Federal_Tax_Questions

Question
1.. Distinguish between realized gains and losses and recognized gains and losses.

2.Amos, a single individual with a salary of $50,000, incurred and paid the following expenses during the year:
Medical expenses: $5,000
Alimony: $14,000
Casualty loss (after $100 floor): $1,000
State income taxes: $4,000
Moving expenses: $1,500
Contribution to a traditional IRA: $2,000
Student loan interest: $1,200

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Analyze the above expenses and determine which ones are deductible for AGI. Please support your position.

3. Carl had the following transactions for 2010.
Salary: $55,000
Damage award (compensatory) for city bus accident: $20,000
Loss on sale of stock investment: $4,500
Loan from father to purchase auto: $10,000
Alimony paid to former wife: $11,000

What is Carl’s AGI for 2010?

4. Sara owns a sole proprietorship, and Phil is the sole shareholder of a C (regular) corporation. Each business sustained a $9,000 operating loss and a $2,000 capital loss for the year. Evaluate how these losses will affect the taxable income of the two owners.

5. John forms a corporation and transfers property having a basis to him of $18,000 and a fair market value of $26,000 to the corporation for 1,000 shares of $10 par stock. One year later, Hal transfers property having a basis to him of $2,500 and a fair market value of $3,500 for 100 shares of the stock. Hal is not related to John. The corporation issued no other stock.

(a) How much gain does John recognize on his exchange? What is the basis to John of his 1,000 shares?
(b) What gain or loss is recognized by the corporation when it issues its shares to John? What is the basis to the corporation of the property it received from John?
(c) How much gain does Hal recognize on his exchange? What is the basis to Hal of his 100 shares?

6. XYZ Company had a net loss of $90,000 from operations in 2007. Tina owns XYZ and works 20 hours a week in the business. She has a large amount of income from other sources and is in the 33% marginal tax bracket. Would Tina’s tax situation be better if XYZ were a proprietorship or a C corporation? Explain why

7. On April 18, 2011, Tara Wilson purchased 30 shares of ABC stock for $210, and on September 29, 2011, she purchased 90 additional shares for $900. On November 28, 2011, she sold 48 shares, which could not be specifically identified, for $576, and on December 8, 2011, she sold another 25 shares for $200. What is her recognized gain or loss?

8. In 2010, OK Company had a net loss of $82,000 from operations. Jane owns OK Company and works 20 hours a week in the business. She has a large amount of income from other sources and is in the 35% marginal tax bracket. Would Jane’s tax situation be better if OK Company were a proprietorship or a C corporation? Explain why.

9. Bob Smith, a professional basketball player, raises Black Angus cattle under circumstances that would indicate that the activity is a hobby. His adjusted gross income for the year is $80,000, and he has $1,000 of other miscellaneous itemized deductions, all of which are subject to the two-percent floor. During the taxable year, the feed for the cattle cost $3,000. The income from the sale of cattle was $2,800.

(a) Under the hobby loss rule, to what extent is the expense of $3,000 deductible?

(b) Under the two-percent-of-adjusted-gross-income limitation, how much is the overall deductible amount of his itemized deductions?

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