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problem-Adelene, who lives in a winter resort area, rented her personal residence for 14 days while she




Question;50. Adelene, who lives in a winter resort area, rented her personal residence for 14 days while she was visiting Brussels. Rent income was $5,000. Related expenses for the year were as follows:Real property taxes $ 3,800Mortgage interest 7,500Utilities 3,700Insurance 2,500Repairs 2,100Depreciation 15,000Determine the effect on Adelene?s AGI.51. LO.3 During the year (not a leap year), Anna rented her vacation home for 30 days, used it personally for 20 days, and left it vacant for 315 days. She had the following income and expenses:Rent income $ 7,000ExpensesReal estate taxes 2,500Interest on mortgage 9,000Utilities 2,400Repairs 1,000Roof replacement (a capital expenditure) 12,000Depreciation 7,500a. Compute Anna?s net rent income or loss and the amounts she can itemize on her tax return, using the court?s approach to allocating property taxes and interest.b. How would your answer in part (a) differ using the IRS?s method of allocating property taxes and interest?52. LO.3 How would your answer to Problem 51 differ if Anna had rented the house for 87 days and had used it personally for 13 days?53. LO.1, 3 Chee, single, age 40, had the following income and expenses during the year (not a leap year):IncomeSalary $43,000Rental of vacation home (rented 60 days, used personally 60 days, vacant 245 days) 4,000Municipal bond interest 2,000Dividend from General Electric 400ExpensesInterest on home mortgage 8,400Interest on vacation home 4,758Interest on loan used to buy municipal bonds 3,100Property tax on home 2,200Property tax on vacation home 1,098State income tax 3,300State sales tax 900Charitable contributions 1,100Tax return preparation fee 300Utilities and maintenance on vacation home 2,600Depreciation on rental 50% of vacation home 3,500Calculate Chee?s taxable income for the year before personal exemptions.54. LO.1, 3, 4 Elisa and Clyde operate a retail sports memorabilia shop. For the current year, sales revenue is $55,000 and expenses are as follows:Cost of goods sold $21,000Advertising 1,000Utilities 2,000Rent 4,500Insurance 1,500Wages to Boyd 8,000Elisa and Clyde pay $8,000 in wages to Boyd, a part-time employee. Because this amount is $1,000 below the minimum wage, Boyd threatens to file a complaint with the appropriateFederal agency. Although Elisa and Clyde pay no attention to Boyd?s threat, Chelsie (Elisa?s mother) gives Boyd a check for $1,000 for the disputed wages. Both Elisa andClyde ridicule Chelsie for wasting money when they learn what she has done. The retail shop is the only source of income for Elisa and Clyde.a. Calculate Elisa and Clyde?s AGI.b. Can Chelsie deduct the $1,000 payment on her tax return? Explain.c. How could the tax position of the parties be improved?55. LO.3, 4 Jay?s sole proprietorship has the following assets:Basis Fair Market ValueCash $ 10,000 $ 10,000Accounts receivable 18,000 18,000Inventory 25,000 30,000Patent 22,000 40,000Land 50,000 75,000 $125,000 $173,000The building in which Jay?s business is located is leased. The lease expires at the end of the year.Jay is 70 years old and would like to retire. He expects to be in the 35% tax bracket.Jay is negotiating the sale of the business with Lois, a key employee. They have agreed on the fair market value of the assets, as indicated previously, and agree that the total purchase price should be about $200,000.a. Advise Jay regarding how the sale should be structured.b. Advise Lois regarding how the purchase should be structured.c. What might they do to achieve an acceptable compromise?


Paper#41308 | Written in 18-Jul-2015

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