ADMS 3520 Lecture Notes - Fax, Photocopier, Life Insurance

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harlequinmanatee372

14 Jul 2013

School

York University

Department

Administrative Studies

Course

ADMS 3520

Professor

Jason Fleming

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Document Summary

Lecture 8: income or loss from a business and introduction to gst/hst. Use the lecture notes for studying; for parts that you think you really need more info please search for the relevant materials in ctp ch. Self-study problem 6-8: ignore items 12 and 13. Business income compared to employment income, property income and capital gains. The rules for computing income or loss from business or property are contained in subdivision b of division b of ita 9 to 37. Before we can apply the rules in subdivision b we must decide if it is business income or employment income (subdivision a) or property income (also subdivision b) or capital gains (subdivision c) Although business is defined in ita 248(1) there have been many court cases on this. Business income is generally speaking income earned from selling goods or providing services. However providing the services of an employee is not business income (it is employment income).

Related Questions

4. _____ In Commissioner v. Tufts, 461 U.S. 300, 103 S.Ct 1826,the Supreme Court concluded that when the amount of thenon-recourse note assumed by the buyer exceeds the propertyâs fairmarket value, the seller excludes the excess from the amountrealized on the sale. 5. _____ Prior to their marriage Jack soldDiane 50% interest in his rental property. Jack is not required torecognize gain/loss on the sale since the sale was in contemplationof marriage. 6. _____ Under a divorce decree the ex-spouse mustrelinquish ownership in an asset to the husband three years afterthe divorce is final. The husband will assume the basis of theproperty from the ex-spouse. 7. _____ A loss on the sale of apersonal residence is not deductible. 8. _____ When the buyerassumes the sellerâs liability on a mortgage, the seller includesthe amount of the mortgage in computing the amount realized fromthe sale. 9. ____ Trade Accounts Receivable are capital assets. 10._____ A corporation may carry forward capital losses to offsetagainst capital gains indefinitely 11. _____To qualify as Section1231 property, it must be used in the trade or business and must beheld for more than one year. 12. _____ Under IRC Section 165(g) ifany security which is a capital asset becomes worthless during thetaxable year, the loss shall be treated as a loss from the sale orexchange of a capital asset on the last day of the taxable year.13. _T____ Business property held for less than or equal to oneyear always produces ordinary income or loss. 14. _____ The basisof business property is reduced by the greater of the depreciationallowed or allowable. 15. ____ Janice buys property by paying$1,000 down and borrowing $9,000. Janiceâs initial basis in theproperty is $1,000.

Partnerships
Determine whether the following statements are True or False: TRUE FALSE

1. Guaranteed payments to partners do not reduce the ordinary income of the partnership.

2. Non recourse borrowing of a partnership increases threat risk basis of each partner in interest in the partnership.

3. Tax exempt interest income decreases the basis of each partner's interest in the partnership.

4. A partner's basis in a partnership equals the fair market value of the property contributed, plus the partner's share of all liabilities, minus any liability of the partner assumed by the partnership.

5. A capital loss is deductible in order to determine the ordinary income of a partnership.

6. In computing the ordinary income of a partnerships, charitable contributions are not deducted.

7. The passive loss rules apply to a partner in a partnership.

8. A partner does not recognize any income when services are exchanged for a partnership interest.

9. An ordinary loss if fully deductible by a partner without regard to his partnerships basis.

10. The holding period of property acquired by a partnership as a contribution by a partner includes the period during which the property was held by the contributing partner.

11. After the initial formation of a partnership, the partner's basis will decrease by their pro rata share of losses.

12. Under Section 721, when a partner contributes property with a FMV that is higher than the property's adjusted basis, a pre contribution gain is suspended and will be allocated 100% to the contributing partner when the property is sold by the partnership.

13. Under Section 721, the partnership's basis in the contributed property iis the contributors fair market value.

14. Section 1245 gains are separately stated items for a partnership.

15. Under Section 721, if property contributed to a partnership is subject to a liability, a taxable gain may occur which would reduce a partner's basis.

scarletbear126

Note: This problem is for the 2018 taxyear.

Janice Morgan, age 24, is single and has no dependents. She is afreelance writer. In January 2018, Janice opened her own officelocated at 2751 Waldham Road, Pleasant Hill, NM 88135. She calledher business Writers Anonymous. Janice is a cash basis taxpayer.She lives at 132 Stone Avenue, Pleasant Hill, NM 88135. Her SocialSecurity number is 123-45-6789. Janice's parents continue toprovide health insurance for her under their policy. Janice wantsto contribute to the Presidential Election Campaign Fund.

During 2018, Janice reported the following income and expenseitems connected with her business.

Income from sale of articles	$85,000
Rent	16,500
Utilities	7,900
Supplies	1,800
Insurance	5,000
Travel (including meals of $1,200)	3,500

Janice purchased and placed in service the following fixedassets for her business. Janice wants to elect immediate expensingunder Â§ 179, if possible.

Furniture and fixtures (new) costing $21,000 on January10.
Computer equipment (new) costing $12,400 on July 28.

Janiceâs itemized deductions include:

State income tax	$2,950
Home mortgage interest paid to First National Bank	6,000
Property taxes on home	2,500
Charitable contribution to her alma mater, State College	1,200

Janice did not keep a record of the sales tax she paid. Theamount from the sales tax table is $437.
Janice reports interest income of $4,000 on certificates of depositat Second National Bank. She made estimated tax payments of $3,000for 2018.

Required:
Compute Janice Morganâs 2018 Federal income tax payable (or refunddue) by providing the following information that would be reportedon Form 1040 and Schedules A, B, C, and SE.

Make realistic assumptions about any missing data.
If an amount is zero, enter "0".
Enter all amounts as positive numbers.
When computing the tax liability, do not round your immediatecalculations.
If required, round your final answers to the nearestdollar.

Provide the following that would be reported on Janice's Form1040:

1. Filing status: The taxpayers' filingstatus:

2. Calculate taxable gross income.
$

3. Calculate the total adjustments forAGI.
$

4. Calculate adjusted gross income.
$

5. Calculate the greater of the standarddeduction or itemized deductions.
$

6. Calculate the qualified busies incomededuction.
$

7. Calculate total taxable income.
$

8. Calculate the income tax liability.
$

9 Calculate SE taxes due.
$

10. Calculate the total tax creditsavailable.
$

11. Calculate total withholding and taxpayments.
$

12. Calculate the amount overpaid(refund):
$

13. Calculate the amount of taxes owed:
$

Provide the following that would be reported on Janice'sSchedule A:

1. Calculate the deduction allowed for medicaland dental expenses.
$

2. Calculate the deduction for taxes.
$

3. Calculate the deduction for interest.
$

4. Calculate the charitable deductionallowed.
$

5. Calculate total itemized deductions.
$Provide the following that would be reported on Janice's ScheduleB:

1. Calculate the interest amount:
$

2. Calculate the ordinary dividends:
$

Provide the following that would be reported on Janice'sSchedule C:

1. Calculate income from sales:
$

2. Calculate total expenses:
$

3. Calculate net profit or loss
$ Provide the following that would be reported on Janice's Form4562.

Click here to access Exhibit 8.1 and the depreciation tables inthe textbook.

1. Calculate the total deprecation for thefurniture and fixtures:
$

2. Calculate the total depreciation for thecomputer equipment.
$

Provide the following that would be reported on Janice'sScheduled SE. When computing the self-employment tax liability, donot round your calculations. Round your final answers to thenearest dollar. Use rounded amount when determining the deductionfor self-employment tax.

1. Calculate the self-employmentliability:
$

2. Calculate the eduction for self-employmenttax:
$

2018 Tax Rate Schedules

Use the 2018 Tax Rate Schedules to compute the tax.

Note: Because the tax rate schedules are used instead of the taxtables, the amount of tax computed may vary slightly from theamount listed in the tables. This variation occurs because the taxfor a particular income range in the tax table is based on themidpoint amount.

2018 Tax Rate Schedules

SingleâSchedule X

Head of householdâSchedule Z

If taxable incomeis:
Overâ

But not
overâ

The taxis:

of the amount
overâ

If taxable incomeis:
Overâ

But not
overâ

The taxis:

of the amount
overâ

$9,525