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tax problems - questin and answer,.,.




Question;1. LO.2, 4, 5 Sheila inherited 300 shares of stock, 100 shares of Magenta and 200 shares of Purple. She has a stockbroker sell the shares for her, uses the proceeds for personal expenses, and thinks nothing further about the transactions. What issues does she face when she prepares her Federal income tax return?2. LO.2 An individual taxpayer sells some used assets at a garage sale. Why are none of the proceeds taxable in most situations?3. LO.2, 4 Alison owns a painting that she received as a gift from her aunt 10 years ago.The aunt created the painting. Alison has displayed the painting in her home and has never attempted to sell it. Recently, a visitor noticed the painting and offered Alison $5,000 for it. If Alison decides to sell the painting, what tax issues does she face?4. LO.2 Is a song that is owned by its creator always an ordinary asset? Why or why not?5. LO.2 Is a note receivable that arose in the ordinary course of the taxpayer?s retail business a capital asset? Why or why not?6. LO.2 Why do court decisions play an important role in the definition of capital assets?7. LO.2 Michel is a ?bond trader? who buys and sells bonds regularly for his own account.His cousin, who purports to be a tax expert but is not a CPA, has told Michel that because the bonds Michel holds are inventory, they are ordinary assets and not capital assets. Is this always true? Explain.8. LO.2 Anwar owns vacant land that he purchased many years ago as an investment. After getting approval to subdivide it into 35 lots, he made minimal improvements and then sold the entire property to a real estate developer. Anwar?s recognized gain on the sale was $1.2 million. Is this transaction eligible for the ?real property subdivided for sale? provisions? Why or why not?9. LO.3 What is the difference between a ?worthless security? and ?? 1244 stock??10. LO.3 Gina purchased an original issue discount bond several years ago. She paid $138,000 for the $200,000 face value bond. She sold the bond this year for $173,000. Is all of Gina?s gain long-term capital gain? Why or why not?11. LO.3 Tony receives $58,000 from a real estate developer for an option to purchase land Tony is holding for homesite development. Fourteen months later, the option expires unexercised. How is the $58,000 taxed to Tony?12. LO.3 Hubert purchases all of the rights in a patent from the inventor who developed the patented product. After holding the patent for two years, Hubert sells all of the rights in the patent for a substantial gain. What issues does Hubert face if he wants to treat the gain as a long-term capital gain?13. LO.3 Blue Corporation and Fuchsia Corporation are engaged in a contract negotiation over the use of Blue?s trademarked name, DateSiteForSeniors. For a one-time payment of $45,000, Blue licensed Fuchsia to use the name DateSiteForSeniors, and the license requires that Fuchsia pay Blue a royalty every time a new customer signs up on Fuchsia?s website. Blue is a developer of ?website ideas? that it then licenses to other companies such as Fuchsia. Did Fuchsia purchase a franchise right from Blue, or did Fuchsia purchase the name DateSiteForSeniors from Blue?14. LO.4 Shen purchased corporate stock for $20,000 on April 10, 2011. On July 14, 2013, when the stock was worth $12,000, Shen died and his son, Mijo, inherited the stock.What has to happen to the value of the property while Mijo holds it if he is to tackShen?s holding period onto his own holding period?15. LO.4 At the date of a short sale, Sylvia has held substantially identical securities for more than 12 months. What is the nature of any gain or loss from the close of her short sale?16. LO.5 After netting all of her short-term and long-term capital gains and losses, Misty has a net short-term capital loss and a net long-term capital loss. Can she net these against each other? Why or why not?17. LO.2, 5 Charlie sells his antique farm tractor collection at a loss. He had acquired all of the tractors for his personal pleasure and sold all of them for less than he paid for them. What is the tax status of the tractors? Is his gain a 28% loss? Explain.18. LO.7, 8 Hakim?s rental building was not insured when it was destroyed by a hurricane.His adjusted basis for the building was substantial, but was less than he had paid for the building in 2008. The building was Hakim?s only asset that was damaged by the hurricane.How should Hakim handle this situation?19. LO.7, 8 As a result of a casualty event, Theresa disposed of tangible personal property (a ? 1231 asset) at a realized and recognized loss. At the time of the casualty, the property was worth substantially less than Theresa had paid for it, but it still had an adjusted basis greater than zero. This was her only business casualty, and she has some ? 1231 lookback loss. Is the resulting loss a casualty loss that can be offset against a long-term capital gain or a casualty loss deductible for AGI as an ordinary loss?


Paper#39623 | Written in 18-Jul-2015

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