Assessment $6$ Problems: Applying the IRS Code

In a Word document, provide complete answers with explanations to the problems below.

Problem $1$

In $2021,$ Matthew contributed equipment with an adjusted basis of $$40,000$ and an FMV of $$36,000$ to Construction Limited Partnership $($CLP$)$ in return for a $3\%$ limited partnership interest. Matthew$$s share of CLP income and losses for the year were as follows:

Interest $$1,000$

Dividends $600$

Capital gains $1,800$

Ordinary loss $(8,650)$

CLP had no liabilities.

What are Matthew$$s initial basis, allowed losses, and ending at$-$risk amount?

Problem $2$

During the current year, Ben worked $1,500$ hours as a tax consultant and $500$ hours as a real estate agent. His one other employee $($his wife$)$ worked $350$ hours in the real estate business. Ben earned $$60,000$ as a tax consultant, and together the couple lost $$18,000$ in the real estate business.

How should Ben treat the loss on his federal income tax return?

Problem $3$

Chrystal died owning an interest in a passive activity property. The property had an adjusted basis of $$270,000,$ a fair market value of $$284,000,$ and suspended losses of $$25,000.$

What can be deducted on her final income tax return?

Problem $4$

Howard has a $$76,000$ loss from an investment in a partnership in which he does not participate. His basis in the interest is $$70,000.$

a$.$ How much of the loss is disallowed by the at$-$risk rules?

b$.$ How much of the loss is disallowed by the passive loss rules?

Problem $5$

Roberta gave her daughter a passive activity last year that had an adjusted basis of $$37,500.$ The activity had suspended losses of $$17,500$ and a fair market value of $$60,000.$ In the current year, her daughter realized an income of $$9,000$ from the passive activity.

What is the tax effect on Roberta and her daughter last year and in the current year?

Problem $6$

Charles had the following itemized deductions in $2021$:

State income taxes $$3,000$

Charitable contributions $4,900$

Mortgage interest $($personal residence$)14,000$

Medical expenses $[$$$8,000-(7\mathrm{.}5\%\backslash$times $$75,000)]2,375$

a$.$ What are Charles$$ itemized deductions for AMT purposes?

b$.$ What is the amount of the AMT adjustment?