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Use the provided Excel spreadsheet for the Critical ThinkingAssignment for this week. In column A, you will find a list oftransactions that may (or may not be deductible). Columns B throughH have options from which you are to select the appropriate taxtreatment of the transaction. Once you have made all of yourselections, upload the completed spreadsheet for grading.

In eachindependent item below, assume that a single taxpayer earned$30,000 in W-2 income. Show the appropriate amount that shouldappear under each heading. More than one option may beselected
Item Amount Include in Gross Income Exclude form Gross Income Deduction for AGI Deduction from AGI Appears on Schedule A Appears on Schedule B Appears on Schedule D
Interest from Savings Account $60
Dividends from stock investment $500
Bad Debt from an Unpaid Loan $6,000
Donation of automobile to charity $600
Cash donation to church $500
Cash donation to charity $3,000
Student loan interest $1,200
Alimony $12,000
Loss on the sale of stock purchased 5years ago $900
Gain of the sale of stock purchased 6years ago $1,200
Traditional IRA contributions $4,500
Net loss on real estate rentalproperties $6,000
Home business (sole proprietorship)profit $12,000
Moving expenses $2,500

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Reid Wolff
Reid WolffLv2
28 Sep 2019

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1. Taxpayerwants to make a donation to qualified public charity today. Thedonation would consist of real estate held by Taxpayer forinvestment for five years which real estate has a fair market valueof $30,000. Taxpayer's adjusted basis in the real estate is$20,000. Taxpayer wants to know how much gain Taxpayer wouldrecognize as a result of this transaction and if Taxpayer may takean income tax charitable deduction for this contribution? What isthe correct answer to Taxpayer’s questions?

a. Taxpayer would recognize a gain of $10,000, and Taxpayer may takecharitable deduction based on the fair market value of the realestate subject to the Taxpayer’s 50% of adjusted gross incomelimitation for charitable contributions of capital assets toqualified public charities, provided Taxpayer itemizesdeductions.

b. Taxpayer does not recognize any gain, but Taxpayer’s charitablededuction would be based on Taxpayer’s adjusted basis in theproperty contributed.

c. Taxpayer’s allowable charitable deduction would be $10,000.

d. None of the above is correct.

2. Assume that in 2018 Taxpayer makes a donation to qualifiedpublic charity of real estate held by Taxpayer for investment forfive years and having a fair market value of $20,000 on the date ofthe contribution. Taxpayer's basis in the property is $30,000. Howmuch loss or deduction would be allowable to or recognized bytaxpayer as a result of this transaction?

a. Taxpayer would recognize a capital loss of $10,000 that may be usedto offset Taxpayer’s capital gains.

b. There would be no deductible loss allowable with respect to theinherent loss in the property, but taxpayer may take a charitablededuction of $20,000 subject to the adjusted gross incomepercentage limitation, and provided Taxpayer itemizesdeductions.

c. Taxpayer may carry over the loss until Taxpayer makes a bargainsale of other real estate to a public charity.

d. Taxpayer’s allowable charitable income tax deduction would be$30,000.

3. Tom, Dick,and Larry purchase real estate from Jane. The grantee portion ofthe deed Jane gives them reads “to Tom, Dick, and Larry.” Tom,Dick, and Larry own the real estate as:

a. joint tenants with right of survivorship

b. tenants by the entireties

c. tenants in common

d. trustees

4. Common stockof ABC Corporation, a publicly traded corporation, and cash wascontributed by Taxpayer to a qualified public charity on June 10,2018. Taxpayer’s adjusted basis in the stock was $1,000 and thefair market value of the stock on June 10 was $1,500. $2,000 ofcash was also contributed to qualified public charity on June 10,2018. The stock was held long-term and was held for investment.What is the correct income tax treatment as a result of thedonations?

a. Taxpayer’s initial income tax charitable deduction amount would be$1,000 for the stock with no gain recognized with respect to thestock and $2,000 for the cash, both subject to the same adjustedgross income limitation, assuming that Taxpayer itemizesdeductions.

b. The amount of the charitable deduction may be limited based uponthe overall phase-out of itemized deductions.

c. Taxpayer’s initial income tax charitable deduction amount would be$1,500 for the stock with $500 gain recognized and $2,000 for thecash, both subject to the same adjusted gross income limitation,assuming that Taxpayer itemizesdeductions.

d. b and c are both correct.

e. None of the above statements is a correct statement.

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