Sally owns real property for which the annual property taxes are $14,880. She sells the property to Kate on April 2, 2017, for $744,000. Kate pays the real property taxes for the entire year on October 1, 2017. Assume a 365-day year. Round any division to four decimal places. Round your final answers to the nearest dollar.
a. How much of the property taxes can be deducted by Sally and how much by Kate?
Sally can deduct ________ and Kate can deduct ________ of the property taxes.
b. What effect does the property tax apportionment have on Kate's adjusted basis in the property?
Kate's adjusted basis for the property is increased by the _________ she paid that is apportioned to Sally.
c. What effect does the apportionment have on Sally's amount realized from the sale?
Sally paid none of the real property taxes and is permitted to deduct the apportioned share of _______. Her amount realized is increased by this amount
d. How would the answers in part b and c differ if the taxes were paid by Sally?
If the taxes were paid by Sally, Sally's amount realized would be __________ . Kate's adjusted basis would be __________.
Sally owns real property for which the annual property taxes are $14,880. She sells the property to Kate on April 2, 2017, for $744,000. Kate pays the real property taxes for the entire year on October 1, 2017. Assume a 365-day year. Round any division to four decimal places. Round your final answers to the nearest dollar.
a. How much of the property taxes can be deducted by Sally and how much by Kate?
Sally can deduct ________ and Kate can deduct ________ of the property taxes.
b. What effect does the property tax apportionment have on Kate's adjusted basis in the property?
Kate's adjusted basis for the property is increased by the _________ she paid that is apportioned to Sally.
c. What effect does the apportionment have on Sally's amount realized from the sale?
Sally paid none of the real property taxes and is permitted to deduct the apportioned share of _______. Her amount realized is increased by this amount
d. How would the answers in part b and c differ if the taxes were paid by Sally?
If the taxes were paid by Sally, Sally's amount realized would be __________ . Kate's adjusted basis would be __________.
Related questions
1.Assume that Timberline Corporation has 2016 taxable income of $240,000 before the §179 expense.
| Asset | Purchase Date | Basis |
| Furniture (7-year) | December 1 | $350,000 |
| Computer Equipment (5-year) | February 28 | 90,000 |
| Copier (5-year) | July 15 | 30,000 |
| Machinery (7-year) | May 22 | 480,000 |
| Total | $950,000 |
a. What is the maximum amount of §179 expense Timberline may deduct for 2016? What is Timberlineâs §179 carryforward to 2017, if any?
b. What would Timberlineâs maximum depreciation expense be for 2016 assuming no bonus depreciation?
________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
2).]Hans runs a sole proprietorship. Hans (a single individual) reported the following net §1231 gains and losses since he began business:
| Year | Net §1231 Gains/(Losses) |
| Year 1 | ($65,000) |
| Year 2 | 15,000 |
| Year 3 | 0 |
| Year 4 | 0 |
| Year 5 | 10,000 |
| Year 6 | 50,000 |
a.
______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
Kase, an individual, purchased some property in Potomac, Maryland, for $200,000 approximately 10 years ago. Kase is approached by a real estate agent representing a client who would like to exchange a parcel of land in North Carolina for Kaseâs Maryland property. Kase agrees to the exchange. The transaction qualifies as a like-kind exchange and the fair market value of each property is $675,000.
What is Kaseâs realized gain or loss,
Recognized gain or loss,
Basis in the North Carolina property in each of the following scenario?
______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
4) Russell Corporation sold a parcel of land valued at $500,000. Its basis in the land was $275,000. For the land, Russell received $0.00 in cash in year 0 and a note providing that Russell will receive $250,000 in year 1 and $250,000 in year 2 from the buyer.
a. What is Russellâs realized gain on the transaction?
b. What is Russellâs recognized gain in year 0, year 1, and year 2?
______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
5). Rayleen owns a condominium near Orlando, Florida. This year, she incurs the following expenses in connection with her condo:
| Insurance | $1,250 |
| Mortgage interest | 7,000 |
| Property taxes | 2,100 |
| Repairs and maintenance | 800 |
| Utilities | 2,300 |
| Depreciation | 9,000 |
During the year, Rayleen rented the condo for 130 days and she received $25,000 of rental receipts. She did not use the condo at all for personal purposes during the year. Rayleen is considered to be an active participant in the property. Rayleen's AGI from all sources other than the rental property is $130,000. Rayleen does not have passive income from any other sources. What is Rayleen's AGI?
______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
6).]Careen owns a condominium near Newport Beach in California. This year, she incurs the following expenses in connection with her condo:
| Insurance | $1,500 |
| Mortgage interest | 8,500 |
| Property taxes | 4,000 |
| Repairs and maintenance | 950 |
| Utilities | 1,900 |
| Depreciation | 5,500 |
During the year, Careen rented the condo for 90 days, receiving $20,000 of gross income. She personally used the condo for 50 days. Assuming Careen uses the IRS method of allocating expenses to rental use of the property. What is Careen's net rental income for the year?
______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
7). Darren (single) purchased a home on January 1, 2012 for $400,000. Darren lived in the home as his primary residence until January 1, 2014 when he began using the home as a vacation home. He used the home as a vacation home until January 1 2015 (he used a different home as his primary residence from January 1, 2014 to January 1, 2015). On January 1, 2015, Darren moved back into the home and used it as his primary residence until January 1, 2016 when he sold the home for $500,000. What amount of the $100,000 gain Darren realized on the sale must he recognize for tax purposes in 2016?
______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
Bonus:
Moab [an unincorporated entity] manufactures and distributes high-tech biking gadgets. It has decided to streamline some of its operations so that it will be able to be more productive and efficient. Because of this decision it has entered into several transactions during the year.
Part (1) Determine the gain/loss realized and recognized in the current year for each of these events. Also determine whether the gain/loss recognized is §1231, capital, or ordinary. Construct a chart to show transactions and gains/loss in good format.
Moab sold a machine that it used to make computerized gadgets for $27,300 cash. It originally bought the machine for $19,200 three years ago and has taken $8,000 depreciation.
Moab held stock in ABC Corp. which had a value of $12,000 at the beginning of the year. That same stock had a value of $15,230 at the end of the year.
sold some of its inventory for $7,000 cash. This inventory had a basis of $5,000.
Moab disposed of an office building with a fair market value of $75,000 for another office building with a fair market value of $55,000 and $20,000 in cash. It originally bought the office building seven years ago for $62,000 and has taken $15,000 in depreciation.
Moab sold land it held for investment for $28,000. It originally bought the land for $32,000 two years ago.
Moab sold another machine for a note, payable in four annual installments of $12,000. The first payment was received in the current year. It originally bought the machine two years ago for $32,000 and had claimed $9,000 in depreciation expense against the machine.
Moab sold stock it held for eight years for $2,750. It originally purchased the stock for $2,100.
Moab sold another machine for $7,300. It originally purchased this machine six months ago for $9,000 and has claimed $830 in depreciation expense against the asset.
| Item | Sales price | Cost | Depreciation where applicable | Gain/loss | Character of gain/loss |
| A | $27,300 | $19,200 | $8,000 | ||
| B | |||||
| C | |||||
| D | |||||
| E | |||||
| F | |||||
| G | |||||
| H | |||||
Part (2) From the recognized gains/losses determined in part 1, determine the net §1231 gain/loss and the net ordinary gain/loss Moab will recognize on its tax return. Moab also has $2,000 of nonrecaptured §1231 losses from previous years.
______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
During 2015, George, a salaried taxpayer, paid the followingtaxes which were not incurred in connection with a trade orbusiness: Federal income tax withheld by employer $1,500; Stateincome tax withheld by employer $1,100; FICA tax withheld byemployer $700; Real property taxes $900; Federal auto gasolinetaxes $300; Federal excise tax on telephone bills $50. What amountcan George claim for 2015 as an itemized deduction for the taxespaid, assuming he elects to deduct state and local incometaxes?
| A. | $1,400 | |
| B. | $1,100 | |
| C. | $1,150 | |
| D. | None are correct | |
| E. | $2,000 |
Choose the correct statement:
| A. | If a financial planner becomes certified, then he/she may notdeduct the Certified Financial Planner (CFP) dues because it is notnecessary to be certified in order to engage in the business ofbeing a financial planner. | |
| B. | If a taxpayer does a lot of business travel, the taxpayer maydeduct the amount paid for an airline club membership. | |
| C. | None are correct | |
| D. | Membership dues to a golf club are deductible as long as thereis a business purpose. | |
| E. | In order to be deductible, dues and subscriptions must berelated to the taxpayerâs occupation. |
For 2015, Eugene and Linda had adjusted gross income of $30,000.Additional information for 2015 is as follows: Cash contribution tochurch $1,500; Tuition paid to a parochial school $1,200;Contribution to the American Red Cross $400; Cash contribution to aneedy family $75. What is the maximum amount that they can use as adeduction for charitable contributions for 2015?
| A. | $1,900 | |
| B. | $1,975 | |
| C. | none are correct | |
| D. | $3,175 | |
| E. | $3,000 |
For the year ended December 31, 2015, David, a married taxpayerfiling a joint return, reported the following: Investment incomefrom interest $24,000; Investment expenses other than interest$4,000; Interest expense on funds borrowed in 2006 to purchaseinvestment property $70,000. What is the maximum amount that Davidcan deduct in 2015 as investment interest expense?
| A. | $7,000 | |
| B. | $20,000 | |
| C. | None are correct | |
| D. | $21,000 | |
| E. | $24,000 |
Barry is a self-employed attorney who travels to New York on abusiness trip during 2015. Barry's expenses were as follows:Airfare $560; Taxis $40; Meals $200; Lodging $350. How much mayBarry deduct as travel expenses for the trip?
| A. | $1,050 | |
| B. | $1,000 | |
| C. | $950 | |
| D. | None are correct | |
| E. | $0 |
Christine saw a television advertisement asking for donations ofused vehicles to a charitable foundation and decided to donate herold car. Which of the following statements is correct?
| A. | She can take a deduction greater than the amount for which thecharity actually sells the vehicle. | |
| B. | She can claim an estimated value for the auto if the charityuses it rather than selling it. | |
| C. | The charity is not required to provide her with any informationabout what they do with the auto. | |
| D. | She can take a tax deduction large enough on an after-tax basisto equal the amount she would have received if she sold the cardirectly. |
