7:49 1 of 5 Practice+Set+2 77) - ... Practice Set #2 Christian Wolff is age 66...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
7:49 1 of 5 Practice+Set+2 77) - ... Practice Set #2 Christian Wolff is age 66 in 2022. He lives with his spouse at 500 North Jamboree, Newport Beach, CA 92660 (which was sold in 2022 see below). His Social Security number is 122-65- 2112. Christian was divorced from his first wife in 2013. He pays $35,000 annually in alimony to his ex-wife Robin Wolff (Social Security Number 558-55-7567). The divorce agreement was updated as of June 3, 2018. He married his new wife Dana Cummings (Social Security Number 223-31-2222) in 2014; she is 55 as of 2022. They purchased their Newport Beach home together right after their marriage on June 15, 2014. Dana Cummings does not work. Christian owns ZZZ Accounting, LLC, a single member limited liability company and provides bookkeeping and tax services for which he uses the cash method of accounting. Christian formed this business two years ago after he left his form employer "Big Four LLP". He uses his home address as the legal address for the business. His revenues and expenses for 2022 are as follows: Client revenue Salary and Wage expenses (per W-2s, includes employer payroll taxes) Rent expense Utilities Telephone Advertising Entertainment Meals catered from local restaurant into office for employees working late Meals (in restaurants) (1) Assume Bonus Depreciation was taken for this new equipment under Section 168(k) and placed in service on January 15, 2022 19,000 Purchase of office equipment on January 15th (1) 50,000 Health insurance (2) 46,000 Accounting and legal fees (3) 50,000 Employee Benefits (including contributions to the employee profit- 47,000 sharing plan) (2) $34,000 for employees' insurance and $12,000 for Christian and Dana's supplemental plan to Medicare insurance ($6,000 for each of them). $1,100,000 500,000 Q Done 85,000 16,000 5,800 5,500 12,500 5,000 (3) The $50,000 includes expenses of $20,000 related to the purchase of another tax and bookkeeping firm and $30,000 to expand into an unrelated business that he did not purchase. New copier equipment purchased on January 2nd was destroyed by a small fire in the office on 7:55 Back Practice Set 2-2.pdf Q Practice Set #2 Christian Wolff is age 66 in 2022. He lives with his spouse at 500 North Jamboree, Newport Beach, CA 92660 (which was sold in 2022 see below). His Social Security number is 122-65- 2112. Christian was divorced from his first wife in 2013. He pays $35,000 annually in alimony to his ex-wife Robin Wolff (Social Security Number 558-55-7567). The divorce agreement was updated as of June 3, 2018. He married his new wife Dana Cummings (Social Security Number 223-31-2222) in 2014; she is 55 as of 2022. They purchased their Newport Beach home together right after their marriage on June 15, 2014. Dana Cummings does not work. Dashboard Christian owns ZZZ Accounting, LLC, a single member limited liability company and provides bookkeeping and tax services for which he uses the cash method of accounting. Christian formed this business two years ago after he left his former employer Big Four LLP". He uses his home address as the legal address for the business. His revenues and expenses for 2022 are as follows: Client revenue Salary and Wage expenses (per W-2s, includes employer payroll taxes) Rent expense Utilities Telephone Advertising Entertainment (1) Assume Bonus Depreciation was taken for this new equipment under Section 168(k) and placed in service on January 15, 2022 Meals catered from local restaurant into office for employees working late Meals (in restaurants) 19,000 Purchase of office equipment on January 15th (1) 50,000 Health insurance (2) 46,000 Accounting and legal fees (3) 50,000 Employee Benefits (including contributions to the employee profit- 47,000 sharing plan) (2) $34,000 for employees' insurance and $12,000 for Christian and Dana's supplemental plan to Medicare insurance ($6,000 for each of them). (3) The $50,000 includes expenses of $20,000 related to the purchase of another tax and bookkeeping firm and $30,000 to expand into an unrelated business that he did not purchase. 000 000 Calendar LO 5 76 To Do $1,100,000 500,000 85,000 16,000 5,800 5,500 12,500 5,000 Notifications Inbox 7:55 Back Practice Set 2-2.pdf Q (1) Assume Bonus Depreciation was taken for this new equipment under Section 168(k) and placed in service on January 15, 2022 (2) $34,000 for employees' insurance and $12,000 for Christian and Dana's supplemental plan to Medicare insurance ($6,000 for each of them). (3) The $50,000 includes expenses of $20,000 related to the purchase of another tax and bookkeeping firm and $30,000 to expand into an unrelated business that he did not purchase. Dashboard New copier equipment purchased on January 2nd was destroyed by a small fire in the office on March 16th. The basis of the equipment was $15,000 with no depreciation taken (it was purchased in 2022) and it was completely destroyed. There was no insurance on the equipment. Other income for Christian and Dana includes the following: U.S. company dividend income: - Alphabet Inc. held for 1 year - ABC Inc. held for 35 days Interest income: First National Bank First City Bank City of Tustin bonds Treasury Bills $ 19,000 $ 11,500 $ 8,000 $ 4,500 $ 30,000 $ 10,000 Both U.S. companies are publicly traded on the New York Stock Exchange. During the year, Christian and Dana also had the following transactions: Christian worked from his home office for part of 2022 because the office building he rented his office in had restricted access to some of his clients due to COVID-19 measures. The home office was used exclusively for his work in 2022, even after access restrictions to the office building he rents were lifted. He also observed clients enjoyed meeting at his home versus the office since it was closer to many of their homes; as such, he regularly used his home office for business throughout 2022, even after his office building lifted visitor restrictions. His home office is 330 square feet of their 1,650 square foot home. The expenses related to his Newport Beach residence for the year were the mortgage interest and taxes noted below, utilities of $2,500, insurance of $1,500, HOA fees of $3,000, house cleaning of $700, internet of $275, and painting of the office only of $2,500. No depreciation will be taken. Christian received social security benefits for the first-time starting January 1, 2022. His gross social security is $2,500 per month for 12 months. He was paid $2,000 per month which is net of Medicare health premiums. 000 000 Calendar Christian withdrew $25,000 from his 401(k) with his former employer "Big Four LLP in 2022. Vanguard is the investment company of the 401(k). This amount was reported on a 1099 R in Box 1 and 2 a. It was also noted that this was a Normal distribution in Box 7 (Code 7). In Box 4 it was noted that $7,500 of federal taxes were withheld from the distribution. 76 LO To Do Notifications Inbox 7:55 Back Practice Set 2-2.pdf Q Christian withdrew $25,000 from his 401(k) with his former employer "Big Four LLP" in 2022. Vanguard is the investment company of the 401(k). This amount was reported on a 1099 R in Box 1 and 2 a. It was also noted that this was a Normal distribution in Box 7 (Code 7). In Box 4 it was noted that $7,500 of federal taxes were withheld from the distribution. He sold 75 shares of Red, Inc. stock for $25,000 on March 12, 2022. He had purchased the stock on September 5, 2019, for $50,000. On December 12, 2022, Christian sold 300 shares of Apple Inc. stock for $43,500 which he had purchased on January 15, 2019 for $40 a share. He then purchased 500 shares of Apple, Inc. stock on December 30, 2022 for $130 per share. Christian received an inheritance (as sole beneficiary) on January 4, 2022 of $250,000, which is the fair market value of land he received from his Uncle Victor who passed away. His uncle paid $75,000 for the land in 2010. He also received life insurance of $400,000 from his uncle's policy where he was the sole beneficiary. Christian used $200,000 of the insurance to purchase 50 shares of Purple, Inc. stock on May 31, 2022, and used the remaining amount of the life insurance to invest $200,000 in 100 shares of Gold, Inc. stock on June 30, 2022. Christian received 200 shares of Salmon, Inc. stock worth $100,000 as a gift from his wealthy actor cousin, Alex, on June 17, 2017. Alex's adjusted basis for the stock was $30,000. No gift taxes were paid on the transfer. Alex had purchased the stock on April 1, 2012. Christian sold the stock on November 1, 2022, for $125,000. On October 15, 2022, Christian sold one-half of the Purple, Inc. stock for $175,000 and all the Gold Stock for $165,000. Christian was notified on August 1, 2022, that 100 shares of company stock he purchased from Black, Inc. as one of their first investors on September 1, 2017 for $300,000 had become worthless. (Black declared bankruptcy.) Total stock outstanding when he originally invested was $950,000. While he perceived that the investment was risky, he did not anticipate that the corporation would declare bankruptcy. He will not receive anything from the bankruptcy proceedings. On January 31, 2022, Christian received a parcel of land in Flagstaff, AZ worth $285,000 in exchange for a parcel of land he owned in Tempe, AZ. Because the Tempe parcel was worth $300,000, he also was paid $15,000 cash. Doug's adjusted basis for the Tempe parcel was $125,000. He originally purchased it on September 18, 2014. 76 During 2015, he loaned $50,000 to his sister, Virginia. He executed a note and his sister paid interest and some principal payments on the note. The loan balance was $47,000 with $1,500 unpaid interest when his sister filed for Ch 7 bankruptcy on January 20, 2022. Christian was informed on June 30, 2022 by the bankruptcy court that he would not receive any further principal and interest payments on the note. Therefore, the note is fully worthless in 2022. On December 31, 2022, Christian sold the home in which he and Dana had been living in since their marriage. They will move into another home in 2023. The sales price was $1,300,000, selling expenses were $175,000 (including commissions). Christian purchased the condominium for $400,000 and had made no improvements to the condo. In anticipation of buying their new home in 2023, Christian sold the inherited land from his uncle on December 31, 2022. The consideration was a $750,000 installment note plus cash of $150,000. The note is to be paid in three installments with payments due on December 31, 2022, December 31, 2023, and December 31, 2024. The selling expenses were $30,000. He received the first installment payment of $250,000 on December 31, 2022. Assume he uses all available elections to minimize the tax consequences of this sale and made improvements to the property of $150,000 prior to the sale. Christian's broker advised him to invest $150,000 in We Drill Oil, LLC on January 15, 2022. 5 Dashboard 000 000 Calendar To Do Notifications Inbox 7:55 Back Practice Set 2-2.pdf Q In anticipation of buying their new home in 2023, Christian sold the inherited land from his uncle on December 31, 2022. The consideration was a $750,000 installment note plus cash of $150,000. The note is to be paid in three installments with payments due on December 31, 2022, December 31, 2023, and December 31, 2024. The selling expenses were $30,000. He received the first installment payment of $250,000 on December 31, 2022. Assume he uses all available elections to minimize the tax consequences of this sale and made improvements to the property of $150,000 prior to the sale. Christian's broker advised him to invest $150,000 in We Drill Oil, LLC on January 15, 2022. Christian's share of the ordinary loss for 2022 from We Drill Oil, LLC per his K-1 (taxed as a partnership for tax purposes) was $160,000. Additional potential deductions, exclusive of the aforementioned information, are as follows: $30,000 12,000 Medical expenses Property taxes on residence ($10k) and other personal properties ($2k) State income taxes (estimated tax payments) Charitable contributions to their church (cash) Mortgage interest on residence sold (First National) Bank), and interest on loan for investment property (Bank of America) $2,000 Tax Preparation Fees (time incurred by the CPA was 10,000 80% related to his business) Sales taxes paid Because Christian was too busy helping his clients with year-end planning and estimated tax calculations, he didn't have the time to estimate his 2022 tax liability very accurately. (This seems to happen every year.) Therefore, Christian and Dana made estimated Federal income tax payments totaling $137,500 equally on the quarterly due dates ($34,375 per quarter); their prior year tax liability was $125,000. If they are overpaid, they would like to apply the overpayment to their 2023 tax liability. Dashboard 35,000 50,000 20,900 REQUIREMENTS (READ CAREFULLY): Compute Christian and Dana's lowest net tax payable or refund due for 2022 if they make any available elections. Prepare the tax forms for your computations. HINT: You should consider the applicability of the following forms and schedules in order to prepare a complete and accurate tax return: Forms 1040, 4562, 4797, 6198, 6252, 8582, 8824, 8829, 8949, 8959, 8960, 8995 and Schedules 1, 2, A, B, C, D, E and SE. Intuit Pro connect has been provided to you although you may use other software (or even prepare the return by hand.) Make sure you prepare the federal tax return with all the required schedules and statements that would be filed with the IRS. Do not prepare the state return. You will also need to document 5,000 all I your assumptions of WHY you treated each item in the problem as taxable, non-taxable, deductible, or nondeductible. While IRC Code Sections are NOT required for this practice set, explanations must be specific to the fact/transaction being discussed. The entire assignment is worth 150 points. Failure to provide explanations and your analysis will result in a reduction of all of the points on the assignment. Be creative and thorough on your write up. 76 You should submit a pdf of the federal tax return that will be filed with the IRS and your write up. Your write up should be at least two pages in length. (Do NOT include any estimated tax forms or other information that is generated for the client from the tax software, including any schedules that may print before page 1 of Form 1040.) 000 000 Calendar POST ALL DOCUMENTS ON CANVAS by the due date of Monday, December 4, 2023 at 11:55 pm. This deadline will NOT be extended for any printing issues - gather screen prints into a SINGLE pdf document if necessary to meet the deadline. LO 5 To Do Notifications Inbox 7:55 Back Practice Set 2-2.pdf Q Medical expenses Property taxes on residence ($10k) and other personal properties ($2k) State income taxes (estimated tax payments) Charitable contributions to their church (cash) Mortgage interest on residence sold (First National) Bank), and interest on loan for investment property (Bank of America) $2,000 Tax Preparation Fees (time incurred by the CPA was 10,000 80% related to his business) Sales taxes paid Dashboard $30,000 12,000 Because Christian was too busy helping his clients with year-end planning and estimated tax calculations, he didn't have the time to estimate his 2022 tax liability very accurately. (This seems to happen every year.) Therefore, Christian and Dana made estimated Federal income tax payments totaling $137,500 equally on the quarterly due dates ($34,375 per quarter); their prior year tax liability was $125,000. If they are overpaid, they would like to apply the overpayment to their 2023 tax liability. 35,000 50,000 20,900 REQUIREMENTS (READ CAREFULLY): Compute Christian and Dana's lowest net tax payable or refund due for 2022 if they make any available elections. Prepare the tax forms for your computations. HINT: You should consider the applicability of the following forms and schedules in order to prepare a complete and accurate tax return: Forms 1040, 4562, 4797, 6198, 6252, 8582, 8824, 8829, 8949, 8959, 8960, 8995 and Schedules 1, 2, A, B, C, D, E and SE. Intuit Pro connect has been provided to you although you may use other software (or even prepare the return by hand.) Make sure you prepare the federal tax return with all the required schedules and statements that would be filed with the IRS. Do not prepare the state return. You will also need to document 5,000 all your assumptions of WHY you treated each item in the problem as taxable, non-taxable, deductible, or nondeductible. While IRC Code Sections are NOT required for this practice set, explanations must be specific to the fact/transaction being discussed. The entire assignment is worth 150 points. Failure to provide explanations and your analysis will result in a reduction of all of the points on the assignment. Be creative and thorough on your write up. 000 000 Calendar You should submit a pdf of the federal tax return that will be filed with the IRS and your write up. Your write up should be at least two pages in length. (Do NOT include any estimated tax forms or other information that is generated for the client from the tax software, including any schedules that may print before page 1 of Form 1040.) LO 76 POST ALL DOCUMENTS ON CANVAS by the due date of Monday, December 4, 2023 at 11:55 pm. This deadline will NOT be extended for any printing issues gather screen prints into a SINGLE pdf document if necessary to meet the deadline. 5 To Do Notifications Inbox 7:49 1 of 5 Practice+Set+2 77) - ... Practice Set #2 Christian Wolff is age 66 in 2022. He lives with his spouse at 500 North Jamboree, Newport Beach, CA 92660 (which was sold in 2022 see below). His Social Security number is 122-65- 2112. Christian was divorced from his first wife in 2013. He pays $35,000 annually in alimony to his ex-wife Robin Wolff (Social Security Number 558-55-7567). The divorce agreement was updated as of June 3, 2018. He married his new wife Dana Cummings (Social Security Number 223-31-2222) in 2014; she is 55 as of 2022. They purchased their Newport Beach home together right after their marriage on June 15, 2014. Dana Cummings does not work. Christian owns ZZZ Accounting, LLC, a single member limited liability company and provides bookkeeping and tax services for which he uses the cash method of accounting. Christian formed this business two years ago after he left his form employer "Big Four LLP". He uses his home address as the legal address for the business. His revenues and expenses for 2022 are as follows: Client revenue Salary and Wage expenses (per W-2s, includes employer payroll taxes) Rent expense Utilities Telephone Advertising Entertainment Meals catered from local restaurant into office for employees working late Meals (in restaurants) (1) Assume Bonus Depreciation was taken for this new equipment under Section 168(k) and placed in service on January 15, 2022 19,000 Purchase of office equipment on January 15th (1) 50,000 Health insurance (2) 46,000 Accounting and legal fees (3) 50,000 Employee Benefits (including contributions to the employee profit- 47,000 sharing plan) (2) $34,000 for employees' insurance and $12,000 for Christian and Dana's supplemental plan to Medicare insurance ($6,000 for each of them). $1,100,000 500,000 Q Done 85,000 16,000 5,800 5,500 12,500 5,000 (3) The $50,000 includes expenses of $20,000 related to the purchase of another tax and bookkeeping firm and $30,000 to expand into an unrelated business that he did not purchase. New copier equipment purchased on January 2nd was destroyed by a small fire in the office on 7:55 Back Practice Set 2-2.pdf Q Practice Set #2 Christian Wolff is age 66 in 2022. He lives with his spouse at 500 North Jamboree, Newport Beach, CA 92660 (which was sold in 2022 see below). His Social Security number is 122-65- 2112. Christian was divorced from his first wife in 2013. He pays $35,000 annually in alimony to his ex-wife Robin Wolff (Social Security Number 558-55-7567). The divorce agreement was updated as of June 3, 2018. He married his new wife Dana Cummings (Social Security Number 223-31-2222) in 2014; she is 55 as of 2022. They purchased their Newport Beach home together right after their marriage on June 15, 2014. Dana Cummings does not work. Dashboard Christian owns ZZZ Accounting, LLC, a single member limited liability company and provides bookkeeping and tax services for which he uses the cash method of accounting. Christian formed this business two years ago after he left his former employer Big Four LLP". He uses his home address as the legal address for the business. His revenues and expenses for 2022 are as follows: Client revenue Salary and Wage expenses (per W-2s, includes employer payroll taxes) Rent expense Utilities Telephone Advertising Entertainment (1) Assume Bonus Depreciation was taken for this new equipment under Section 168(k) and placed in service on January 15, 2022 Meals catered from local restaurant into office for employees working late Meals (in restaurants) 19,000 Purchase of office equipment on January 15th (1) 50,000 Health insurance (2) 46,000 Accounting and legal fees (3) 50,000 Employee Benefits (including contributions to the employee profit- 47,000 sharing plan) (2) $34,000 for employees' insurance and $12,000 for Christian and Dana's supplemental plan to Medicare insurance ($6,000 for each of them). (3) The $50,000 includes expenses of $20,000 related to the purchase of another tax and bookkeeping firm and $30,000 to expand into an unrelated business that he did not purchase. 000 000 Calendar LO 5 76 To Do $1,100,000 500,000 85,000 16,000 5,800 5,500 12,500 5,000 Notifications Inbox 7:55 Back Practice Set 2-2.pdf Q (1) Assume Bonus Depreciation was taken for this new equipment under Section 168(k) and placed in service on January 15, 2022 (2) $34,000 for employees' insurance and $12,000 for Christian and Dana's supplemental plan to Medicare insurance ($6,000 for each of them). (3) The $50,000 includes expenses of $20,000 related to the purchase of another tax and bookkeeping firm and $30,000 to expand into an unrelated business that he did not purchase. Dashboard New copier equipment purchased on January 2nd was destroyed by a small fire in the office on March 16th. The basis of the equipment was $15,000 with no depreciation taken (it was purchased in 2022) and it was completely destroyed. There was no insurance on the equipment. Other income for Christian and Dana includes the following: U.S. company dividend income: - Alphabet Inc. held for 1 year - ABC Inc. held for 35 days Interest income: First National Bank First City Bank City of Tustin bonds Treasury Bills $ 19,000 $ 11,500 $ 8,000 $ 4,500 $ 30,000 $ 10,000 Both U.S. companies are publicly traded on the New York Stock Exchange. During the year, Christian and Dana also had the following transactions: Christian worked from his home office for part of 2022 because the office building he rented his office in had restricted access to some of his clients due to COVID-19 measures. The home office was used exclusively for his work in 2022, even after access restrictions to the office building he rents were lifted. He also observed clients enjoyed meeting at his home versus the office since it was closer to many of their homes; as such, he regularly used his home office for business throughout 2022, even after his office building lifted visitor restrictions. His home office is 330 square feet of their 1,650 square foot home. The expenses related to his Newport Beach residence for the year were the mortgage interest and taxes noted below, utilities of $2,500, insurance of $1,500, HOA fees of $3,000, house cleaning of $700, internet of $275, and painting of the office only of $2,500. No depreciation will be taken. Christian received social security benefits for the first-time starting January 1, 2022. His gross social security is $2,500 per month for 12 months. He was paid $2,000 per month which is net of Medicare health premiums. 000 000 Calendar Christian withdrew $25,000 from his 401(k) with his former employer "Big Four LLP in 2022. Vanguard is the investment company of the 401(k). This amount was reported on a 1099 R in Box 1 and 2 a. It was also noted that this was a Normal distribution in Box 7 (Code 7). In Box 4 it was noted that $7,500 of federal taxes were withheld from the distribution. 76 LO To Do Notifications Inbox 7:55 Back Practice Set 2-2.pdf Q Christian withdrew $25,000 from his 401(k) with his former employer "Big Four LLP" in 2022. Vanguard is the investment company of the 401(k). This amount was reported on a 1099 R in Box 1 and 2 a. It was also noted that this was a Normal distribution in Box 7 (Code 7). In Box 4 it was noted that $7,500 of federal taxes were withheld from the distribution. He sold 75 shares of Red, Inc. stock for $25,000 on March 12, 2022. He had purchased the stock on September 5, 2019, for $50,000. On December 12, 2022, Christian sold 300 shares of Apple Inc. stock for $43,500 which he had purchased on January 15, 2019 for $40 a share. He then purchased 500 shares of Apple, Inc. stock on December 30, 2022 for $130 per share. Christian received an inheritance (as sole beneficiary) on January 4, 2022 of $250,000, which is the fair market value of land he received from his Uncle Victor who passed away. His uncle paid $75,000 for the land in 2010. He also received life insurance of $400,000 from his uncle's policy where he was the sole beneficiary. Christian used $200,000 of the insurance to purchase 50 shares of Purple, Inc. stock on May 31, 2022, and used the remaining amount of the life insurance to invest $200,000 in 100 shares of Gold, Inc. stock on June 30, 2022. Christian received 200 shares of Salmon, Inc. stock worth $100,000 as a gift from his wealthy actor cousin, Alex, on June 17, 2017. Alex's adjusted basis for the stock was $30,000. No gift taxes were paid on the transfer. Alex had purchased the stock on April 1, 2012. Christian sold the stock on November 1, 2022, for $125,000. On October 15, 2022, Christian sold one-half of the Purple, Inc. stock for $175,000 and all the Gold Stock for $165,000. Christian was notified on August 1, 2022, that 100 shares of company stock he purchased from Black, Inc. as one of their first investors on September 1, 2017 for $300,000 had become worthless. (Black declared bankruptcy.) Total stock outstanding when he originally invested was $950,000. While he perceived that the investment was risky, he did not anticipate that the corporation would declare bankruptcy. He will not receive anything from the bankruptcy proceedings. On January 31, 2022, Christian received a parcel of land in Flagstaff, AZ worth $285,000 in exchange for a parcel of land he owned in Tempe, AZ. Because the Tempe parcel was worth $300,000, he also was paid $15,000 cash. Doug's adjusted basis for the Tempe parcel was $125,000. He originally purchased it on September 18, 2014. 76 During 2015, he loaned $50,000 to his sister, Virginia. He executed a note and his sister paid interest and some principal payments on the note. The loan balance was $47,000 with $1,500 unpaid interest when his sister filed for Ch 7 bankruptcy on January 20, 2022. Christian was informed on June 30, 2022 by the bankruptcy court that he would not receive any further principal and interest payments on the note. Therefore, the note is fully worthless in 2022. On December 31, 2022, Christian sold the home in which he and Dana had been living in since their marriage. They will move into another home in 2023. The sales price was $1,300,000, selling expenses were $175,000 (including commissions). Christian purchased the condominium for $400,000 and had made no improvements to the condo. In anticipation of buying their new home in 2023, Christian sold the inherited land from his uncle on December 31, 2022. The consideration was a $750,000 installment note plus cash of $150,000. The note is to be paid in three installments with payments due on December 31, 2022, December 31, 2023, and December 31, 2024. The selling expenses were $30,000. He received the first installment payment of $250,000 on December 31, 2022. Assume he uses all available elections to minimize the tax consequences of this sale and made improvements to the property of $150,000 prior to the sale. Christian's broker advised him to invest $150,000 in We Drill Oil, LLC on January 15, 2022. 5 Dashboard 000 000 Calendar To Do Notifications Inbox 7:55 Back Practice Set 2-2.pdf Q In anticipation of buying their new home in 2023, Christian sold the inherited land from his uncle on December 31, 2022. The consideration was a $750,000 installment note plus cash of $150,000. The note is to be paid in three installments with payments due on December 31, 2022, December 31, 2023, and December 31, 2024. The selling expenses were $30,000. He received the first installment payment of $250,000 on December 31, 2022. Assume he uses all available elections to minimize the tax consequences of this sale and made improvements to the property of $150,000 prior to the sale. Christian's broker advised him to invest $150,000 in We Drill Oil, LLC on January 15, 2022. Christian's share of the ordinary loss for 2022 from We Drill Oil, LLC per his K-1 (taxed as a partnership for tax purposes) was $160,000. Additional potential deductions, exclusive of the aforementioned information, are as follows: $30,000 12,000 Medical expenses Property taxes on residence ($10k) and other personal properties ($2k) State income taxes (estimated tax payments) Charitable contributions to their church (cash) Mortgage interest on residence sold (First National) Bank), and interest on loan for investment property (Bank of America) $2,000 Tax Preparation Fees (time incurred by the CPA was 10,000 80% related to his business) Sales taxes paid Because Christian was too busy helping his clients with year-end planning and estimated tax calculations, he didn't have the time to estimate his 2022 tax liability very accurately. (This seems to happen every year.) Therefore, Christian and Dana made estimated Federal income tax payments totaling $137,500 equally on the quarterly due dates ($34,375 per quarter); their prior year tax liability was $125,000. If they are overpaid, they would like to apply the overpayment to their 2023 tax liability. Dashboard 35,000 50,000 20,900 REQUIREMENTS (READ CAREFULLY): Compute Christian and Dana's lowest net tax payable or refund due for 2022 if they make any available elections. Prepare the tax forms for your computations. HINT: You should consider the applicability of the following forms and schedules in order to prepare a complete and accurate tax return: Forms 1040, 4562, 4797, 6198, 6252, 8582, 8824, 8829, 8949, 8959, 8960, 8995 and Schedules 1, 2, A, B, C, D, E and SE. Intuit Pro connect has been provided to you although you may use other software (or even prepare the return by hand.) Make sure you prepare the federal tax return with all the required schedules and statements that would be filed with the IRS. Do not prepare the state return. You will also need to document 5,000 all I your assumptions of WHY you treated each item in the problem as taxable, non-taxable, deductible, or nondeductible. While IRC Code Sections are NOT required for this practice set, explanations must be specific to the fact/transaction being discussed. The entire assignment is worth 150 points. Failure to provide explanations and your analysis will result in a reduction of all of the points on the assignment. Be creative and thorough on your write up. 76 You should submit a pdf of the federal tax return that will be filed with the IRS and your write up. Your write up should be at least two pages in length. (Do NOT include any estimated tax forms or other information that is generated for the client from the tax software, including any schedules that may print before page 1 of Form 1040.) 000 000 Calendar POST ALL DOCUMENTS ON CANVAS by the due date of Monday, December 4, 2023 at 11:55 pm. This deadline will NOT be extended for any printing issues - gather screen prints into a SINGLE pdf document if necessary to meet the deadline. LO 5 To Do Notifications Inbox 7:55 Back Practice Set 2-2.pdf Q Medical expenses Property taxes on residence ($10k) and other personal properties ($2k) State income taxes (estimated tax payments) Charitable contributions to their church (cash) Mortgage interest on residence sold (First National) Bank), and interest on loan for investment property (Bank of America) $2,000 Tax Preparation Fees (time incurred by the CPA was 10,000 80% related to his business) Sales taxes paid Dashboard $30,000 12,000 Because Christian was too busy helping his clients with year-end planning and estimated tax calculations, he didn't have the time to estimate his 2022 tax liability very accurately. (This seems to happen every year.) Therefore, Christian and Dana made estimated Federal income tax payments totaling $137,500 equally on the quarterly due dates ($34,375 per quarter); their prior year tax liability was $125,000. If they are overpaid, they would like to apply the overpayment to their 2023 tax liability. 35,000 50,000 20,900 REQUIREMENTS (READ CAREFULLY): Compute Christian and Dana's lowest net tax payable or refund due for 2022 if they make any available elections. Prepare the tax forms for your computations. HINT: You should consider the applicability of the following forms and schedules in order to prepare a complete and accurate tax return: Forms 1040, 4562, 4797, 6198, 6252, 8582, 8824, 8829, 8949, 8959, 8960, 8995 and Schedules 1, 2, A, B, C, D, E and SE. Intuit Pro connect has been provided to you although you may use other software (or even prepare the return by hand.) Make sure you prepare the federal tax return with all the required schedules and statements that would be filed with the IRS. Do not prepare the state return. You will also need to document 5,000 all your assumptions of WHY you treated each item in the problem as taxable, non-taxable, deductible, or nondeductible. While IRC Code Sections are NOT required for this practice set, explanations must be specific to the fact/transaction being discussed. The entire assignment is worth 150 points. Failure to provide explanations and your analysis will result in a reduction of all of the points on the assignment. Be creative and thorough on your write up. 000 000 Calendar You should submit a pdf of the federal tax return that will be filed with the IRS and your write up. Your write up should be at least two pages in length. (Do NOT include any estimated tax forms or other information that is generated for the client from the tax software, including any schedules that may print before page 1 of Form 1040.) LO 76 POST ALL DOCUMENTS ON CANVAS by the due date of Monday, December 4, 2023 at 11:55 pm. This deadline will NOT be extended for any printing issues gather screen prints into a SINGLE pdf document if necessary to meet the deadline. 5 To Do Notifications Inbox
Expert Answer:
Answer rating: 100% (QA)
To compute Christian and Danas lowest net tax payable or refund due for 2022 well need to prepare their federal tax return with all the required forms and schedules Heres a breakdown of the steps and ... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
Students also viewed these accounting questions
-
The following additional information is available for the Dr. Ivan and Irene Incisor family from Chapters 1-5. Ivan's grandfather died and left a portfolio of municipal bonds. In 2012, they pay Ivan...
-
Being able to identify an industry to use for benchmarking yourfirm's results with similar companies is frequently not easy. Choose a type of business and go to www.naics.com. This Web site allows...
-
The general fund agrees to lend the enterprise fund $2,000 for three months. How is this interfund loan reported on the general fund's financial statements?
-
The ionic substance strontium oxide, SrO, forms from the reaction of strontium metal with molecular oxygen. The arrangement of the ions in solid SrO is analogous to that in solid NaCl (Figure 2.21):...
-
1. Identify 3 students to play the roles of the employees. Ask these 3 individuals to read their roles below. 2. Identify 1 student to play the role of the president of the social enterprise (Taylor...
-
Customer profitability, distribution. Spring Distribution has decided to analyze the profitability of five new customers. It buys bottled water at $12 per case and sells to retail customers at a list...
-
Problem 3 For a multiple linear regression model with 4 variables, where ~ Y = Bo+B1X1 + B2X2 + 3X3 + B4X4 + , N(0,2), what is the test statistic for each of the following tests? and what is the...
-
The first step of problem solving involves identifying the problem. One way to go about identifying the problem is to use heuristics (asking questions). If you were investigating an increase in...
-
Outline the basis of the evolution of international banking regulation under Basel I (4 Marks) Q.3. Describe the key deficiencies in bank regulation and risk management in financial institutions that...
-
The Basel Committee's document, Principles for enhancing corporate governance, sets out best practices for banking organisations. Mr Nout Wellink, Chairman of the Basel Committee and President of the...
-
Due diligence can be defined as "investigation by or on behalf of an intended buyer of a business to check that it has the desired assets, turnover, profits, market share positions technology,...
-
Explain the key principles identified by the Basel Committee that needs to be followed to ensure sound corporate governance. Link your explanation to the practical operation of a named bank.
-
Joe Kerry, owner of a small bakery, wants to obtain marketing insights to improve his business. Joe has a limited budget and would like to gather free secondary data. What is the best option for Joe?
-
What are the two methods used to translate financial statements and how does the functional currency play a role in determining which method is used?
-
On the basis of the details of the following fixed asset account, indicate the items to be reported on the statement of cashflows: ACCOUNT Land ACCOUNT NO. Balance Date Item Debit Credit Debit Credit...
-
How much of each of the following prizes or awards is taxable? a. Cheline received a $50,000 gift bag at the Oscars in 2012. b. Jon received a gold watch worth $350 for 25 years of service to his...
-
Kathy Kennedy (age 44) is a single taxpayer and she lives at 212 North Pine Way, Payson, AZ 85541. Her Social Security number is 467-98-9784. Kathy's earnings and income tax withholding as the...
-
Jason and Mary Wells, friends of yours, were married on December 30, 2012. They know you are studying taxes and have come to you with a question concerning their filing status. Jason and Mary would...
-
Classify each of the following as either a policy instrument or an intermediary target. Explain your answer. a. Long-term interest rates b. Central bank interest rates c. M2 d. Reserve requirements
-
The New York Fed executes foreign exchange interventions for the Federal Reserve system. Go to https://www.newyorkfed.org/markets/quar_reports.html to see quarterly summaries of the Feds foreign...
-
The New Zealand dollar to U.S. dollar exchange rate is 1.38, and the British pound to U.S. dollar exchange rate is 0.65. If you find that the British pound to New Zealand dollar is trading at 0.5,...
Study smarter with the SolutionInn App