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tax problems - questin ch 15




Question;48. LO.3 Walter, who is single, owns a personal residence in the city. He also owns a cabin near a ski resort in the mountains. He uses the cabin as a vacation home. In August, Walter borrowed $60,000 on a home equity loan and used the proceeds to reduce credit card obligations and other debt. This year, he paid the following amounts of interest.On his personal residence $16,000On the cabin 7,000On the home equity loan 2,500On credit card obligations 1,500On purchase of personal-use SUV 1,350What amount, if any, must Walter recognize as an AMT adjustment?49. LO.3 During the current year, Yoon earned $10,000 in dividends on corporate stock and incurred $13,000 of investment interest expense related to the stock holdings. Yoon also earned $5,000 interest on private activity bonds that were issued in 2007 and incurred interest expense of $3,500 in connection with the bonds.a. How much investment interest expense can Yoon deduct for regular income tax andAMT purposes for the year?b. What is the AMT adjustment for these events?50. LO.3 Gabriel, age 40, and Edith, age 33, are married with two dependents. They reported AGI of $110,000 in 2013 that included net investment income of $10,000 and gambling income of $2,500.They incurred the following expenses during the year, all of which resulted in itemized deductions for regular income tax purposes.Medical expenses (before AGI floor) $13,000State income taxes (sales tax option not chosen) 2,800Personal property tax 900Real estate tax 9,100Interest on personal residence 8,600Interest on home equity loan (proceeds were used to buy a new fishing boat) 1,800Investment interest expense 2,600Charitable contribution (cash) 4,200Unreimbursed employee expenses (before 2%-of-AGI floor) 3,800a. What is Gabriel and Edith?s AMT adjustment for itemized deductions in 2013? Is it positive or negative?b. Assume the same facts as above, and assume that Gabriel and Edith also earned interest of $5,000 on private activity bonds that were issued in 2012. They borrowed money to buy these bonds and paid interest of $3,900 on the loan. Determine the effects of these amounts on AMTI.51. LO.2, 3 Chuck is single and has no dependents. He does not itemize deductions. In 2013, he claims a $3,900 personal exemption and records taxable income of $120,000.Chuck?s tax preferences total $51,000. What is Chuck?s AMTI?52. LO.3 Emily owns a coal mine (basis $12,000 at the beginning of the year) that qualifies for a 15% depletion rate. Gross income from the property was $140,000, and net income before the percentage depletion deduction was $60,000. What is Emily?s AMT preference for excess depletion?53. LO.4 Amos incurred and expensed intangible drilling costs (IDC) of $70,000. His net oil and gas income was $60,000. What is the amount of Amos?s tax preference item for IDC?54. LO.2, 3, 4 Jerry, who is single with no dependents and does not itemize, provides you with the following information for the tax year.Short-term capital loss $ 7,000Long-term capital gain 25,000Municipal bond interest received on 2004 private activity bonds 9,000Dividends from U.S. corporations 2,300Excess of FMV over cost of ISOs (the rights became freely transferable and not subject to a substantial risk of forfeiture this year) 35,000What is the total amount of Jerry?s tax preference items and AMT adjustments?55. LO.2, 3, 4 Pat, who is age 66 and single with no dependents, received a salary of $90,000. She reports interest income of $1,000, dividend income of $5,000, gambling income of $4,000, and interest income from 2006 private activity bonds of $40,000. The dividends are not qualified dividends. The following additional information may be relevant.Compute Pat?s tentative minimum tax.Medical expenses (before AGI floor) $12,000State income taxes 4,100Real estate taxes 2,800Mortgage interest on residence 3,100Investment interest expense 1,800Gambling losses 5,10056. LO.2, 5 Renee and Sanjeev, who are married, report taxable income of $273,000. They computed positive AMT adjustments of $38,000, negative AMT adjustments of $14,000, and tax preference items of $67,500.a. Compute their AMTI.b. Compute their tentative minimum tax.57. LO.2, 3, 4, 5 Farr, who is single, has no dependents and does not itemize. She shows the following items relative to her 2013 tax return.Bargain element from the exercise of an ISO (no restrictions apply to the stock) $ 45,000MACRS depreciation on shopping mall building acquired in1990 (ADS depreciation would have yielded $26,000) 49,000Percentage depletion in excess of property?s adjusted basis 50,000Taxable income for regular income tax purposes 121,000a. Determine Farr?s AMT adjustments and preferences.b. Calculate the AMT (if any).58. LO.2, 3, 4, 5 Lynn, age 45, is single and has no dependents. Her income and expenses for 2013 are reported as follows.IncomeSalary $33,000Taxable interest on corporate bonds 1,800Dividend income 1,900Business income 64,000ExpendituresMedical expenses $12,000State income taxes 6,000Real estate taxes 8,500Mortgage (qualified housing) interest 9,200Investment interest 5,500Cash contributions to various charities 2,900The $64,000 business income is from Apex Office Supplies Company, a sole proprietorship that Lynn owns and operates. Apex claimed MACRS depreciation of $3,175 on real and personal property used in the business. ADS depreciation on the property would have been $2,500.Lynn received interest of $30,000 on City of Pensacola private activity bonds that were issued in 2011.Based on the information presented above, compute Lynn?s 2013 AMT.59. LO.5, 6 Bonnie, who is single, has taxable income of $0 in 2013. She reports positive timing adjustments of $200,000 and AMT exclusion items of $100,000 for the year. What is Bonnie?s AMT credit for carryover to 2014?60. LO.7 Aqua, Inc., a calendar year corporation, records the following gross receipts and taxable income for 2010?2013. Aqua?s first year of operations was 2010.Year Gross Receipts Taxable Income 2010 $6,000,000 $1,400,000 2011 7,000,000 1,312,000 2012 7,500,000 985,000 2013 7,200,000 1,002,000a. When is Aqua first exempt from the AMT as a small corporation?b. Is Aqua subject to the AMT for 2013? Explain.61. LO.7 Gray Corporation (a calendar year corporation) reports the following information.Compute Gray?s ACE adjustment for each year. 2012 2013 2014Unadjusted AMTI $3,000 $2,000 $5,000Adjusted current earnings 4,000 3,000 2,00062. LO.7 In each of the following independent situations, determine the tentative AMT.AMTI (Before the Exemption Amount)Quincy Corporation $150,000Redland Corporation 160,000Tanzen Corporation 320,00063. LO.7 Brown Inc., a calendar year taxpayer, reported the following transactions.Taxable income $2,600,000Depreciation for regular income tax purposes on realty in excess of ADS (placed in service in 1996) 550,000Excess amortization of certified pollutions control facilities 450,000Tax-exempt interest on private activity bonds (issued in 2007) 1,030,000Percentage depletion in excess of the property?s adjusted basis 60,000a. Calculate Brown?s regular income tax liability.b. Calculate Brown?s tentative AMT.c. Calculate Brown?s AMT.


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