Thomas receives tangible personal property as an inheritance from a decedent who died in 2021. The property was depreciated by the deceased, and Thomas will also depreciate it. At the date of the deceased’s death, the property was worth more than the deceased’s adjusted basis. What is the impact of these facts on Thomas when he sells the property at a gain several years after he acquired it?
> For 2021, Maddie has gross income of $38,350 and a $5,000 long-term capital loss. She claims the standard deduction. Maddie is 35 years old and unmarried with two dependent children. How much of Maddie’s $5,000 capital loss carries over to 2022?
> Three C corporations reported the following results for the calendar tax year 2021. a. Determine each corporation’s Federal income tax liability. b. Construct a single Microsoft Excel formula that will produce the correct answer for all
> Dan, a professional basketball player, is to receive a bonus of $2,000,000 for signing an employment contract. An NQDC plan is established to postpone the income beyond Dan’s peak income years. In 2021, his employer transfers the bonus to an escrow agent
> In December 2021, Nell, Inc., an accrual basis taxpayer, paid $12,000 for insurance premiums for the 2022 calendar year. How much of the premiums can Nell, Inc., deduct in 2021?
> Locate the most recent data available from the IRS on Form 8824 filings (irs.gov/statistics). In a Microsoft Excel spreadsheet, use this information to provide a summary of these transactions through time [e.g., the number of like-kind exchanges that hav
> Gabriella, age 34, and Beth, age 32, have been married for nine years. Gabriella, who is a college student, works part-time and earns $1,500. Beth is a high school teacher and earns a salary of $34,000. a. What is the maximum amount Gabriella can contrib
> Louis is a participant in the SIMPLE IRA of his employer Brown, Inc. During 2021, he contributes 8% of his salary of $63,000, and his employer contributes 3%. What is the total amount that will be vested in his account at the end of 2021?
> Jacob Patterson is limited from making a fully deductible $6,000 IRA contribution because of his income level. Instead, he makes a $3,500 nondeductible IRA contribution to his traditional IRA. Find out how Jacob reports this on his return, and complete t
> Jimmy establishes a Roth IRA at age 47 and contributes $89,600 over 18 years. The account is now worth $112,000. How much of these funds may Jimmy withdraw tax-free?
> Carla was the owner of vacant land that she was holding for investment. She paid $2,000,000 for the land in 2018. Raymond was an investor in vacant land. He thought Carla’s land might be the site of an exit ramp from a new freeway. Raymond gave Carla $83
> Harvey is a self-employed accountant with earned income from the business of $120,000 (after the deduction for one-half of his self-employment tax). He uses a defined contribution Keogh plan. What is the maximum amount Harvey can contribute to his retire
> Quentin’s roadside vegetable stand (adjusted basis of $275,000) is destroyed by a tractor-trailer accident. He receives insurance proceeds of $240,000. Quentin immediately uses the proceeds plus additional cash of $45,000 to build another roadside vegeta
> Consuela was a tenant in a campus apartment. She is a student at State University. Her lease began on August 1, 2021, and was due to expire on July 31, 2022. However, her landlord sold the building, and the new owner wanted to demolish it to build a reta
> Using the legend provided below, classify each statement under 2021 tax law. a. A child care credit is available. b. The deduction of charitable contributions is subject to percentage limitation(s). c. Excess charitable contributions can be carried forwa
> The U.S. tax system allows many businesses to use the cash method of accounting. Find another country that allows some businesses to use the cash method, and explain how that system compares to the U.S. system. E-mail your answer to your instructor, also
> Lee inherits a traditional IRA at the end of 2021. a. If Lee inherits the IRA from her spouse when the value is $231,050, how must the balance be distributed to her? b. If Lee inherits the IRA from her brother, how must the balance be distributed to her?
> Kim is a 40% shareholder in Taupe, a calendar year S corporation. During 2021, Taupe had an operating loss of $200,000. If Kim has a basis of $50,000 in his stock and has made a loan to Taupe of $20,000, how much of the loss can he deduct for 2021?
> Cheng is age 77, and the balance in her traditional IRA account at the end of December of the prior year is $231,000. Using Exhibit 19.3, calculate Cheng’s required minimum distribution for 2022.
> In 2021, Emily receives a distribution of $125,000 from her wholly owned calendar year corporation. As of January 1, 2021, the corporation has accumulated E & P of $15,000 and for 2021 has current E & P of $65,000. Emily’s basis in her stock is $35,000.
> Enzo is a single taxpayer with the following gains and losses for 2021: • $2,100 short-term capital loss. • $24,000 long-term capital gain from sale of stock. • $14,000 § 1231 gain that is all unrecaptured § 1250 gain. What is the amount and character of
> Neal uses the percentage of completion method to report his gross income from long-term contracts that were to begin in 2021. In 2022, he completes a contract for more than the estimate of total costs that was used in the prior year. What are the tax acc
> An apartment building was acquired in 2012. 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?
> Tom and Alice Honeycutt, ages 45 and 46, respectively, live at 101 Glass Road, Delton, MI 49046. Tom is a county employee, and Alice is a self-employed accountant. Tom’s Social Security number is 111-11-1111; Alice’s Social Security number is 123-45-6789
> Devon Bishop, age 45, is single. He lives at 1507 Rose Lane, Albuquerque, NM 87131. His Social Security number is 111-11-1117. Devon did not engage in any virtual currency transactions during the year, and he does not want $3 to go to the Presidential El
> Glen and Diane Okumura (both age 48) are married, file a joint return, and live at 39 Kaloa Street, Honolulu, HI 96815. Glen’s Social Security number is 111-11-1111, and Diane’s is 123-45-6789. The Okumuras have two dependent children, Amy (age 15) and J
> Justin Stone was an employee of DataCare Services, Inc. His salary was $45,000 through November 10, 2020, when he was laid off. DataCare Services provided medical insurance for Justin and his family during his employment and agreed to continue this cover
> Anthony Barrone is a graduate student at State University. His 10-year-old son, Jamie, lives with him, and Anthony is Jamie’s sole support. Anthony’s wife died in 2020, and Anthony has not remarried. Anthony received $
> Purple Corporation purchases residential rental property for $1,000,000 (disregarding any allocation to the land) on March 9, 2018. Straight-line cost recovery of $130,295 is taken before the property is sold on October 23, 2021, for $1,000,000. a. What
> Ashley Panda lives at 1310 Meadow Lane, Wayne, OH 43466, and her Social Security number is 123-45-6777. Ashley is single and has a 20-year-old son, Bill. His Social Security number is 111-11-1112. Bill lives with Ashley, and she fully supports him. Bill
> Wally, Inc., sold the following three personal property assets in year 6: / What is Wally’s § 1245 recapture in year 6? a. $500 loss b. $300 gain c. $800 gain d. $1,600 gain
> Wally, Inc., sold the following three personal property assets in year 6: What is Wally’s net § 1231 gain or loss in year 6? a. $500 loss b. $300 gain c. $800 gain d. $1,600 gain
> Yanling owns a 150-unit motel that was constructed in the late 1960s. It is located on 10 acres on the main highway leading into the city. Yanling renovated the motel three years ago. Yanling’s motel is condemned by the city, which is going to use 2 of t
> Randall owns an office building (adjusted basis of $250,000) that he has been renting to a group of physicians. During negotiations over a new seven-year lease, the physicians offer to purchase the building for $900,000. Randall accepts the offer with th
> Does your state impose income tax on an S corporation in addition to imposing tax on the shareholders? Elaborate.
> Scott and Brooke are the sole shareholders of Tananger Company, a calendar year S corporation. After several loss years, in December 2021, Tananger is forced to borrow $300,000 for working capital purposes. Robin State Bank makes the loan to Tananger, bu
> During 2021, Jayden Steele received a distribution of $24,000 on stock he owns in Razorbill Corporation. He had planned to report this amount as dividend income until he talked to his father-in-law, Jim. According to Jim, who had examined Razorbill’s fin
> Prepare an outline of a speech on the topic “Should a Millennial Establish a Roth IRA and Contribute to It?” for your school’s Investment Club.
> Find the full IRS RMD table, and compute the 2022 required minimum distribution in each of the following situations. a. Anya’s IRA balance is $215,000, and she is 76 years old. b. Anya is 78 years old, and her IRA balance is $196,000. c. Anya, age 72, is
> Jacob purchased business equipment for $56,000 in 2018 and has taken $35,000 of regular MACRS depreciation. Jacob sells the equipment in 2021 for $26,000. What is the amount and character of Jacob’s gain or loss?
> Prepare two PowerPoint slides for each of the following items to present to your school’s Accounting Club. a. What is an inherited IRA? b. If you inherit an IRA, can you make additional contributions to it? c. Do an inherited IRA’s funds remain tax defer
> Locate IRS data about taxable IRA distributions, specifically reporting the annual number of returns with distributions and their amounts. Comment about the data for the most recent three years, using $100,000 AGI ranges up to $5,000,000. E-mail your gra
> Pedro comes to your office and indicates that he received $61,000 from a qualified retirement plan in 2021 before he was 59½ years old. He is not disabled or eligible for any of the other statutory exceptions to avoid the additional 10% early withdrawal
> In 2021, your client, Clear Corporation, changed from the cash to the accrual method of accounting for its radio station. The company had a positive § 481 adjustment of $2,400,000 as a result of the change and began amortizing the adjustment in 2021. In
> Your client, Vernon Jones, is a self-employed attorney. Vernon uses the cash method of accounting. In reviewing his accounting records to get ready to prepare his tax return for the current year, you find an entry in December about a lost check. In discu
> Your client, Alternate Fuel, Inc. (a regular corporation), owns three sandwich shops in the Philadelphia area. In 2018, the year Alternate Fuel incorporated, it acquired land on the outskirts of Philadelphia with the hope of someday farming the land to c
> Using information from the IRS Tax Stats website (irs.gov/ statistics), find a statistic for partnerships that indicates how much total noncapital gain there was in the latest year for which data are available.
> Find a state website that has tax forms and instructions for the state. Call that state “X.” Find a discussion in those sources that reveals whether state X taxes gains from the sale of real estate that is located in state Y when the taxpayer is an indiv
> Katie exchanges a building and land (used in her business) for Tyler’s land and building and some equipment (used in his business). a. What are Katie’s recognized gain or loss and basis for the land and building and eq
> Daniela Fletcher owns undeveloped land (adjusted basis of $80,000 and fair market value of $92,000) on the East Coast. On January 4, 2021, she exchanges it with Lisa Martin (an unrelated party) for undeveloped land on the West Coast and $3,000 cash. Lisa
> An individual taxpayer had a net $1231 loss in 2021. Could any of this loss be treated as a long-term capital loss? Why or why not?
> Maria meets all of the requirements of § 1237 (subdivided realty). In 2021, she begins selling lots and sells four separate lots to four different purchasers. She also sells two contiguous lots to another purchaser. The sales price of each lot is $30,000
> Barbella purchased a wedding ring for $15 at a yard sale in May. She thought the ring was costume jewelry, but it turned out to be a real diamond ring. She is not in the business of buying and selling anything. She researched the ring on the internet and
> 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
> Dennis sells short 100 shares of ARC stock at $20 per share on January 15, 2021. He buys 200 shares of ARC stock on April 1, 2021, at $25 per share. On May 2, 2021, he closes the short sale by delivering 100 of the shares purchased on April 1. a. What ar
> Missy, age 30, has owned her principal residence (adjusted basis of $225,000) for five years. During the first three years of ownership, she occupied it as her principal residence. During the past two years, she was in graduate school and rented the resi
> Cisco, a calendar year taxpayer who is age 63, owns a residence in which he has lived for 21 years. The residence is destroyed by fire on August 8, 2021. The adjusted basis is $190,000, and the fair market value is $320,000. Cisco receives insurance proc
> Ramesh owns a beach house (four years) and a cabin in the mountains (six years). His adjusted basis is $300,000 in the beach house and $315,000 in the mountain cabin. Ramesh also rents a townhouse in the city where he is employed. During the year, he occ
> For 2021, Wilma has properly determined taxable income of $36,000, including $3,000 of unrecaptured § 1250 gain and $8,200 of 0%/15%/20% gain. Wilma qualifies for head-of-household filing status. Compute Wilma’s tax liability and the tax savings from the
> Jane and Blair are married taxpayers filing jointly and have 2021 taxable income of $107,000. The taxable income includes $5,000 of gain from a capital asset held five years, $2,100 of gain from a capital asset held seven months, and $13,000 of gain from
> Wesley, who is single, listed his personal residence with a real estate agent on March 3, 2021, at a price of $390,000. He rejected several offers in the $350,000 range during the summer. Finally, on August 16, 2021, he and the purchaser signed a contrac
> Several years ago Nicolas, a timber dealer, purchased a tract of land with a substantial stand of trees on it. The land cost $8,000, and the timber cost $250,000. On the first day of 2021, the timber was appraised at $325,000. In August 2021, Nicolas cut
> Taylor has owned and occupied her personal residence (adjusted basis of $190,000) for four years. In April 2021, she sells the residence for $300,000 (selling expenses are $20,000). On the same day as the sale, Taylor purchases another house for $350,000
> Karl purchased his residence on January 2, 2020, for $260,000, after having lived in it during 2019 as a tenant under a lease with an option to buy clause. On August 1, 2021, Karl sells the residence for $315,000. On June 13, 2021, Karl purchases a new r
> Wanda, a calendar year taxpayer, owned a building (adjusted basis of $250,000) in which she operated a bakery that was destroyed by fire in December 2021. She receives insurance proceeds of $290,000 for the building the following March. Wanda is consider
> Fred is an investor in vacant land. When he thinks he has identified property that would be a good investment, he approaches the landowner, pays the landowner for a “right of first refusal” to purchase the land, records this right in the property records
> Cabel’s warehouse, which has an adjusted basis of $380,000 and a fair market value of $490,000, is condemned by an agency of the Federal government to make way for a highway interchange. The initial condemnation offer is $425,000. After substantial negot
> Emily’s warehouse (adjusted basis of $450,000) is destroyed by a hurricane in October 2021. Emily, a calendar year taxpayer, receives insurance proceeds of $525,000 in January 2022. Calculate Emily’s realized gain or loss, recognized gain or loss, and ba
> Mitchell, a calendar year taxpayer, is the sole proprietor of a fast-food restaurant. His adjusted basis for the building and the related land is $450,000. On March 12, 2021, state authorities notify Mitchell that his property is going to be condemned so
> For each of the following involuntary conversions, indicate whether the property acquired qualifies as replacement property, any resulting recognized gain, and the basis for the property acquired. a. Krystal owns a warehouse that is destroyed by a tornad
> Roger inherited 100 shares of Periwinkle stock when his mother, Emily, died. Emily had acquired the stock for a total of $60,000 on November 15, 2017. She died on August 10, 2021, and the shares were worth a total of $55,000 at that time. Roger sold the
> Aliya held vacant land that qualified as an investment asset. She purchased the vacant land on April 10, 2017. She exchanged the vacant land for a rental house in a qualifying like-kind exchange on January 22, 2021. Aliya was going to hold the house for
> The AGI of the Newtons, a married couple, is $201,000 this year. They would like to contribute to a Roth IRA. a. What is the maximum amount this couple can contribute to a Roth IRA? Show your calculations using Microsoft Excel. b. Now suppose that the Ne
> Determine the realized, recognized, and postponed gain or loss and the new basis for each of the following like-kind exchanges. g. Create a Microsoft Excel spreadsheet that—by entering the fair market value and basis of property given u
> Tom Howard and Frank Pérez are good friends (and former college roommates). Each owns investment property in the other’s hometown (Tom lives in Kalamazoo, MI; Frank lives in Austin, TX). To make their lives easier, they decide to exchange the investment
> Benny purchased $400,000 of Peach Corporation face value bonds for $320,000 on November 13, 2020. The bonds had been issued with $80,000 of original issue discount because Peach was in financial difficulty in 2020. On December 3, 2021, Benny sold the bon
> Melaney has had a bad year with her investments. She lent a friend $8,000; the friend did not repay the loan when it was due and then declared bankruptcy. The loan is totally uncollectible. Melaney also was notified by her broker that the Oak corporate b
> Hilde purchased all of the rights to a patent on a new garden tool developed by a friend of hers who was an amateur inventor. The inventor had obtained the patent rights, set up a manufacturing company to produce and sell the garden tool, and produced su
> Suni owns land (adjusted basis of $90,000; fair market value of $125,000) that she uses in her business. She exchanges it for another parcel of land (worth $100,000) and stock (worth $25,000). Determine Suni’s: a. Realized and recognized gain or loss on
> In two unrelated transactions, Laura exchanges property that qualifies for like-kind exchange treatment. In the first exchange, Laura gives up land purchased in May 2019 (adjusted basis of $20,000; fair market value of $17,000) in exchange for a differen
> Del Mar Corporation (EIN 33-1234567) was formed and began operations on January 1, 2021. The corporate address is 463 E. Pershing Blvd. Cheyenne, WY 82001. Del Mar uses the accrual basis of accounting. The corporation’s 12/31/2021 tria
> As of January 1, 2021, Norman has a basis of $85,000 in his 30% capital interest in the Plata Partnership. He and the partnership use the calendar year for tax purposes. The partnership incurs an operating loss of $440,000 for 2021 and a profit of $285,0
> Aiden has a 35% capital interest in the Oro Partnership and is entitled to a yearly guaranteed payment of $40,000. As of January 1, 2021, Aiden’s basis in the partnership interest is $87,000. During tax year 2021, Oro recorded the following transactions.
> Refer to Form 4797 near the end of this chapter. Where would a $1231 gain on the disposition of business land be entered on the form?
> Jenna owns 30% of the stock in Mockingbird, a calendar year S corporation. Her basis in the stock as of January 1, 2021, is $130,000. Mockingbird has an operating loss of $500,000 in 2021 and an operating profit of $600,000 in 2022. Jenna withdraws $70,0
> Jim Oza owns all of the stock in Drake, a calendar year S corporation. For calendar year 2021, Drake anticipates an operating loss of $160,000 and could, if deemed worthwhile, sell a stock investment that would generate a $10,000 long-term capital loss.
> Assume the same facts as in Problem 50. Kirby Turner is a 20% shareholder in Thrasher Corporation. She is aware of the tax consequences of the various items listed on the Schedule K–1 (Form 1120S) she received but does not understand their effect on basi
> Ling is the sole shareholder of Crimson Corporation (a C corporation). At a time when Crimson has a deficit in accumulated E & P of $90,000 and current E & P of $65,000, it distributes a cash dividend of $85,000. If Ling’s basis in her stock is $15,000,
> Deena, Walt, and Pat form Swan Corporation with the following investments. In addition to the 500 shares of stock, Pat receives $100,000 in cash from Swan Corporation. Assume that each share of Swan stock is worth $1,000. a. How much loss does Walt reali
> During 2022, Siskin Corporation (a C corporation) entered into the following transactions. Income from operations……………………………………………………………………………… $500,000 Expenses from operations ………………………………………………………………………………425,000 Dividends from domestic corporations (
> On December 6, 2021, Kestrel Company (a calendar year taxpayer) authorizes a cash donation of $50,000 to the Memphis Public Library. The pledge is carried out as follows: $15,000 on December 12, 2021; $25,000 on February 13, 2022; and $10,000 on May 10,
> Robin incurred the following capital transactions in 2021. LTCG …………………………………………$10,000 LTCL ……………………………………………..8,000 STCG ……………………………………………..2,000 STCL ………………………………………………..–0– Robin also reported a net long-term capital loss in 2020 of $2,000, which it
> Citron, a calendar year taxpayer, began business in January 2020. It had a long-term capital gain of $5,000 in 2020 and a long-term capital loss of $10,000 in 2021. For both years, Citron had an operating profit in excess of $100,000. How are these capit
> Garnet incurs the following capital asset transactions during the year. Long-term capital gain ……………………………………………..$8,000 Short-term capital gain ……………………………………………….3,000 Further, Garnet has an excess capital loss carryforward of $6,000 from last year. a.
> Refer to Form 4797 near the end of this chapter. Where would a $1231 loss be entered on the form?
> On November 19, 2019, Rex is granted a nonqualified stock option to purchase 100 shares of Tan Company. On that date, the stock is selling for $8 per share, and the option price is $9 per share. Rex exercises the option on August 21, 2020, when the stock
> Rosa exercises ISOs for 100 shares of Copper Corporation common stock at the option price of $100 per share on May 21, 2021, when the fair market value is $120 per share. She sells the 100 shares of common stock three and one-half years later for $140. a
> Samuel, age 32, loses his job in a corporate downsizing. As a result of his termination, he receives a distribution of the balance in his § 401(k) account of $20,000 ($25,000 2 $5,000 Federal income tax withholding) on May 1, 2021. Samuel’s marginal tax
> Carri and Dane, ages 34 and 32, respectively, have been married for 11 years, and both are active participants in employer qualified retirement plans. Their total AGI in 2021 is $201,000, and they earn salaries of $89,000 and $95,000, respectively. What
> Answer the following independent questions with respect to traditional IRA contributions for 2021. a. Juan, age 41, earns a salary of $28,000 and is not an active participant in any other qualified plan. His wife, Agnes, has no earned income. What is the
> Answer the following independent questions with respect to a deductible IRA and § 401(k) contributions for 2021. a. Govind, age 31, earns a salary of $26,000 and is not an active participant in any other qualified plan. His wife Olga reports $600 of comp
