$1.($LO$1)$ Indicate whether the following activities should be classified as business, investment, or personal.

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Kaitlin knits and crochets and sells her items at her church. She does not keep an inventory record and does not charge sales tax.

Lydia spends $$125$ to have her hair cut.

Steven purchases land to be used as a parking lot for his business

Sharon owns multiple rental apartment buildings and materially participates in the management of the properties

Bob spends $$100$ monthly to pay for access to real$-$time stock quotes

Farrah purchases a desk to use in her office for her consulting business

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$2.($LO$2)$ Classify each of the following assets as realty, personalty $($tangible$),$ personalty $($intangible asset$),$ or natural resource.

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Coal

Natural Resource

Covenant not to competea

Warehouse used to store chemicals

Trademark used to sell a product

Automobile used to drive for work

Printer used in an office

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$3.($LO$2)$ Classify each of the following assets as ordinary, Section $1231,$ or capital.

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Notes receivable

One parcel of land held for investment

Automobile used $100\%$ for business held for three years

$1967$ Ford Mustang owned for personal pleasure

Desk and chair used in business sold after three months

Land used as a playground for a day care center

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$4.($LO$3)$ Elnaz paid $$180,000$ for a building in the current year. She also paid commissions of $$2,800,$ transfer fee of $$150,$ survey fee of $$100,$ appraisal fees of $$850,$ and title insurance of $$600.$

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What is the initial basis of building?

Assume Elnaz replaced the roof for $$42,000$ and deducted $$37,000$ of depreciation through the date of sale. What is Elnaz$$s adjusted basis in the building?

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$5.($LO$4)$ Fantasia is a popular photographer in her area and she typically charges $$125$ for a photo session. Mario is an accountant who charges $$100$ per hour to complete a tax return. Fantasia would like to have her tax return prepared and wants to exchange her photography services for Mario$$s work on her tax return. Mario estimates that it will take about four hours to complete the tax return. They agree to four photo sessions of Mario$$s children. How much income, if any, must Fantasia include in her income?

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$7.($LO$6)$ Elijah owns an apartment building that he purchased $10$ years ago for $$345,000.$ His current adjusted basis is $$220,000$ and his outstanding mortgage is $$250,000.$ Elijah sells the building for cash of $$300,000$ plus assumption of his mortgage. He pays commissions on the sale of $$30,000,$ title transfer fees of $$500,$ and an attorney at closing $$1,000.$ What is Elijah$$s realized and recognized gain?