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south western federal taxation

Questions and Answers of South Western Federal Taxation

On January 1, 2010, Stephanie Bridges acquired depreciable real property for $50,000. She used straight-line depreciation to compute the asset’s cost recovery. The asset was sold for $96,000 on
Larry is the sole proprietor of a trampoline shop. During 2019, the following transactions occurred:• Unimproved land adjacent to the store was condemned by the city on February 1. The condemnation
On May 2, 1989, Hannah Weather (Social Security number: 111-22-3333) acquired residential real estate for $450,000. Of the cost, $100,000 was allocated to the land and $350,000 to the building. On
On June 1, 2015, Skylark Enterprises (not a corporation) acquired a retail store building for $500,000 (with $100,000 being allocated to the land). The store building was 39-year real property, and
On December 1, 2017, Lavender Manufacturing Company (a corporation) purchased another company’s assets, including a patent. The patent was used in Lavender’s manufacturing operations; $49,500 was
Copper Industries (a sole proprietorship) sold three ? 1231 assets during 2019. Data on these property dispositions are as follows: a. Determine the amount and the character of the recognized gain
Siena Industries (a sole proprietorship) sold three ? 1231 assets during 2019. Data on these property dispositions are as follows: a. Determine the amount and the character of the recognized gain
Keshara has the following net ? 1231 results for each of the years shown. What would be the nature of the net gains in 2018 and 2019? Tax Year Net 5 1231 Loss Net § 1231 Galn 2014 $18,000 2015
Gray, Inc., a C corporation, has taxable income from operations of $1,452,000 for 2019. It also has a net long-term capital loss of $355,000 from the sale of a subsidiary’s stock. The year 2019 is
Asok’s AGI for 2019 is $133,250. Included in this AGI is a $45,000 25% long-term capital gain and a $13,000 0%/15%/20% long-term capital gain. Asok is single and uses the standard deduction.
For 2019, 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.
Jane and Blair are married taxpayers filing jointly and have 2019 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
For 2019, Ashley has gross income of $38,350 and a $5,000 long-term capital loss. She claims the standard deduction. Ashley is 35 years old and unmarried with two dependent children. How much of
Helena has the following long-term capital gains and losses for 2019: $65,000 28% gain, $53,000 28% loss, $28,000 25% gain, and $24,000 0%/15%/20% loss. She also has a $33,000 short-term loss and a
Paul has the following long-term capital gains and losses for 2019: $62,000 28% gain, $21,000 28% loss, $18,000 25% gain, and $64,000 0%/15%/20% gain. He also has a $53,000 short-term loss and a
Phil and Susan Hammond are married taxpayers filing a joint return. The couple have two dependent children. Susan has wages of $34,000 in 2018. Phil does not work due to a disability, but he is a
In 2019, Bertha Jarow had a $28,000 loss from the sale of a personal residence. She also purchased a patent on a rubber bonding process from an individual inventor for $7,000 (and resold it in two
Elaine Case (single with no dependents) has the following transactions in 2019:AGI (exclusive of capital gains and losses)...........$240,000Long-term capital
Dennis sells short 100 shares of ARC stock at $20 per share on January 15, 2019. He buys 200 shares of ARC stock on April 1, 2018, at $25 per share. On May 2, 2019, he closes the short sale by
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, 2015. She died on August 10, 2019, and the shares were
Maria held vacant land that qualified as an investment asset. She purchased the vacant land on April 10, 2015. She exchanged the vacant land for a rental house in a qualifying like-kind exchange on
Consuela was a tenant in a campus apartment. She is a student at State University. Her lease began on August 1, 2019, and was due to expire on July 31, 2020. However, her landlord sold the building,
Hilde purchased all of the rights to a patent on a new garden tool developed by a friend of hers who is an amateur inventor. The inventor obtained the patent rights, set up a manufacturing company to
Carla was the owner of vacant land that she was holding for investment. She paid $2,000,000 for the land in 2017. Raymond was an investor in vacant land. He thought Carla’s land might be the site
Benny purchased $400,000 of Peach Corporation face value bonds for $320,000 on November 13, 2018. The bonds had been issued with $80,000 of original issue discount because Peach was in financial
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
Maria meets all of the requirements of § 1237 (subdivided realty). In 2019, she begins selling lots and sells four separate lots to four different purchasers. She also sells two contiguous lots to
Pebble Securities is a corporation that buys and sells financial assets. It purchases notes receivable from manufacturers that need cash immediately and cannot wait to collect the notes. Pebble pays
Enzo is a single taxpayer with the following gains and losses for 2019:• $2,100 short-term capital loss.• $24,000 long-term capital gain from sale of stock.• $14,000 § 1231 gain that is all
An apartment building was acquired in 2010. 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?
Sissie owns two items of business equipment. Both were purchased in 2015 for $100,000, both have a 7-year MACRS recovery period, and both have an adjusted basis of $37,490. Sissie is considering
Jacob purchased business equipment for $56,000 in 2016 and has taken $35,000 of regular MACRS depreciation. Jacob sells the equipment in 2019 for $26,000. What is the amount and character of
Renata Corporation purchased equipment in 2017 for $180,000 and has taken $83,000 of regular MACRS depreciation. Renata Corporation sells the equipment in 2019 for $110,000. What is the amount and
Elliott has the following capital gain and loss transactions for 2019.Short-term capital gain....................................$ 1,500Short-term capital
Coline has the following capital gain and loss transactions for 2019.Short-term capital gain...................................$ 5,000Short-term capital
Shen purchased corporate stock for $20,000 on April 10, 2017. On July 14, 2019, when the stock was worth $12,000, Shen died and his son, Mijo, inherited the stock. Mijo sold the stock for $14,200 on
On May 9, 2019, Glenna purchases 500 shares of Ignaz Company stock for $7,500. On June 30, 2019, she writes a call option on the stock, giving the grantee the right to buy the stock for $9,000 during
Thomas receives tangible personal property as an inheritance from a decedent who died in 2019. The property was depreciated by the deceased, and Thomas will also depreciate it. At the date of the
If depreciable equipment used in a business is sold at a recognized gain on July 10, 2019, and it was purchased on August 21, 2018, does § 1245 depreciation recapture apply to the asset? Explain.
Review Examples 50 and 52 in the text. In both examples, the taxpayer’s AGI is $129,400 even though in Example 52 there is $700 of nonrecaptured § 1231 loss from 2018. Explain why the two AGI
Steven established a sole proprietorship in 2013. He sold § 1231 assets at a loss in 2017 and 2018. He had only sold § 1231 assets at a gain before 2017. In 2019, he could sell a § 1231 asset at a
An individual taxpayer had a net § 1231 loss in 2019. Could any of this loss be treated as a long-term capital loss? Why or why not?
Hakim’s rental building (a § 1231 asset) was not insured when it was destroyed by a hurricane. His adjusted basis for the building was substantial but was less than he had paid for the building in
Lloyd 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. Lloyd also rents a townhouse in
Wesley, who is single, listed his personal residence with a real estate agent on March 3, 2019, at a price of $390,000. He rejected several offers in the $350,000 range during the summer. Finally, on
Karl purchased his residence on January 2, 2018, for $260,000, after having lived in it during 2017 as a tenant under a lease with an option to buy clause. On August 1, 2019, Karl sells the residence
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 2019. She receives insurance proceeds of $290,000
Edith’s warehouse (adjusted basis of $450,000) is destroyed by a hurricane in October 2019. Edith, a calendar year taxpayer, receives insurance proceeds of $525,000 in January 2020. Calculate
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, 2019, state authorities notify
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 2017 (adjusted basis of $20,000;
Tanya Fletcher owns undeveloped land (adjusted basis of $80,000 and fair market value of $92,000) on the East Coast. On January 4, 2019, she exchanges it with Lisa Martin (an unrelated party) for
Tyneka inherited 1,000 shares of Aqua, Inc. stock from Joe. Joe’s basis was $35,000, and the fair market value on July 1, 2019 (the date of death) was $45,000. The shares were distributed to Tyneka
Helene and Pauline are twin sisters who live in Louisiana and Mississippi, respectively. Helene is married to Frank, and Pauline is married to Richard. Frank and Richard are killed in an auto
Dan bought a hotel for $2,600,000 in January 2015. In May 2019, he died and left the hotel to Ed. While Dan owned the hotel, he deducted $289,000 of cost recovery. The fair market value in May 2019
As sole heir, Dazie receives all of Mary’s property (adjusted basis of $11,400,000 and fair market value of $13,820,000). Six months after Mary’s death, the fair market value is $13,835,000.a.
On September 18, 2019, Gerald received land and a building from Frank as a gift. No gift tax was paid on the transfer. Frank?s records show the following: a. Determine Gerald?s adjusted basis for
Roberto has received various gifts over the years and has decided to dispose of several of these assets. What is the recognized gain or loss from each of the following transactions, assuming that no
Rod Clooney purchases Agnes Mitchell?s sole proprietorship for $990,000 on August 15, 2019. The assets of the business are: a. Calculate Agnes?s realized and recognized gain. b. Determine Rod?s
Kevin purchases 1,000 shares of Bluebird Corporation stock on October 3, 2019, for $300,000. On December 12, 2019, Kevin purchases an additional 750 shares of Bluebird stock for $210,000. According
Karen Samuels (Social Security number 123-45-6789) makes the following purchases and sales of stock: Assuming that Karen is unable to identify the particular lots that are sold with the original
Chee purchases Tan, Inc. bonds for $108,000 on January 2, 2019. The face value of the bonds is $100,000; the maturity date is December 31, 2023; and the annual interest rate is 5%. Chee will
Kareem bought a rental house in March 2014 for $300,000, of which $50,000 is allocated to the land and $250,000 to the building. Early in 2016, he had a tennis court built in the backyard at a cost
Anne sold her home for $290,000 in 2019. Selling expenses were $17,400. She purchased it in 2013 for $200,000. During the period of ownership, Anne had done the following:• Deducted $50,500
On August 31, 2018, Harvey and Ling, who file a joint return and live in Charleston, South Carolina, sell their personal residence, which they have owned and lived in for 10 years. The realized gain
Gary, who is single, sells his principal residence (owned and occupied by him for seven years) in November 2019 for a realized gain of $148,000. He had purchased a more expensive new residence eight
On February 24, 2019, Allison’s building, with an adjusted basis of $1,300,000 (and used in her trade or business), is destroyed by fire. On March 31, 2019, she receives an insurance reimbursement
On June 5, 2019, Brown, Inc., a calendar year taxpayer, receives cash of $750,000 from the county upon condemnation of its warehouse building (adjusted basis of $500,000 and fair market value of
In June 2019, Sue exchanges a sport-utility vehicle (adjusted basis of $16,000; fair market value of $19,500) for cash of $2,000 and a pickup truck (fair market value of $17,500). Both vehicles are
On July 1, 2019, Katrina purchased tax-exempt bonds (face value of $75,000) for $82,000. The bonds mature in five years, and the annual interest rate is 3%.a. How much interest income and/or interest
Bob is notified by the city public housing authority on May 3, 2019, that his apartment building is going to be condemned as part of an urban renewal project. On June 1, 2019, Carol offers to buy the
Reba, a calendar year taxpayer, owns an office building that she uses in her business. The building is involuntarily converted on November 15, 2019. On January 5, 2020, Reba receives enough proceeds
Comment on the following transactions.a. Mort owns 500 shares of Pear, Inc. stock with an adjusted basis of $22,000. On July 28, 2019, he sells 100 shares for $3,000. On August 16, 2019, he purchases
Thelma inherited land from Sadie on June 7, 2019. The land appreciated in value by 100% during the six months Sadie owned it. The value has remained stable during the three months Thelma has owned
Susie purchased her primary residence on March 15, year 4, for $550,000. She sold it on October 15, year 7, for $240,000. What amount of loss from the sale is recognized on her year 7 income tax
Robin inherits 1,000 shares of Wal-Mart stock from her aunt in 2019. According to the information received from the executor of her aunt’s estate, Robin’s adjusted basis for the stock is $55,000.
In early year 8, Alice sold Tom, her son, 20 shares of common stock for $20,000. Alice had paid $25,000 for the stock in year 2. In late year 8, Tom sold the stock to an unrelated third party for
On January 25, year 10, Mother Hall gave her daughter, Nadyne, 500 shares of common stock of XYZ, Corp. The fair market value of the stock on January 25 was $2,000. Mother Hall had paid $4,000 for
On February 1 of the current year, Duffy learned that he was bequeathed 1,000 shares of common stock under his father’s will. Duffy’s father had paid $12,500 for the stock 20 years ago. Fair
How are transactions using Bitcoin (or another virtual currency) treated under U.S. tax law? Some background on Bitcoin can be found at bitcoin.org/en/faq. Locate the current IRS guidance on this
Ted and Marvin Brown purchased an apartment building in 2007 as equal tenants in common. After a hectic decade of co-ownership, the brothers decided that their business association should be
Ruth Ames died on January 10, 2019. In filing the estate tax return, her executor, Melvin Sims, elects the primary valuation date and amount (fair market value on the date of death). On March 12,
Joshua and Ellen are married and file a joint return. Three individuals qualify as their dependents: their two children, ages 5 years and 6 months, and Ellen’s 18-year-old son from a previous
Green Corporation hires six individuals on January 4, 2019, all of whom qualify for the work opportunity credit. Three of these individuals receive wages of $8,500 during 2019, and each individual
Oak Corporation holds the following general business credit carryovers.2015............................................$
Determine the appropriate amount of 2019 additional Medicare tax for Mario, a single individual. His wages total $440,000.
In 2019, Bianca earned a salary of $164,000 from her employer. How much in FICA and Medicare taxes will be withheld from Bianca’s salary?
Santiago and Amy are married and file a joint tax return. They have three children, ages 12, 14, and 18. All parties are U.S. citizens. Their AGI is $140,000. Determine any available child tax credit
During 2019, Lincoln Company hires seven individuals who are certified to be members of a qualifying targeted group. Each employee works in excess of 600 hours and is paid wages of $7,500 during the
On July 16, 2019, 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
Madison and Nick Koz have two children, ages 8 and 10. Both children meet the definition of qualifying child. The Koz family has adjusted gross income of $300,000. What is the amount of the child tax
In 2019, 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
Bonnie and Jake (ages 35 and 36, respectively) are married with no dependents and live in Montana (not a community property state). Because Jake has large medical expenses, they seek your advice
Five years ago Gerald invested $150,000 in a passive activity, his sole investment venture. On January 1, 2018, his amount at risk in the activity was $30,000. His shares of the income and losses
A number of years ago, Lee acquired a 20% interest in the BlueSky Partnership for $60,000. The partnership was profitable through 2018, and Lee’s amount at risk in the partnership interest was
A number of years ago, Kay acquired an interest in a partnership in which she is not a material participant. Kay’s basis in her partnership interest at the beginning of 2018 is $40,000. Kay’s
Dorothy acquired a 100% interest in two passive activities: Activity A in January 2014 and Activity B in 2015. Through 2017, Activity A was profitable, but it produced losses of $200,000 in 2018 and
In 2018, 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 2018 and $25,000 in 2019,
Sally recently invested $10,000 (tax basis) in a limited partnership interest. Her atrisk amount is also $10,000. The partnership lost $6,000 this year, and Sally’s share of the loss is $2,000.
For calendar year 2019, 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 after$100
Linda, who files as a single taxpayer, had AGI of $280,000 for 2019. She incurred the following expenses and losses during the year:Medical expenses (before the 10%-of-AGI

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