Bartleby Sitemap - Textbook Solutions
All Textbook Solutions for CONCEPTS IN FED.TAX.,2020-W/ACCESS
48P49P50P51P52P53P54P55P56P57P58P59P60P61P62P63P64P65IIP66IIP67IIPIn each of the following problems, identify the tax issue(s) posed by the facts presented. Determine the possible tax consequences of each issue that you identify. Thans grandmother dies and leaves him jewelry worth 40,000. In addition, he is the beneficiary of a 100,000 life insurance policy that his grandmother had bought before she retired.In each of the following problems, identify the tax issue(s) posed by the facts presented. Determine the possible tax consequences of each issue that you identify. Binh met Anika 10 years ago at a cocktail party. Anika was a wealthy investor with extensive holdings in the oil and gas industry. Binh was a real estate agent earning about 35,000 a year. Several months later, Binh proposed marriage and Anika accepted. Just before the wedding, Anika told Binh that she had a mental hangup about marriage, and Binh agreed to live with her without being married. In return, Anika promised to leave Binh her entire estate. In the ensuing years, they had an intimate, marriage-like relationship, attending social, business, and family functions together. Anika died in 2015. No will was found immediately. A few months after Anikas death, her sister found a one-page paper signed by Anika. The paper left Anikas entire estate to her brothers and sisters and named her sister as executor of the estate. Binh sued Anikas estate and won a judgment of 2 million for services rendered to Anika during their relationship. The estate appealed the decision, which was affirmed as to liability but reversed and remanded for a new trial on the amount of the judgment. Binh and the estate subsequently worked out an agreement in which the estate paid Binh 1.2 million to settle his claim.In each of the following problems, identify the tax issue(s) posed by the facts presented. Determine the possible tax consequences of each issue that you identify. Ariel has worked for Sander Corporation for 30 years. Sander has a pension plan in which it matches employee contributions by up to 5 percent of the employees salary. Ariel, who is single, retires during the current year when she is 66 years old. Her pension plan contains payments and earnings of 300,000, half of which are attributable to payments made by Ariel and half attributable to payments made by Sander. Under the plan, Ariel is to receive 2,000 per month until she dies.71IIP72IIP73IIP74IIP75IIP76IIP77TA80TAReggie receives a 2-year scholarship to Big University. The scholarship stipulates that, to improve his teaching skills, he must spend his first year teaching at an affiliated school. He will be paid his scholarship by the affiliated school based on the level of pay for the teaching duties he is assigned. Upon completion of the first year, Reggie will return to Big University and work on the research required to obtain his degree. During the second year, he will receive his scholarship from Big University. Is Reggies scholarship taxable?83IPCalculate Carmins adjusted gross income on her 2019 tax return. Then do one or both of the following, according to your professors instructions: a. Include a brief explanation of how you determined each item that affected adjusted gross income and any items you excluded from gross income. Your solution to the problem should contain a list of each item included in adjusted gross income and its amount, with the explanations attached. b. Write a letter to Carmin explaining how you determined each item that affected adjusted gross income and any items you excluded from gross income. You should include a list of each item included in adjusted gross income and its amount.85DCMarlo and Merlins son, Alex, needs 20,000 to start a business. They have 30,000 in securities that they can use to give him the capital he needs. Pertinent information regarding the securities is given below: Marlo and Merlin are in the 28 percent marginal tax rate bracket; Alex is in the 15 percent marginal tax rate bracket. Neither Marlo, Merlin, nor Alex has any other capital asset transactions during the year. Alexs basis in any of the securities gifted to him will be the lesser of his parents basis or the fair market value of the security. Discuss the tax effects of alternate methods of transferring 20,000 to Alex, and devise an optimal plan for making the transfer.87TPC88TPC89EDC1DQWhy does the computation of adjusted gross income apply only to individual taxpayers and not to other tax entities such as corporations?3DQ4DQ5DQ6DQ7DQ8DQ9DQWhat is the difference between a trade or business and a production of income activity and why is it important to distinguish between these two types of activities?11DQ12DQ13DQ14DQ15DQ16DQ17DQ18DQ19DQ20DQ21DQ22DQ23DQ24DQ25DQ26P27P28P29P30P31P32P33P34P35P36P37P38P39P40P41P42P43P44P45P46P47P48P49P50P51P52P53P54P55PHassad owns a rental house on Lake Tahoe. He uses a real estate firm to screen prospective renters, but he makes the final decision on all rentals. He also is responsible for setting the weekly rental price of the house. During the current year, the house rents for 1,500 per week. Hassad pays a commission of 150 and a cleaning fee of 75 for each week the property is rented. During the current year, he incurs the following additional expenses related to the property: a. What is the proper tax treatment if Hassad rents the house for only 1 week (7 days) and uses it 50 days for personal purposes? b. What is the proper tax treatment if Hassad rents the house for 8 weeks (56 days) and uses it 44 days for personal purposes? c. What is the proper tax treatment if Hassad rents the house for 25 weeks (175 days) and uses it 15 days for personal purposes?Ray, 83, is a used car dealer. He lives in a rural community and operates the business out of his home. One room in his 6-room house is used exclusively for his business office. He parks the cars in his front yard, and when customers come along, they sit on the front porch and negotiate a sale price. The income statement for Rays auto business is as follows: If Rays home were rental property, the annual depreciation would be 2,900. The utilities and upkeep on the home cost Ray 6,400 for the year. Rays mortgage interest for the year is 2,400. When asked about the loan fees, Ray bitterly responds that Jim, the bank loan officer, charges him 10 percent of his gross profit on cars financed through the bank. Ray says, The money is under the table, and if I dont shell out the cash, Jim wont loan the money to my customers to buy my cars. Everybody goes to Jimhes got the cash. Write a letter to Ray explaining the proper treatment of this information on his tax return.58P59P60P61P62P63P64P65PJoy incurs the following expenses in her business. When can she deduct the expenses if she uses the accrual method of accounting? the cash method? a. Joy rents an office building for 750 a month. Because of a cash flow problem, she is unable to pay the rent for November and December 2019. On January 5, 2019, Joy pays the 2,250 rent due for November, December, and January. b. Joy borrows 60,000 on a 1-year note on October 1, 2019. To get the loan, she has to prepay 6,200 in interest. c. Joy owes employees accrued wages totaling 20,000 as of December 31, 2019. The accrued wages are paid in the regular payroll on January 5, 2020. d. Joy purchases 2,400 worth of supplies from a local vendor. The supplies are delivered on January 29, 2019. They are fully used up on December 30, 2019. Because of unusual circumstances, a bill for the supplies arrives from the vendor on January 10, 2020, and is promptly paid. e. While at a trade convention, Joy purchases some pens and paperweights to send out as holiday gifts to her clients. She charges the 700 cost to her credit card in December 2019. She pays the credit card bill in January 2020.67P68P69P70P71P72IIP73IIP74IIP75IIP76IIP77IIP78IIP79IIP80IIP81IIP91CP92DC93DC94DC95TPCAllison and Paul are married and have no children. Paul is a lawyer who earns a salary of 80,000. In November 2018, Allison quit her job as a copy editor and began exploring the possibility of breeding and showing horses. She would run the business on their property. Allison expects to travel to nine or ten horse shows during the year. While researching the activity, she came across an article entitled: IRS Cracking Down on Horse BreedingIs It Really a Business or Is It a Hobby? She is unsure of the tax ramifications discussed in the article and has come to you for advice on whether her activity will be considered a business or a hobby. Allison provides you with the following projections of the 2019 income and expense items for the horse breeding and showing activity: Revenue: Expenses: Paul and Allison expect to receive 6,000 in interest and dividend income, they will have an 8,000 net long-term capital gain, and their other itemized deductions will total 16,300 in 2019. Write a letter to Allison explaining the factors the IRS will use to determine whether she is engaged in a trade or business or a hobby. You should also provide her with a calculation of their taxable income and tax liability and explain the difference(s) caused by the classification of the horse breeding and showing activity as a business or as a hobby.1DQ2DQ3DQ4DQ5DQ6DQ7DQ8DQ9DQ10DQ11DQ12DQ13DQ14DQ15DQ16DQ17DQ18DQ19DQ20DQ21DQ22P23P24P25P26P27P28P29P30P31P32P33P34P35P36P37P38P39P40P41P42P43P44P45P46P47P48P49P50P51P52P53P54P55P56P57P58P59P60P61P62P63P64P65P66P67P68P69P70IIP71IIP72IIP73IIP74IIP75IIP76IIP77IIP78IIP79IIP80TA81TA82TA83TA84TA85IP86DC87DC88DC89TPC90TPC91EDC1DQ2DQ3DQ4DQ5DQ6DQWhat is the purpose of the passive loss rules?8DQ9DQ10DQ11DQ12DQ13DQ14DQ15DQ16DQ17P18P19PCarlos opens a dry cleaning store during the year. He invests 30,000 of his own money and borrows 60,000 from a local bank. He uses 40,000 of the loan to buy a building and the remaining 20,000 for equipment. During the first year, the store has a loss of 24,000. How much of the loss can Carlos deduct if the loan from the bank is nonrecourse? How much does Carlos have at risk at the end of the first year?21P22P23P24P25P26P27P28P29P30P31P32P33P34P35P36P37P38P39P40P41P42P43P44PThe Goodson Company is a chain of retail electronics stores. How much of a loss can Goodson deduct in each of the following cases? Explain. a. An employee drops a 65-inch 3D television, cracking the plastic casing on the back. The television normally sells for 3,300. The cost of the set is 2,400, and Goodson sells the damaged set for 1,500. b. The company replaces its inventory system. The old system cost 45,000 and has a basis of 16,000. The company sells the old system for 7,500. The new system costs 75,000. c. A flood damages one of Goodsons retail stores. The building suffers extensive water damage. The basis of the building is 60,000, and the cost of repairing the damage is 72,000. The insurance company reimburses Goodson 50,000. d. The owner of Goodson sells a complete home entertainment center (e.g., projection TV, DVD, stereo system) to his sister for 7,000. The usual sales price is 8,500. The system costs 6,300. e. Assume the same facts as in part d, except that the owner sells the home entertainment center to his sister for 5,500. f. The owner of Goodson finds that the controller has embezzled 10,000 from the company. Before the owner can confront the controller, the controller leaves town and cannot be found. g. Upon arriving at the companys headquarters, the vice president of sales finds that someone has broken in and stolen three computers. The damage to the outside door is extensive. The cost of repairing the door is 1,500, and the cost of replacing the three computers is 9,500. The original cost of the computers totals 10,500. Goodsons basis in the computers is 5,000. The thieves also stole 350 from the petty cash fund. Goodson files a claim with its insurance company and receives 4,800.46P47P48P49P50P51P52P53P54P55P56P57P58P59P60P61P62P63P64P65P66P67P68P69P70IIP71IIP72IIP73IIP74IIP75IIP76IIP77IIP78IIP79IIP80IIP81TA82TA83TA