Dear Tutor, Can you please help do problem #1, #6 and #7 in the midterm file? Thank you. I have attached the ebook too, the problems should be covered by chapter 21, may in Chapter 27 and 28. Thank you.

AC 361 - Midterm Exam - Spring 2014 Joanne Ferris, Instructor -- Page #1 GENERAL: The take-home examination is open book & notes, and calculators may be used. Since it's a take-home exam, I won't be able to monitor how long you really spend on the test but try to spend no more than ten hours on the test. The point allocation is shown, and please show all your work so that partial credit may be given when appropriate. Problem #1 - 18 Points: On l July 2013, Jennifer (a cash basis, calendar year taxpayer) made an installment sale of some specialized, custom made printing equipment. Jennifer originally purchased the printing equipment system on 2 January 2009 for a total cost of $900,000. Jennifer correctly claimed allowable depreciation of $692,460 from inception through l July 2013; this includes $51,840 of depreciation expense for 2013. Jennifer originally took out a $700,000 mortgage when she purchased the printing equipment, and this mortgage had been paid down to $530,000 as of the date of the l July 2013 sale. The following escrow statement summarizes the sale: Charges Sales price of the printing equipment... Property tax credit to buyer on the sale. Commission paid on the sale.............. Mortgage on the printing equipment which was assumed by the buyer.. Installment note payable to Darien in two equal installments due on 7/l/2014 & 7/l/2015 plus interest @l0%... Cash paid to Jennifer upon escrow closing... Escrow statement totals............... REQUIRED: Credits 1,500,000 3,000 70,000 530,000 600,000 303,000 1,503,000 ________ 1,503,000 A. Jennifer wants to report the lowest amount of income legally possible. How much and what type of income and/or expense must Jennifer report in 2013 from this transaction? B. On l July 2014, Jennifer received a $360,000 payment for the $60,000 of interest and $300, 000 of principal which were due on that date. How much and what type of income and/or expense must Jennifer report in 2014 from this $360,000 collection? C. On 2 January 2015, Jennifer sold the rights to receive the remaining installment payment and received a total payment of $285,000 on the sale. The $285,000 included payment for $15,000 of accrued interest and $270,000 of principal paid for the rights to collect the remaining $300,000 of principal owed on the installment note. The sale was made to an unrelated party. How much and what type of income and/or expense must Jennifer report in 2015 from this transaction? AC361 - Midterm Exam - Spring 2014- Page #2 Problem #2 - 12 Points: A) In the current year, the POD Partnership received revenues of $100,000 and paid the following amounts: $20,000 in rent and utilities, and $10,000 as a distribution to partner Olivia. In addition, the partnership earned $4,000 of qualifying dividend income during the year. Partner Don owns a 50% interest in the partnership. How much income must Don report for the tax year? a. $42,000 ordinary income. b. $37,000 ordinary income. c. $40,000 ordinary income; $2,000 of qualifying dividends. d. $35,000 ordinary income; $2,000 of qualifying dividends. e. None of the above. B) On a partnership's Form 1065, which of the following statements is not true? a. The partnership reconciles its net income (including separately stated items) to book income on Schedule M-1 or M-3. b. The partnership balance sheet on Schedule L is generally presented on a financial (book) basis. c. All partnership income and expense items are reported on Form 1065, page 1. d. The partnership's equivalent of taxable income is reported in the \"Analysis of Income (Loss).\" e. All of the above statements are true. C) On January 1 of the current year, Jenna and Rob form an equal partnership. Jenna makes a cash contribution of $80,000 and a property contribution (adjusted basis of $120,000; fair market value of $160,000) in exchange for her interest in the partnership. Rob contributes property (adjusted basis of $190,000; fair market value of $240,000) in exchange for his partnership interest. Which of the following statements is true concerning the income tax results of this partnership formation? a. Jenna has a $200,000 tax basis for her partnership interest. b. Rob recognizes a $50,000 gain on his property transfer. c. Rob has a $240,000 tax basis for his partnership interest. d. The partnership has a $160,000 adjusted basis in the property contributed by Jenna. e. None of the statements is true. D) Tara and Robert formed the TR Partnership four years ago. Because they decided the company needed some expertise in multimedia presentations, they offered Katie a 1/3 interest in partnership capital and profits if she would come to work for the partnership. On July 1 of the current year, the unrestricted partnership interest (fair market value of $25,000) was transferred to Katie. How should Katie treat the receipt of the partnership interest in the current year? a. Nontaxable. b. $25,000 ordinary income. c. $25,000 short-term capital gain. d. $25,000 long-term capital gain. e. None of the above. E) Rick is a 30% partner in the ROC Partnership. At the beginning of the tax year, Rick's basis in the partnership interest was $60,000, including his share of partnership liabilities. During the current year, ROC reported net ordinary income of $40,000. In addition, ROC distributed $5,000 to each of the partners ($15,000 total). At the end of the year, Rick's share of partnership liabilities increased by $20,000. Rick's basis in the partnership interest at the end of the year is: a. $120,000. b. $87,000. c. $75,000. d. $60,000. e. None of the above. s F) Terri's basis in her partnership interest was $120,000, including her $40,000 share of partnership liabilities. The partnership decides to liquidate, and after repaying all liabilities, distributes all remaining assets proportionately to the partners. Terri receives $30,000 cash and accounts receivable with a $20,000 basis and a $22,000 fair market value to the partnership. What gain or loss does Terri recognize, and what is her basis in the accounts receivable? a. $0 gain or loss; $20,000 basis. b. $0 gain or loss; $90,000 basis. c. $70,000 loss; $20,000 basis. d. $30,000 loss; $20,000 basis. e. $30,000 loss; $22,000 basis AC 361 - Midterm Exam -Spring 2014- Page #3 Problem #3 - 15 Points: The Estate of Jeff Mitchell was formed on on l July 2012 and adopted an initial fiscal year ending on 30 June 2013. Ann Mitchell (a single 17 year old cash basis taxpayer) is the sole beneficiary of the estate. The cash activity for several relevant periods is shown below: Totals for 1 July 2012 to l July 2012 to l Jan 2013 to 30 June 2013 31 Dec 2012 30 June 2013 Rental income on land 600,000 300,000 300,000 Taxable interest income, Wells Fargo 300,000 150,000 150,000 California muni bond interest income 100,000 50,000 50,000 Long term capital gains from stock Gross income totals 500,000 1,500,000 250,000 750,000 250,000 750,000 Property taxes on the land.............. ( 80,000) ( 40,000) ( 40,000) Fiduciary fees for general services to the estate................................ ( 50,000) ( 25,000) ( 25,000) (400,000) ( 200,000) ( 200,000) 970,000 485,000 485,000 Distributions to Ann Mitchell, the sole beneficiary.................... NET CASH FLOW BEFORE INCOME TAXES..................... Strangely enough, NO cash activity occurred between 1 July 2013 through 31 December 2013. A. How much and what type of income and/or expense from the Estate must Ann report on her 2012 individual income tax return? B. How much and what type of income and/or expense from the Estate must Ann report on her 2013 individual income tax return? C. What is the taxable income for the Estate of Jeff Mitchell =s initial fiscal year ended 30 June 2013? D. What is the net tax liability for the Estate of Jeff Mitchell =s initial fiscal year ended 30 June 2013? AC361 - Midterm Exam - Spring 2014- Page #4 Problem #4 - 22 Points: The EN Limited Partnership consists of Eddie Niiya (the general partner) and Joanne Ferris & Lee Duey (the limited partners). Their interests in profits, losses & capital are 30% - Eddie & 50% - Joanne & 20% Lee Duey. The partnership and partners are on the cash basis, and the pre-closing trial balance with amounts shown at tax basis of the partnership as of 12/31/2013 was as follows: Debits (Credits) Assets at tax basis (net of accumulated depreciation)......... 1,060,000 Recourse loan due to Wells Fargo Bank............................. (100,000) Nonrecourse loan due to Union Bank................................. (230,000) Eddie Niiya (30% GP interest) beginning capital............. ( 90,000) Joanne Ferris (50% LP interest) beginning capital.......... (150,000) Lee Duey (20% LP interest) beginning capital......... ( 60,000) Cash drawings during the year paid to Eddie.............................. 30,000 Cash drawings during the year paid to Joanne.......................... 50,000 Cash drawings during the year paid to Lee................... 20,000 Sales for 2013....................................................................... ( 866,000) Guaranteed payment to Eddie .................................. 40,000 Business entertainment expense.......................................... 40,000 IRC Section 179 expense...................................................... 30,000 Depreciation expense 30,000 Business rent expense.......................................................... 120,000 Other business operating expenses............................. 50,000 Interest income.................................................................... ( 20,000) Political contribution to Jerry Brown for Governor.......... 6,000 Charitable contributions to Golden Gate University.......... 40,000 Trial balance totals................................................. -0- REQUIRED: A. B. C. D. E, What is the partnership's ordinary income for the year? How much and what type of income and deductions are allocated to Eddie? What is Eddie's final capital account after \"closing\" as of 31 December 2013? What is Eddie=s basis in the partnership as of 31 December 2013? If Lee were paid $110,000 of cash as a LIQUIDATING DISTRIBUTION on 12/31/2013, how much income or loss, if any, would she RECOGNIZE on the liquidating distribution? AC 361 - Midterm Exam - Spring 2014 - Page #5 Problem #5 - 16 Points: The trial balance of the JK partnership as of 12/31/2013 is shown below: Dr (Cr) Dr (Cr) Tax Basis Market Values Cash.............................................................. 10,000 10,000 Accounts receivable..................................... 0 100,000 Computer equipment which cost $140,000 on which $110,000 of depreciation had properly been claimed............................... 30,000 90,000 Land held for investment.............................. 20,000 200,000 ( 50,000) ( 50,000) James Smith, 30% general partner........ 3,000 (105,000) Kevin Larkin, 70% general partner.............. 7,000 (245,000) Recourse mortgage (from 1995) to Union Bank Ordinary P&L for 2013.............................. Trial balance totals.............................. (20,000) -0- N/A -0- REQUIRED: A. What is James's basis in the partnership as of 12/31/2013? B. What is Kevin's basis in the partnership as of 12/31/2013? C. If James were to sell his partnership interest for $105,000 in cash, how much and what type of gain or loss would he have on the all 2013 transactions including the sale? Problem #6 - 10 Points : A)The trustee of the Epsilon Trust distributed an asset to Telly, a qualifying income beneficiary. The asset's basis to the trust was $10,000, and its fair market value on the distribution date was $50,000. Which of the following statements is true? (2 points) a. Lacking any election by the trustee, the trust recognizes $40,000 gross income on the distribution. b. Lacking any election by the trustee, Telly's basis in the asset is $10,000. c. Lacking any election by the trustee, Telly's basis in the asset is stepped up to $50,000. d. Assuming that the trustee made an election under 643(e), the trust is allowed a $10,000 distribution deduction for this transaction. e. Assuming that the trustee made an election under 643(e), Telly recognizes $10,000 gross income on the distribution. B) A friend of yours is in the process of establishing a trust in which YOU will be the sole beneficiary. The proposed trust will be a simple trust which will have $200,000 of rental income before depreciation expense of $80,000. Your friend is trying to decide whether to have the trust written so that depreciation is specifically treated as an expense at trust level OR to have depreciation \"follow the income\". As the beneficiary, do you care which way depreciation is treated? Please explain your reasoning. (3 points) C) Your client Pryce is one of the income beneficiaries of the Santiago Trust. Pryce says to you, \"I want all of the exempt interest income from Santiago to be allocated to me, as I am the income beneficiary who is subject to the highest marginal Federal income tax rate.\" How do you respond to Pryce's request? (3 points) D) . Another friend of yours bought some stock on 4/1/2012 for $150,000. Unfortunately, your friend died on 6/19/2012 at which time the stock's value had increased to $250,000. Other than the clothing worn at the time of his death, the stock was the only asset owned by your friend. You have just discovered that you are the SOLE BENEFICIARY of your friend's estate, and you inherited the stock on 6/19/2012 (the date of your late friend's death). It is now March 20, 2013, and the stock value is now $325,000. The executor wants to make sure that the sale results in long-term capital gain, so he has asked you whether he can sell the stock now or must he wait until either (1) 4/2/2013 OR (2) 6/20/2013. What should the executor do & how much taxable gain is involved? (2 points) Problem 7 - (7 Points): Jim's basis in the partnership prior to the distribution was $30,000. Jim has owned her partnership interest for 10 years. Jim received a liquidating distribution which included her proportionate share of the partnership Section 751 \"hot assets\" as follows: Basis to the Distributing Partnership Cash........................................... 42,000 Inventory..................................... 15,000 Capital asset (acquired 4 years ago)..... 9,000 Total distributions..................... 66,000 Fair Market Value 42,000 22,000 46,000 110,000 REQUIRED: (i) How much, if any, gain must Jim recognize on the distribution? (ii) Six months after receiving the liquidating distribution, Jim sold the inventory for $22,000. How much gain or loss must Jim report from the sale of the inventory? (ii) Six months after receiving the liquidating distribution, Jim sold the capital asset for $52,000. How much and what type of gain or loss must Jim report