Problem 4-25 Billy Dent, as the owner of an apartment building, receives and makes the following payments during 2011: How much rental income must Billy Dent include on his 2011 income tax return? Answer: Billy Dent must include on his 2011 income tax return $9,000.00 Problem 4-32 Arnold and Barbara Cane were divorced in June 2011. Pursuant to the divorce decree, Arnold is obliged to perform as follows: * A. Transfer title of their personal home to Barbara. They purchased the house in 1998 and their basis today is $400,000.
(a) $100 bill found under the sugar caddy at the restaurant (b) Inheritance of a car from your grandmother valued at $5,000. (c) Loan from your father-in-law to start your business, (d) Child Support received totaling $16,500. (4 pts) The inheritance of a car from your grandmother valued at $5,000 would be excluded from income as long as the $5,000 was under the caps. The tax code where you would find this would be under sections 101-139. Chapter 5 3.
How much is suspended under the at-risk rules and the passive loss rules at the beginning of 2011? Question : (TCO 3) Wes’ at-risk amount in a passive activity is $25,000 at the beginning of the current year. His current loss from the activity is $35,000, and he has no passive activity income. At the end of the current year, which of the following statements is incorrect? Question : (TCO 2) The installment method applies to which of the following sales with payments being made in the year following the year of sale?
First Round Capital proposed to invest $50,000 of equity capital into DLK, but on the condition that the investment firm be granted the right to elect five members to DLK’s board of directors. Discouraged by the “high cost” of external borrowing, Lacey decides to approach Kaylee and Doug. Lacey suggests to Kaylee and Doug that each of the three original investors contribute an additional $25,000 to DLK in exchange for five 20-year debentures. The debentures will be unsecured and subordinate to ACME’s debt. Annual interest on the debentures will accrue at a floating 5% premium over the prime rate.
(US Code, Section 121 (a); http://www.law.cornell.edu/uscode/text/26/121 Conclusion: There should be a little or no difference between paying an old mortgage and assuming a new one. If the couple sells a house they could exclude up to $500,000 of recognized gain, if they have lived in this house for at least two years in the five year period. (b) Can John and Jane Smith utilize a 1031 tax exchange to buy a more expensive house using additional money from John's case? Applicable Law &
For the Petersan’s their allowable expense will be $3,000.00 for their one qualifying child, and based on their AGI of $90,916.00, they are limited to a $600.00 ($3,000 x .20) credit. This calculation is made using the table on Form 2441, and then reflected on line 48 of Form 1040. There is one additional credit they will qualify for and that is the Child Tax Credit. This is an up to $1,000 tax credit (reduces tax dollar for dollar) for each qualifying child subject to income limits. The Petersan’s have one qualifying child that meets the IRS criteria for the full $1,000 tax credit.
Note that accrual-basis taxpayers are limited in their ability to use the installment sale method with respect to routine business transactions. ________________________________________ 9. Joe, a plumber, received a $4,000 payment for services performed in November 2010. The customer complained about the quality of the work, and in December, filed a claim with a local court for refund. In February 2011, the case is settled, and Joe refunds $2,500 to the customer.
(3) Issue b) Can John and Jane Smith utilize a 1031 tax exchange to buy a more expensive house using additional money from John's case? A married couple that files a joint return can exclude up to $500,000 of gain when they sell their house (if they have owned and lived in it for 2 out of the last 5 years). If this is the case and 100% of the gain is excludable they wouldn’t need to report this on their tax return. If only part of that is excludable then they would report the sale of their home on Schedule D of Form 1040 and put “Section 121 Exclusions” as the explanation. Since this new home will be their primary residence then they cannot utilize a 1031 tax exchange to defer the gain.
Week 3 Problem Set Marlana Sisson Heber Howard December 22, 2012 University of Phoenix Problem 67 Chapter 5 Ken is 63 years old and unmarried. He retired at age 55 when he sold his business, Understock.com. Though Ken is retired, he is still very active. Ken reported the following financial information this year. Assume Ken’s modified adjusted gross income for purposes of the bond interest exclusion and for determining the taxability of his Social Security benefits is $70,000 and that Ken files as a single taxpayer.
Charlene A. Porter Attorney at Law 3075 Veterans Memorial Highway, Suite 200 Ronkonkoma, NY 11779 631-878-2510 Fax: 631-878-2315 Email firstname.lastname@example.org November 30, 2012 Mary Kate Peterson 74 Laurel Drive Smithtown, NY 11787 RE: Mary Kate Peterson Dear Ms. Peterson, Thank you for meeting us last week. In this letter We will provide you with our legal opinion. You and Mr. Peterson are legally separated and you received a decree of separation a year ago. Jon died last month, leaving no will and his estate is worth $500,000. You and Mr. Peterson have no children together, but Jon’s mother is still living.