During March 2015, Sam constructed new agricultural fences on his farm. The cost of the fencing was $80,000. Sam does not elect immediate expensing under § 179 and he does not claim any available additional first-year depreciation. However, an election not to have the uniform capitalization rules apply is in effect. Compute Sam’s cost recovery deduction for 2015. Sam wants to maximize his cost recovery deductions.
> Blue Corporation and Fuchsia Corporation are engaged in a contract negotiation over the use of Blue’s trademarked name, DateSiteForSeniors. For a one- time payment of $45,000, Blue licensed Fuchsia to use the name DateSiteForSeniors, and the license requ
> Mac, an inventor, obtained a patent on a chemical process to clean old aluminum siding so that it can be easily repainted. Mac has a $50,000 tax basis in the patent. Mac does not have the capital to begin manufacturing and selling this product, so he has
> Benny purchased $400,000 of Peach Corporation face value bonds for $320,000 on November 13, 2014. The bonds had been issued with $80,000 of original issue discount because Peach was in financial difficulty in 2014. On December 3, 2015, Benny sold the bon
> Eagle Partners meets all of the requirements of § 1237 (subdivided realty). In 2015, Eagle Partners begins selling lots and sells four separate lots to four different purchasers. Eagle Partners also sells two contiguous lots to another purchaser. The sal
> Hyacinth, Inc., is a dealer in securities. The firm has spotted a fast-rising company and would like to buy and hold its stock for investment. The stock is currently selling for $2 per share, and Hyacinth thinks it will climb to $40 a share within two ye
> George is the owner of numerous classic automobiles. His intention is to hold the automobiles until they increase in value and then sell them. He rents the automobiles for use in various events (e.g., antique automobile shows) while he is holding them. I
> Rennie owns a video game arcade. He buys vintage video games from estates, often at much less than the retail value of the property. He usually installs the vintage video games in a special section of his video game arcade that appeals to players of “cla
> During the year, Eugene had the four property transactions summarized below. Eugene is a collector of antique glassware and occasionally sells a piece to get funds to buy another. What are the amount and nature of the gain or loss from each of these tran
> Carlson’s general business credit for the current year is $84,000 His net income tax is $190,000, tentative minimum tax is $175,000, and net regular tax liability is $185,000. He has no other tax credits. Determine the amount of Carlson’s general busines
> Alison owns a painting that she received as a gift from her aunt 10 years ago. The aunt created the painting. Alison has displayed the painting in her home and has never attempted to sell it. Recently, a visitor noticed the painting and offered Alison $5
> An individual taxpayer sells some used assets at a garage sale. Why are none of the proceeds taxable in most situations?
> A business building on which straight-line depreciation of $13,000 was taken is sold on the installment basis for $100,000 with $20,000 down and four yearly installments of $20,000 plus interest. The adjusted basis for the building is $35,000 at the time
> Paola and Isidora are married, file a joint tax return, report modified AGI of $148,000, and have one dependent child, Dante. The couple paid $12,000 of tuition and $10,000 for room and board for Dante (a freshman). Dante is a full- time student. Determi
> Gaston Corporation distributes § 1245 property as a dividend to its share- holders. The property’s fair market value is $580,000, and the adjusted basis is $560,000. In addition, the amount of the recapture potential is $55,000. What is the amount and ch
> An apartment building was acquired in 2006. The depreciation taken on the building was $123,000, and the building was sold for a $34,000 gain. What is the maximum amount of 25% gain?
> Jacob purchased business equipment for $56,000 in 2012 and has taken $35,000 of regular MACRS depreciation. Jacob sells the equipment in 2015 for $26,000. What is the amount and character of Jacob’s gain or loss?
> Olivia wants to buy some vacant land for investment purposes. She currently cannot afford the full purchase price. Instead, Olivia pays the landowner $8,000 to obtain an option to buy the land for $175,000 anytime in the next four years. Fourteen months
> Shelia purchases $50,000 of newly issued Gingo Corporation bonds for $45,000. The bonds have original issue discount (OID) of $5,000. After Sheila amortized $2,300 of OID and held the bonds for four years, she sold the bonds for $48,000. What is the amou
> Dexter owns a large tract of land and subdivides it for sale. Assume that Dexter meets all of the requirements of § 1237 and during the tax year sells the first eight lots to eight different buyers for $22,000 each. Dexter’s basis in each lot sold is $15
> Given the following information, determine the ACE adjustment for each year. 2015 2016 2017 $ 800,000 Unadjusted AMTI Adjusted current earnings $2,000,000 $1.500,000 1,200,000 2,000,000 000'006
> Noah, who has $62,000 of AGI before considering rental activities, has $70,000 of losses from a real estate rental activity in which he actively participates. He also actively participates in another real estate rental activity from which he has $33,000
> Rhonda has an adjusted basis and an at-risk amount of $7,500 in a passive activity at the beginning of the year. She also has a suspended passive loss of $1,500 carried over from the prior year. During the current year, she has a loss of $12,000 from the
> Mary’s diamond ring was stolen in 2014. She originally paid $8,000 for the ring, but it was worth considerably more at the time of the theft. Mary filed an insurance claim for the stolen ring, but the claim was denied. Because the insurance claim was den
> On May 9, 2013, Calvin acquired 250 shares of stock in Aero Corporation, a new startup company, for $68,750. Calvin acquired the stock directly from Aero, and it is classified as § 1244 stock (at the time Calvin acquired his stock, the corporation had $9
> During the past tax year, Jane identified $50,000 as a nonbusiness bad debt. In that tax year, Jane had $100,000 of taxable income, of which $5,000 consisted of short-term capital gains. During the current tax year, Jane collected $10,000 of the amount s
> Rose dies with passive activity property having an adjusted basis of $65,000, suspended losses of $13,000, and a fair market value at the date of her death of $90,000. Of the $13,000 suspended loss existing at the time of Rose’s death, how much is deduct
> On April 5, 2015, Kinsey places in service a new automobile that cost $36,000. He does not elect § 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 eac
> In 2015, McKenzie purchased qualifying equipment for his business that cost $212,000. The taxable income of the business for the year is $5,600 before consideration of any § 179 deduction. Calculate McKenzie’s § 179 expense deduction for 2015 and any car
> Lopez acquired a building on June 1, 2010, for $1 million. Calculate Lopez’s cost recovery deduction for 2015 if the building is: a. Classified as residential rental real estate. b. Classified as nonresidential real estate
> Hamlet acquires a 7-year class asset on November 23, 2015, for $100,000. Hamlet does not elect immediate expensing under § 179. He does not claim any available additional first-year depreciation. Calculate Hamlet’s cost recovery deductions
> Marie and Ethan form Roundtree Corporation with the transfer of the following. Marie performs personal services for the corporation with a fair market value of $80,000 in exchange for 400 shares of stock. Ethan contributes an installment note receivable
> Sandstorm Corporation decides to develop a new line of paints. The project begins in 2015. Sandstorm incurs the following expenses in 2015 in connection with the project: Salaries ……………………………………. $85,000 Materials ……………………………………. 30,000 Depreciation on
> Tabitha sells real estate on March 2 for $260,000. The buyer, Ramona, pays the real estate taxes of $5,200 for the calendar year, which is the real estate property tax year. Assume that this is not a leap year. a. Determine the real estate taxes apporti
> Stanford owns and operates two dry cleaning businesses. He travels to Boston to discuss acquiring a restaurant. Later in the month, he travels to New York to discuss acquiring a bakery. Stanford does not acquire the restaurant but does purchase the baker
> Glenda, a calendar year and cash basis taxpayer, rents property from Janice. As part of the rental agreement, Glenda pays $8,400 rent on April 1, 2015 for the 12 months ending March 31, 2016. a. How much is Glenda’s deduction for rent expense in 2015? b
> Jebali Company reports gross income of $340,000 and other property-related expenses of $229,000 and uses a depletion rate of 14%. Calculate Jebali’s depletion allowance for the current year.
> Ella has $105,000 of losses from a real estate rental activity in which she actively participates. She has other rent income of $25,000 and other passive income of $32,000. Her AGI before considering these items of income and loss is $95,000. How much re
> Mable and Jack file a joint return. For the current year, they had the following items: Salaries………………………………………………………………………………….$120,000 Loss on sale of § 1244 stock acquired two years ago…………………….105,000 Gain on sale of § 1244 stock acquired six months
> Many years ago, Jack purchased 400 shares of Canary stock. During the cur- rent year, the stock became worthless. It was determined that the company “went under” because several corporate officers embezzled a large amount of company funds. Identify the r
> Lucy sells her partnership interest, a passive activity, with an adjusted basis of $305,000 for $330,000. In addition, she has current and suspended losses of $28,000 associated with the partnership and has no other passive activities. Calculate Lucy’s t
> In the current year, Ed invests $30,000 in an oil partnership. He has taxable income for the current year of $2,000 from the oil partnership and withdraws $10,000. What is Ed’s at-risk amount at the end of the year?
> Compute the income tax liability for each of the following unrelated C corporations. a. Darter Corporation has taxable income of $68,000. b. Owl Corporation has taxable income of $10,800,000. c. Toucan Corporation, a personal service corporation, has tax
> Determine the treatment of a loss on rental property under the following facts: Basis ………………………………………. $650,000 FMV before the loss……………………800,000 FMV after the loss……………………. 200,000
> Bob owns a collection agency. He purchases uncollected accounts receivable from other businesses at 60% of their face value and then attempts to collect these accounts. During the current year, Bob collected $60,000 on an account with a face value of $80
> Ray and Carin are partners in an accounting firm. The partners have entered into an arm’s length agreement requiring Ray to purchase Carin’s partnership interest from Carin’s estate if she dies before Ray. The price is set at 120% of the book value of Ca
> Determine Hazel’s Federal gross income from the following receipts for the year. Gain on sale of Augusta County bonds …………………… $800 Interest on U.S. government savings bonds ……………… 400 Interest on state income tax refund …………………………. 200 Interest on Augu
> Wes acquired a mineral interest during the year for $10 million. A geological survey estimated that 250,000 tons of the mineral remained in the deposit. During the year, 80,000 tons were mined, and 45,000 tons were sold for $12 million. Other related exp
> In 2015, Muhammad purchased a new computer for $16,000. The computer is used 100% for business. Muhammad did not make a § 179 election with respect to the computer. He does not claim any available additional first-year depreciation. If Muhammad uses the
> On June 5, 2014, Dan purchased and placed in service a 7-year class asset costing $550,000. Determine the maximum deductions that Dan can claim with respect to this asset in 2014 and 2015.
> Janice acquired an apartment building on June 4, 2015, for $1.6 million. The value of the land is $300,000. Janice sold the apartment building on November 29, 2021. a. Determine Janice’s cost recovery deduction for 2015. b. Determine Janice’s cost recove
> On May 5, 2015, Christy purchased and placed in service a hotel. The hotel cost $10.8 million. Calculate Christy’s cost recovery deductions for 2015 and for 2025.
> Cherry Corporation, a calendar year C corporation, is formed and begins business on April 1, 2015. In connection with its formation, Cherry incurs organizational expenditures of $54,000. Determine Cherry Corporation’s deduction for organizational expendi
> Juan, a sole proprietor, acquires a new 5-year class asset on March 14, 2015, for $200,000. This is the only asset Juan acquired during the year. He does not elect immediate expensing under § 179. Juan does not claim any available additional first-year d
> Sarah Ham, operating as a sole proprietor, manufactures printers in the United States. For 2015, the proprietorship has QPAI of $400,000. Sarah’s modified AGI was $350,000. The W–2 wages paid by the proprietorship to employees engaged in the qualified do
> Quail Corporation anticipates that being positively perceived by the individual who is elected mayor will be beneficial for business. Therefore, Quail contributes to the campaigns of both the Democratic and Republican candidates. The Republican candidate
> Sam and Abby are dependents of their parents, and each has income of $2,100 for the year. Sam’s standard deduction for the year is $1,050, while Abby’s is $2,450. As their income is the same, what causes the difference in the amount of the standard deduc
> William and Abigail, who live in San Francisco, have been experiencing problems with their marriage. They have a 3-year-old daughter, April, who stays with William’s parents during the day because both William and Abigail are employed. Abigail worked to
> Joyce, a widow, lives in an apartment with her two minor children (ages 8 and 10), whom she supports. Joyce earns $33,000 during 2015. She uses the standard deduction. a. Calculate the amount, if any, of Joyce’s earned income credit. b. During the year
> For many years, Loretta Johnson, a single mother of three children, has been struggling to make ends meet by working at two jobs that pay barely the minimum wage and together provide just over $15,000. Fortunately, her housing and food costs have been pa
> Mark and Lisa are approaching an exciting time in their lives as their oldest son, Austin, graduates from high school and moves on to college. What are some of the tax issues Mark and Lisa should consider as they think about paying for Austin’s college e
> Bernadette, a longtime client of yours, is an architect and the president of the local Rotary chapter. To keep up to date with the latest developments in her profession, she attends continuing education seminars offered by the architecture school at Stat
> Jim and Mary Jean are married and have two dependent children under the age of 13. Both parents are gainfully employed and during 2015 earn salaries as follows: $16,000 (Jim) and $5,200 (Mary Jean). To care for their children while they work, they pay El
> Crane and Loon Corporations, two unrelated C corporations, have the following transactions for 2015: a. Compute the dividends received deduction for Crane Corporation. b. Compute the dividends received deduction for Loon Corporation.
> Paul and Karen are married, and both are employed (Paul earns $44,000 and Karen earns $9,000 during 2015). Paul and Karen have two dependent children, both under the age of 13. So they can work, Paul and Karen pay $3,800 to various unrelated parties to c
> Ann and Bill were on the list of a local adoption agency for several years, seeking to adopt a child. Finally, in 2014, good news came their way, and an adoption seemed imminent. They paid qualified adoption expenses of $5,000 in 2014 and $11,000 in 2015
> Linda, age 37, who files as a single taxpayer, had AGI of $280,000 for 2015. She incurred the following expenses and losses during the year: Medical expenses (before the 10%-of-AGI limitation) ……………………………. $33,000 State and local income taxes …………………………
> Ramon had AGI of $180,000 in 2015. He is considering making a charitable contribution this year to the American Heart Association, a qualified charitable organization. Determine the current allowable charitable contribution deduction in each of the follo
> 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 28% marginal tax bracket, is considering the following alternatives for satisfying the contribution. Eleanor has a
> In 2006, Liam, who is single, purchased a personal residence for $340,000 and took out a mortgage of $200,000 on the property. In May of the current year, when the residence had a fair market value of $440,000 and Liam owed $140,000 on the mortgage, he t
> Helen borrowed $150,000 to acquire a parcel of land to be held for investment purposes. During 2015, she paid interest of $12,000 on the loan. She had AGI of $90,000 for the year. Other items related to Helen’s investments include the following: Investm
> In 2015, Kathleen Tweardy incurs $30,000 of interest expense related to her investments. Her investment income includes $7,500 of interest, $6,000 of qualified dividends, and a $12,000 net capital gain on the sale of securities. Kathleen asks you to comp
> Norma, who uses the cash method of accounting, lives in a state that imposes an income tax. In April 2015, she files her state income tax return for 2014 and pays an additional $1,000 in state income taxes. During 2015, her withholdings for state income
> Paul, age 62, suffers from emphysema and severe allergies and, upon the recommendation of his physician, has a dust elimination system installed in his personal residence. In connection with the system, Paul incurs and pays the following amounts during 2
> Chaz transfers cash of $60,000 to a newly formed corporation for 100% of the stock. In its initial year, the corporation has net income of $15,000. The income is credited to the earnings and profits account of the corporation. The corporation distributes
> Michael has always been overweight, and now he has decided to do some- thing about it. He recently read in a news story that the IRS allows a medical expense deduction for the cost of certain weight reduction programs. He scheduled an appointment with hi
> Emma Doyle, age 55, is employed as a corporate attorney. For calendar year 2015, she had AGI of $100,000 and paid the following medical expenses: Medical insurance premiums ……………………………………………………………….…. $3,700 Doctor and dentist bills for Bob and April (E
> Leigh sued an overzealous bill collector and received the following settlement: Damage to her automobile that the collector attempted to repossess ………………$ 3,300 Physical damage to her arm caused by the collector ………………………………………. 15,000 Loss of income wh
> Adrian was awarded an academic scholarship to State University for the 2015–2016 academic year. He received $6,500 in August and $7,200 in December 2015. Adrian had enough personal savings to pay all expenses as they came due. Adrian’s expenditures for t
> Linda and Don are married and file a joint return. In 2015, they received $12,000 in Social Security benefits and $35,000 in taxable pension benefits and interest. a. Compute the couple’s adjusted gross income on a joint return. b. Don would li
> For each of the following, determine the amount that should be included in gross income: a. Peyton was selected the most valuable player in the Super Bowl. In recognition of this, he was awarded an automobile with a value of $60,000. Peyton did not need
> Alicia and Rafel are in the process of negotiating a divorce agreement. They both worked during the marriage and contributed an equal amount to the marital assets. They own a home with a fair market value of $400,000 (cost of $300,000) that is subject to
> Vella owns and operates an illegal gambling establishment. In connection with this activity, he has the following expenses during the year: Rent ………………………………………… $ 24,000 Bribes ………………………………………. 40,000 Travel expenses ……………………….…… 4,000 Utilities ……………
> In late 2014, Randy and Rachel Erwin paid $7,000 in legal fees, adoption fees, and other expenses directly related to the adoption of an infant son, Jameson. In 2015, the year in which the adoption becomes final, they pay an additional $8,000. Their AGI
> Pedro, who is a single taxpayer, had AGI of $328,000 for 2015. He incurred the following expenses during the year: Medical expenses before 10%-of-AGI limitation………………………………………… $12,000 State and local income taxes ………………………………………………………………………. 8,900 Real
> Yvonne and Simon form Ion Corporation. Yvonne transfers equipment (basis of $110,000 and fair market value of $165,000). Simon invests $130,000 of cash. They each receive 100 shares in Ion Corporation, worth $130,000, but Yvonne also receives $35,000 of
> Issac has AGI of $73,400 and incurred the following expenses. How much of the business and personal expenditures are deductible (after any limitation) either as miscellaneous itemized deductions or as other itemized deductions? Cost of uniforms………………………
> Donna donates stock in Chipper Corporation to the American Red Cross on September 10, 2015. She purchased the stock for $18,100 on December 28, 2014, and it had a fair market value of $27,000 when she made the donation. a. What is Donna’s charitable con
> Miller owns a personal residence with a fair market value of $195,000 and an outstanding first mortgage of $157,500. Miller gets a second mortgage on the residence and in return borrows $10,000 to purchase new jet skis. How much of the first and second m
> Troy’s financial records for the year reflect the following: Interest income from bank savings account………………………………. $ 900 Taxable annuity receipts……………………………………………………………. 1,800 Safe deposit box rental (to hold annuity documents) ………………………125 Investment
> Pierre, a cash basis, unmarried taxpayer, had $1,400 of state income tax with- held during 2015. Also in 2015, Pierre paid $455 that was due when he filed his 2014 state income tax return and made estimated payments of $975 toward his 2015 state income t
> Jarrod receives a scholarship of $18,500 from Riggers University to be used to pursue a bachelor’s degree. He spends $12,000 on tuition, $1,500 on books and supplies, $4,000 for room and board, and $1,000 for personal expenses. How much may Jarrod exclud
> Compute the taxable Social Security benefits in each of the following situations: a. Erwin and Eleanor are married and file a joint tax return. They have adjusted gross income of $46,000, no tax-exempt interest, and $12,400 of Social Security benefits.
> Casper and Cecile are divorced this year. As part of the divorce settlement, Casper transferred stock to Cecile. Casper purchased the stock for $25,000, and it had a market value of $43,000 on the date of the transfer. Cecile sold the stock for $40,000 a
> Santiago and Amy are married and file a joint tax return claiming their three children, ages 12, 14, and 18, as dependents. Their AGI is $140,000. Deter- mine the amount of the couple’s child tax credit.
> Mike Saxon is negotiating the purchase of a business. The final purchase price has been agreed upon, but the allocation of the purchase price to the assets is still being discussed. Appraisals on a warehouse range from $1,200,000 to $1,500,000. If a val
> Martin transfers real estate with an adjusted basis of $260,000 and fair market value of $350,000 to a newly formed corporation in exchange for 100% of the stock. The corporation assumes the liability on the transferred real estate in the amount of $300,
> Jamie purchased $100,000 of new office furniture for her business in June of the current year. Jamie understands that if she elects to use ADS to compute her regular income tax, there will be no difference between the cost recovery for computing the regu
> On May 28, 2015, Mary purchased and placed in service a new $20,000 car. The car was used 60% for business, 20% for production of income, and 20% for personal use in 2015. In 2016, the usage changed to 40% for business, 30% for production of income, and
> On June 5, 2014, Leo purchased and placed in service a new car that cost $20,000. The business-use percentage for the car is always 100%. Leo claims any available additional first-year depreciation. Compute Leo’s cost recovery deduction for 2014 and 2015
> On October 15, 2015, Jon purchased and placed in service a used car. The purchase price was $25,000. This was the only business-use asset Jon acquired in 2015. He used the car 80% of the time for business and 20% for personal use. Jon used the MACRS stat
