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Keanu sold land for $400,000 plus a note for $400,000




Question;Keanu sold land for $400,000 plus a note for $400,000. The interest rate on the note was equal to the Federal rate. The fair market value of the note was $400,000. His basis in the land was $75,000:a. If Keanu is an accrual basis taxpayer and does not use the installment method to report the gain, his gain in the year of sale is $725,000 ($400,000 + $400,000 ? $75,000)b. If Keanu is a cash basis taxpayer, he cannot use the installment method to report the gain.c. If Keanu is a cash basis taxpayer and uses the installment method, the contract price is $400,000.d. If Keanu is a cash basis taxpayer, his gain in the year of the sale is $325,000 ($400,000 ? $75,000).e. None of the choices.Taylor elects to treat the cutting of timber as a sale or exchange under ? 1231. Taylor purchased the land for $100,000 and the timber for $125,000 several years ago. On the first day of 2013, the timber was appraised at $230,000 and in September 2013 it was cut and sold for $280,000. What is Taylor's Section 1231 gain or loss from this transaction?a. $0.b. $50,000.c. $105,000.d. $155,000.e. None of the choicesIn 2013, Sierra sold land to her son Jack for $100,000 cash and an installment note for $200,000. Sierra's adjusted basis was $150,000. In 2014, after paying $10,000 interest but nothing on the principal, Jack sold the land for $325,000 cash. As a result of the second disposition, what gain must Sierra recognize in 2014?a. $200,000.b. $150,000.c. $100,000.d. $50,000.e. None of the choices.Lindsey, who is retired, reaches age 70 1/2 in 2013, and she will also be age 71 in 2013. She has a $240,000 balance in her traditional IRA. If her life expectancy is 15.3 years, what distribution, if any, must be made by April 1, 2014?Select one:a. $0.b. $15,686.c. $31,373.d. $240,000.e. None of the choices.Zackary purchased his home for $150,000. As a sole proprietor, he operates a certified public accounting practice in his home. For this business, he uses one room exclusively and regularly as a home office. In Year 1, $1,636 of depreciation expense on the home office was deducted on his income tax return. In Year 2, Zackary sustained losses in his business, therefore, no depreciation was taken on the home office. Had he been allowed to deduct depreciation expense, his depreciation expense would have been $1,675. What is the adjusted basis in the home?Select one:a. $146,689.b. $148,325.c. $148,364.d. $150,000.e. None of the choices.Dermot and Melinda are married, file a joint tax return, have AGI of $125,000, and have two children. Mariah is beginning her freshman year at Eastern University during Fall 2013, and Susie is beginningher senior year at Western University during Fall 2013 after having completed her junior year during the spring of that year. Both Mariah and Susie are claimed as dependents on their parents? taxreturn. Mariah?s qualifying tuition expenses and fees total $4,500 for the fall semester, while Susie?s qualifying tuition expenses and fees total $9,250 for each semester during 2013. Full payment is made for the tuition and related expenses for both children during each semester. What amount of education tax credit should be taken for these higher education costs?Select one:a. $-0-.b. $2,750.c. $4,350.d. $5,000.e. None of the choices.


Paper#41420 | Written in 18-Jul-2015

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