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tax problems - questin and answer,.,. ch 15




Question;16. LO.3 In 1998, Desiree purchased an office building for $500,000 to be used in her business.She sells the building in the current tax year. Explain why her recognized gain or loss for regular income tax purposes is different from her recognized gain or loss forAMT purposes.17. LO.3, 8 Celine will be subject to the AMT in 2013. She owns an investment building and is considering disposing of it and investing in other realty. Based on an appraisal of the building?s value, the realized gain would be $85,000.Ed has offered to purchase the building from Celine, with the closing date beingDecember 29, 2013. Ed wants to close the transaction in 2013 because certain beneficial tax consequences will result only if the transaction is closed prior to the beginning of 2014.Abby has offered to purchase the building with the closing date being January 2, 2014. The building has a $95,000 greater AMT adjusted basis.For regular income tax purposes, Celine expects to be in the 25% tax bracket in 2013 and the 28% tax bracket in 2014. What are the relevant income tax issues that Celine faces in making her decision?18. LO.3 Passive activity losses are not deductible in computing either taxable income orAMTI. Explain why an adjustment for passive activity losses may be required for AMT purposes.19. LO.3, 4 What effect do adjustments and preferences have on the calculation of theATNOLD?20. LO.3 For which of the following itemized deductions is the tax treatment the same for regular income tax and AMT purposes?? Medical expenses.? Casualty losses.? Miscellaneous itemized deductions subject to the 2% floor.? State income taxes.? Real estate taxes.? Charitable contributions.? Gambling losses.21. LO.3, 4, 8 Matt, who is single, always has elected to itemize deductions rather than take the standard deduction. In prior years, his itemized deductions always exceeded the standard deduction by a substantial amount. As a result of paying off the mortgage on his residence, he projects that his itemized deductions will exceed the standard deduction by only $500. Matt anticipates that the amount of his itemized deductions will remain about the same in the foreseeable future. Matt?s AGI is $150,000. He is investing the amount of his former mortgage payment each month in tax-exempt bonds, the bonds were issued in 2002. A friend recommends that Matt buy a beach house, to increase his itemized deductions with the mortgage interest deduction. What are the relevant tax issues for Matt?22. LO.3 How does the treatment of medical expenses differ for AMT and regular income tax purposes? Compare the tax treatment of 2012 with that of 2013.23. LO.3 In computing the AMT itemized deduction for interest, it is possible that some interest allowed for regular income tax purposes will not be allowed. Explain.24. LO.3 When converting taxable income to AMTI, what is the reason for a positive adjustment as to personal and dependency exemptions?25. LO.4 Alvin owns a mineral deposit that qualifies for the 15% depletion rate. Under what circumstances will the depletion deduction for regular income tax and AMT purposes differ?26. LO.3, 4 During the year, Fran earned $18,000 of interest income on 2005 private activity bonds. She incurred interest expense of $7,000 in connection with amounts borrowed to purchase the bonds. What is the effect of these items on Fran?s taxable income? On her AMT? Could there be a related beneficial effect in calculating AMTI?Explain.27. LO.6 What is the purpose of the AMT credit? Briefly describe how the credit is computed.28. LO.7 What requirements must be satisfied for a C corporation to be exempt from theAMT?29. LO.7 Some observers believe that the ACE adjustment causes corporations to change some of the accounting methods they use for financial reporting and tax purposes.Comment.30. LO.2, 8 Beige, Inc.?s regular income tax liability is $110,000, and its tentative AMT is $120,000 for the current year. Under what, if any, circumstances would Beige want to accelerate $15,000 of income to the current year, rather than defer it until next year?Be specific.


Paper#39489 | Written in 18-Jul-2015

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