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tax problems - questin and aaannnsswer




Question;56. LO.4 Sarah received a gift of farmland from her father. The land was worth $4 million at the date of the gift, had been farmed by her father for 40 years, and had a tax basis for her father of $30,000. Sarah never farmed the land and sold it eight months after receiving it from her father for $4.2 million. What is Sarah?s holding period for the farmland?What is the nature of the gain from its disposition?57. LO.5 Dennis sells short 100 shares of ARC stock at $20 per share on January 15, 2013.He buys 200 shares of ARC stock on April 1, 2013, at $25 per share. On May 2, 2013, he closes the short sale by delivering 100 of the shares purchased on April 1.a. What are the amount and nature of Dennis?s loss upon closing the short sale?b. When does the holding period for the remaining 100 shares begin?c. If Dennis sells (at $27 per share) the remaining 100 shares on January 20, 2014, what will be the nature of his gain or loss?58. LO.5 Elaine Case (single with no dependents) has the following transactions in 2013:AGI (exclusive of capital gains and losses) $240,000Long-term capital gain 22,000Long-term capital loss (8,000)Short-term capital gain 19,000Short-term capital loss (23,000)What is Elaine?s net capital gain or loss? Draft a letter to Elaine describing how the net capital gain or loss will be treated on her tax return. Assume that Elaine?s income from other sources puts her in the 35% bracket. Elaine?s address is 300 Ireland Avenue, Shepherdstown,WV 25443.59. LO.3, 5 In 2013, Bertha (head of household with three dependents) had a $28,000 loss from the sale of a personal residence. She also purchased from an individual inventor for $17,000 (and resold in two months for $18,000) a patent on a rubber bonding process. The patent had not yet been reduced to practice. Bertha purchased the patent as an investment.In addition, she had the following capital gains and losses from stock transactions:Long-term capital loss ($ 6,000)Long-term capital loss carryover from 2012 (12,000)Short-term capital gain 21,000Short-term capital loss (7,000)What is Bertha?s net capital gain or loss? Draft a letter to Bertha explaining the tax treatment of the sale of her personal residence. Assume that Bertha?s income from other sources puts her in the 28% bracket. Bertha?s address is 1120 West Street, Ashland, OR97520.60. LO.2, 4, 5 Bridgette is known as the ?doll lady.? She started collecting dolls as a child, always received one or more dolls as gifts on her birthday, never sold any dolls, and eventually owned 600 dolls. She is retiring and moving to a small apartment and has decided to sell her collection. She lists the dolls on an Internet auction site and, to her great surprise, receives an offer from another doll collector of $45,000 for the entire collection.Bridgette sells the entire collection, except for five dolls she purchased during the last year. She had owned all of the dolls sold for more than a year. What tax factors should Bridgette consider in deciding how to report the sale?61. LO.5 Phil and Susan are married, filing a joint return. The couple have two dependent children. Susan has wages of $34,000 in 2013. Phil does not work due to a disability, but he is a buyer and seller of stocks on the Internet. He generally buys and holds for longterm gain, but occasionally gets in and out of a stock quickly. The couple?s 2013 stock transactions are detailed below. In addition, they have $2,300 of qualifying dividends.Item Date Acquired Date Sold Cost Sales PriceBlue stock 11/10/12 03/12/13 $ 3,000 $ 6,000Puce stock 12/13/11 05/23/13 36,000 32,000Beige stock 12/14/08 07/14/13 13,000 14,500Red stock 06/29/12 05/18/13 26,000 27,000Black stock 05/15/12 10/18/13 67,000 67,800Gray stock 04/23/11 10/18/13 89,000 88,200What is Phil and Susan?s AGI?62. LO.5 Paul has the following long-term capital gains and losses for 2013: $62,000 28% gain, $21,000 28% loss, $18,000 25% gain, and $64,000 0%/15%/20% gain. He also has a $53,000 short-term loss and a $5,000 short-term gain. What is Paul?s AGI from these transactions? If he has a net long-term capital gain, what is its makeup in terms of the alternative tax rates?63. LO.5 Helena has the following long-term capital gains and losses for 2013: $65,00028% gain, $53,000 28% loss, $28,000 25% gain, and $24,000 0%/15%/20% loss. She also has a $33,000 short-term loss and a $65,000 short-term gain. What is Helena?s AGI from these transactions? If she has a net long-term capital gain, what is its makeup in terms of the alternative tax rates?64. LO.5 For 2013, Ashley has gross income of $8,500 and a $5,000 long-term capital loss.She claims the standard deduction. Ashley is 35 years old and single with two dependent children. How much of Ashley?s $5,000 capital loss carries over to 2014?65. LO.5 Jane and Blair are married filing jointly and have 2013 taxable income of $97,000. The taxable income includes $5,000 of gain from a capital asset held for five years, $2,100 of gain from a capital asset held seven months, and $13,000 of gain from a capital asset held four years. All of the capital assets were stock in publicly traded corporations.Jane and Blair also have qualified dividend income of $3,000. What is the couple?s tax on taxable income?66. LO.5 For 2013, Wilma has properly determined taxable income of $36,000, including $3,000 of unrecaptured ? 1250 gain and $8,200 of 0%/15%/20% gain. Wilma qualifies for head-of-household filing status. Compute Wilma?s tax liability and the tax savings from the alternative tax on net capital gain.67. LO.5 Asok?s AGI for 2013 is $133,050. Included in this AGI is a $45,000 25% long-term capital gain and a $13,000 0%/15%/20% long-term capital gain. Asok is single, uses the standard deduction, and has only his personal exemption. Compute his taxable income, the tax liability, and the tax savings from the alternative tax on net capital gain.68. LO.6 Gray, Inc., a C corporation, has taxable income from operations of $1,452,000 for 2013. It also has a net long-term capital loss of $355,000 from the sale of a subsidiary?s stock. The year 2013 is the first year in the last 10 years that Gray has not had at least $500,000 per year of net long-term capital gains. What is Gray?s 2013 taxable income?What, if anything, can it do with any unused capital losses?69. LO.3, 14 Harriet, who is single, is the owner of a sole proprietorship. Two years ago,Harriet developed a process for preserving doughnuts that gives the doughnuts a much longer shelf life. The process is not patented or copyrighted, but only Harriet knows how it works. Harriet has been approached by a company that would like to buy the process. Harriet insists that she receive a long-term employment contract with the acquiring company as well as be paid for the rights to the process. The acquiring company offers Harriet a choice of two options: (1) $650,000 in cash for the process and a 10-year covenant not to compete at $65,000 per year or (2) $650,000 in cash for a10-year covenant not to compete and $65,000 per year for 10 years in payment for the process. Which option should Harriet accept? What is the tax effect on the acquiring company of each approach?70. LO.8 A sculpture that Korliss Kane held for investment was destroyed in a flood. The sculpture was insured, and Korliss had a $60,000 gain from this casualty. He also had a $17,000 loss from an uninsured antique vase that was destroyed by the flood. The vase was also held for investment. Korliss had no other property transactions during the year and has no nonrecaptured ? 1231 losses from prior years. Both the sculpture and the vase had been held more than one year when the flood occurred. Compute Korliss?s net gain or loss, and identify how it would be treated. Also write a letter to Korliss explaining the nature of the gain or loss. Korliss?s address is 2367 Meridian Road, Hannibal, MO63401.71. LO.8 Keshara has the following net ? 1231 results for each of the years shown. What would be the nature of the net gains in 2012 and 2013?Tax Year Net ? 1231 Loss Net ? 1231 Gain 2008 $16,000 2009 33,000 2010 42,000 2011 $41,000 2012 30,000 2013 41,00072. LO.8, 14 Jingie owns two parcels of business land (? 1231 assets). One parcel can be sold at a loss of $60,000, and the other parcel can be sold at a gain of $70,000. Jingie has no nonrecaptured ? 1231 losses from prior years. The parcels could be sold at any time because potential purchasers are abundant. Jingie has a $35,000 short-term capital loss carryover from a prior tax year and no capital assets that could be sold to generate longterm capital gains. Both land parcels have been held more than one year. What shouldJingie do based upon these facts? (Assume that tax rates are constant, and ignore the present value of future cash flow.)73. LO.7, 8, 9 Siena Industries (a sole proprietorship) sold three ? 1231 assets during 2013. Data on these property dispositions are as follows:Asset Cost Acquired Depreciation Sold for Sold onRack $100,000 10/10/09 $62,000 $85,000 10/10/13Forklift 35,000 10/16/10 23,000 5,000 10/10/13Bin 87,000 03/12/12 34,000 60,000 10/10/13a. Determine the amount and the character of the recognized gain or loss from the disposition of each asset.b. Assuming that Siena has no nonrecaptured net ? 1231 losses from prior years, how much of the 2013 recognized gains is treated as capital gains?


Paper#39626 | Written in 18-Jul-2015

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