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tax problems - questions,.,




Question;17. LO.5 Suzanne owns interests in a bagel shop, a lawn and garden store, and a convenience store. Several full-time employees work at each of the enterprises. As of the end of November of the current year, Suzanne has worked 150 hours in the bagel shop, 250 hours at the lawn and garden store, and 70 hours at the convenience store. In reviewing her financial records, you learn that she has no passive investments that are generating income and that she expects these three ventures collectively to produce a loss. What recommendation would you offer Suzanne as she plans her activities for the remainder of the year?18. LO.5, 11 John, an engineer, operates a separate business that he acquired eight years ago. If he participates 85 hours in the business and it incurs a loss of $34,000, under what circumstances can John claim an active loss?19. LO.2, 3, 5 Rita retired from public accounting after a long and successful career of 45 years. As part of her retirement package, she continues to share in the profits and losses of the firm, albeit at a lower rate than when she was working full-time. Because Rita wants to stay busy during her retirement years, she has invested and works in a local hardware business, operated as a partnership. Unfortunately, the business has recently gone through a slump and has not been generating profits. Identify relevant tax issues for Rita.20. LO.5 Some types of work are counted in applying the material participation standards, and some types are not counted. Discuss and give examples of each type.21. LO.5 Last year Alan?s accountant informed him that he could not claim any of his passive activity losses on his income tax return because of his lack of material participation.To circumvent the tax problem this year, Alan tells his wife that she may have to put in some time at the various businesses. Identify the tax issues that Alan faces.22. LO.5 Sean, a limited partner in Ivy Nursery, is informed that his portion of the entity?s current loss is $18,000. As a limited partner, can Sean assume that his share of the partnership loss is a passive loss? Explain.23. LO.6 What are significant personal services? What role do they play in determining whether a rental activity is treated as a passive activity?24. LO.4, 5, 6 How is passive activity defined in the Code? What aspects of the definition have been clarified by final or Temporary Regulations?25. LO.6 What are extraordinary personal services? Why are they important in determining whether a rental activity is treated as a passive activity?26. LO.8 Caroline owns a real estate rental activity that produces a loss of $65,000 during the current year. Under what circumstances can Caroline treat the entire loss as nonpassive?27. LO.2, 3, 4, 5, 6, 7 In the current year, David and Debbie Wayland, both successful physicians, made a cash investment for a limited partnership interest in a California berry farm. In addition to the cash obtained from the investors, management borrowed a substantial sum to purchase assets necessary for the farm?s operations. The Waylands? investment adviser told them that their share of the tax loss in the first year alone would be in excess of their initial cash investment. This would be followed by several more years of losses. They feel confident that their interest in the berry farm is a sound investment.Identify the tax issues facing the Waylands.28. LO.3, 4, 5 Since his college days, Charles has developed an entrepreneurial streak. After working in his family?s grocery business, he starts several ventures on his own. Even thoughCharles is independently wealthy, he is looking forward to working in each of the ventures.He plans to ?drop in? on the businesses from time to time between personal trips toEurope and the Caribbean. As of the end of the year, he has established computer software stores in Dayton (Ohio), Austin, and Seattle, bagel bakeries in Albany, Athens (Georgia), and Tallahassee, and mountain bike and ski rental shops in small towns in Vermont, WestVirginia, Colorado, and California. Identify the tax issues facing Charles.29. LO.5, 8 Elizabeth owns an interest in a dress shop that has three full-time employees, during the year, she works 450 hours in the shop. Elizabeth also owns an apartment building with no employees in which she works 1,200 hours a year. Is either activity a passive activity? Explain.30. LO.8 Brad owns a small townhouse complex that generates a loss during the year. Under what circumstances can Brad deduct a loss from the rental activity? What limitations apply?31. LO.8 In connection with passive activities, what is a deduction equivalent and how is it computed?32. LO.8, 11 Betty and Steve plan to use some of an inheritance for a beach-related investment.They identify two possibilities that seem worthwhile. First, they would purchase a beach cottage and use it for both personal and rental purposes. Second, they would pool their money with Steve?s brother and purchase several cottages. One of the cottages would be held for personal use, while the others would be held for rental use. Identify the tax issues facing Betty and Steve.


Paper#39486 | Written in 18-Jul-2015

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