed over the years. How should Carol treat the $54,000 cost of the tax practice she has purchased? Because the purchased goodwill and going-concern value qualify as a section 197 intangible assets, the $54,000 is currently expensed .
(LO.4 Federal Taxation) On April 5, 2020, Kinsey places in service a new automobile that cost $60,000. He does not elect section 179 expensing, and he elects not to take any available additional first-year depreciation. The car is used 70% for business and 30% for personal use in each tax year. Kinsey chooses the MACRS 200% declining-balance method of cost recovery (the auto is a 5-year asset). Assume the following luxury automobile limitations: year 1: $10,100; year 2: $16,100. Compute the total depreciation allowed for 2020 and 2021.
64.LO.10 Helen Derby borrowed $150,000 to acquire a parcel of land to be held for investment purposes. During the current year, she reported AGI of $90,000 and paid interest of $12,000 on the loan. Other items related to Helen’s investments include the following: Interest and annuity income$11,000 Long-term capital gain on sale of stock3,500 Real estate tax on the investment land800 a.Determine Helen’s investment interest deduction for the current year. b.Discuss the treatment of the portion of Helen’s investment interest that is disallowed for the current year. c.Complete Helen’s Form 4952 for the current year. For this purpose, assume that she chooses not to include the long-term capital gain as investment income. Her Social Security number is 123-45-6789.
Problem 10-36 (LO. 6, 8) In December of each year, Eleanor Young contributes 10% of her gross income to the United Way (a 50% organization). Eleanor, who is in the 24% marginal tax bracket, is considering the following alternatives for satisfying the contribution. Fair Market Value (1) Cash donation $23,000 (2) Unimproved land held for six years ($3,000 basis) $23,000 (3) Blue Corporation stock held for eight months ($3,000 basis) $23,000 (4) Gold Corporation stock held for two years ($28,000 basis) $23,000 Eleanor has asked you to help her decide which of the potential contributions listed above will be most advantageous tax-wise. Evaluate the four alternatives and complete a letter to Eleanor. Determine the amount of the charitable contribution for each option. CharitableContribution Cash donation $fill in the blank 1 Unimproved land held for six years ($3,000 basis) $fill in the blank 2 Blue Corporation stock held for eight months ($3,000…
Problem 8-8Modified Accelerated Cost Recovery System (MACRS), Election to Expense, Listed Property, Limitation on Depreciation of Luxury Automobiles (LO 8.2, 8.3, 8.4, 8.5) During 2019, William purchases the following capital assets for use in his catering business: New passenger automobile (September 30) $54,000 Baking equipment (June 30) 7,000 Assume that William decides to use the election to expense on the baking equipment (and has adequate taxable income to cover the deduction) but not on the automobile (which has a 5-year recovery period), and he also uses the MACRS accelerated method to calculate depreciation but elects out of bonus depreciation. Click here to access the depreciation table and click here to access the annual automobile depreciation limitations. Calculate William's maximum depreciation deduction for 2019, assuming he uses the automobile 100 percent in his business.
Problem 14-76 (LO. 8, 9, 10) On May 2, 1990, Hannah Weather (Social Security number: 111-22-3333) acquired residential real estate for $450,000. Of the cost, $100,000 was allocated to the land and $350,000 to the building. On August 20, 2019, the building, which then had an adjusted basis of $0, was sold for $545,000 and the land for $200,000. If an amount is zero, enter "0". a. Determine the amount and character of the recognized gain from the sale of the building. There is a gain of $fill in the blank from the sale of the building, of which $fill in the blank is ordinary income due to § 1250 recapture. b. Determine the amount and character of the recognized gain from the sale of the land. The § 1231 gain from the sale of the land is $fill in the blank, of which $fill in the blank is subject to recapture.
Problem 13-84 (LO. 8, 9) Karl purchased his residence on January 2, 2019, for $260,000, after having lived in it during 2018 as a tenant under a lease with an option to buy clause. On August 1, 2020, Karl sells the residence for $315,000. On June 13, 2020, Karl purchases a new residence for $367,000. If an amount is zero, enter "0". a. What is Karl's recognized gain? His basis for the new residence?Karl's recognized gain is $fill in the blank aa8a5403c02a012_1, and his basis for the new residence is $fill in the blank aa8a5403c02a012_2. b. Assume that Karl purchased his original residence on January 2, 2018 (rather than January 2, 2019). What is Karl's recognized gain? His basis for the new residence? Karl's recognized gain is $fill in the blank f8cfe3ffcff0ffc_1, and his basis for the new residence is $fill in the blank f8cfe3ffcff0ffc_2. c. In part (a), what could Karl do to minimize his recognized gain?To minimize his recognized gain, he can continue to…
Exercise 8-24 (LO. 3) McKenzie purchased qualifying equipment for his business that cost $212,000 in 2020. The taxable income of the business for the year is $5,600 before consideration of any § 179 deduction. If an amount is zero, enter "0". a. Calculate McKenzie's § 179 expense deduction for 2020 and any carryover to 2021.§ 179 expense deduction for 2020: $fill in the blank 1§ 179 carryover to 2021: $fill in the blank 2 b. How would your answer change if McKenzie decided to use additional first-year (bonus) depreciation on the equipment instead of using § 179 expensing? Hint: See Concept Summary 8.3.§ 179 expense deduction for 2020: $fill in the blank 3§ 179 carryover to 2021: $fill in the blank 4 Summary of Tables Exhibit 8.3 Regular MACRS table for personalty. Depreciation methods: 200 or 150 percent declining-balance switching to straight-line. Recovery periods: 3, 5, 7, 10, 15, 20 years. Convention: half-year.