Questions from Federal Taxation

Q: Comment on the following transactions. a. Mort owns 500

Comment on the following transactions. a. Mort owns 500 shares of Pear, Inc. stock with an adjusted basis of $22,000. On July 28, 2021, he sells 100 shares for $3,000. On August 16, 2021, he purchases...

Q: Isabelle invests in land, and Grace invests in taxable bonds.

Isabelle invests in land, and Grace invests in taxable bonds. The land appreciates by $8,000 each year, and the bonds earn interest of $8,000 each year. After holding the land and bonds for five years...

Q: Lee owns land and a building (held for investment) with

Lee owns land and a building (held for investment) with an adjusted basis of $75,000 and a fair market value of $250,000. The property is subject to a mortgage of $400,000. Because Lee is in arrears o...

Q: On July 16, 2021, Logan acquires land and a building

On July 16, 2021, Logan acquires land and a building for $500,000 to use in his sole proprietorship. Of the purchase price, $400,000 is allocated to the building, and $100,000 is allocated to the land...

Q: Bailey owns a small rental townhouse complex that generates a loss during

Bailey owns a small rental townhouse complex that generates a loss during the year. Under what circumstances can Bailey deduct a loss from the rental activity? What limitations apply?

Q: Cheryl incurred $8,700 of medical expenses in November 2021

Cheryl incurred $8,700 of medical expenses in November 2021. On December 5, the clinic where she was treated mailed her the insurance claim form it had prepared for her with a suggestion that she sign...

Q: For calendar year 2021, Stuart and Pamela Gibson file a joint

For calendar year 2021, Stuart and Pamela Gibson file a joint return reflecting AGI of $350,000. Their itemized deductions are as follows: Casualty loss in a Federally declared disaster area (not cove...

Q: In 2020, Fred invested $50,000 in a general

In 2020, Fred invested $50,000 in a general partnership. Fred’s interest is not considered to be a passive activity. If his share of the partnership losses is $35,000 in 2020 and $25,000 in 2021, how...

Q: Dorothy acquired a 100% interest in two passive activities: Activity

Dorothy acquired a 100% interest in two passive activities: Activity A in January 2016 and Activity B in 2017. Through 2019, Activity A was profitable, but it produced losses of $200,000 in 2020 and $...

Q: A number of years ago, Kayla acquired an interest in a

A number of years ago, Kayla acquired an interest in a partnership in which she is not a material participant. Kayla’s basis in her partnership interest at the beginning of 2020 is $40,000. Kayla’s sh...