1) If a taxpayer in the 28% tax bracket has the opportunity

1) If a taxpayer in the 28% tax bracket has the opportunity to invest in a taxablecorporate bond that pays 6% interest or to invest in a tax-exempt municipal bond thatpays 3.5% interest (assuming that all other elements of the two bonds, e.g., risk, are equaland that taxable interest would not put the taxpayer in a higher tax bracket), whichinvestment (without considering any effect of state and local taxes) would generate thegreater after-tax yield?2) Jane, age 65, who lives with her unmarried son, Jack, received $7,000, which wasused for her support during the year. Her sources of support were as follows:Social Security BenefitsJackCarol, an unrelated friendDwayne, Jane’s sonEmma, Jane’s sisterTotala. Who is eligible to claim Jane as a dependent?$1,5002,6008005001,600$7,000b. What must be done before Jack can claim the exemption?c. Can anyone claim head-of-household status based on Jane’s dependency exemption?Explain.d. Can Jack claim an old age allowance for his mother? Explain.3) On March 1 of the previous year, a parent sold stock with a cost of $9,000 to herchild, for $6,000, its fair market value. On September 30 of the current year, the childsold the same stock for $7,500 to Jones, who is unrelated to the parent and child. What isthe proper treatment for these transactions?a. Parent has a $3,000 recognized loss and child has $1,500 recognized gain.b. Parent has $3,000 recognized loss and child has $0 recognized gain.c. Parent has $0 recognized loss and child has $0 recognized gain.d. Parent has $0 recognized loss and child has $1,500 recognized gain.4) Alonzo, a single taxpayer, has adjusted gross income of $30,000 in the current year.During the year, a hurricane causes $4,100 damage to Alonzo’s personal use car onwhich he has no insurance. Alonzo purchased the car for $20,000. Immediately before thehurricane, the car’s fair market value was $11,000 and immediately after the hurricane itsfair market value was $6,900. What amount should Alonzo deduct as a casualty loss forthe current year after all threshold limitations are applied?5) In the current tax year, Boris earned $120,000 from his job as a master plumber. Inaddition, he received $40,000 of income from Activity A, and lost $30,000, and 25,000from Activities B and C respectively. Activities A, B, and C are passive activities thatBoris acquired in the current year. What amount of loss may Boris deduct on his currentyear taxes with respect to each activity? What amount of loss, if any, must be carriedover to the subsequent year for each activity?6) Wanda owns a non-depreciable capital asset she has held for investment. Shepurchased the asset for $200,000 six years ago, and it is now subject to a $54,000liability. During the current year, Wanda sells the asset to Steve in exchange for $85,000cash and a new automobile with a fair market value of $45,000 to be used by Wanda forpersonal use. Steve assumes the $54,000 liability. Calculate the amount of Wanda’sLong Term Capital Gain or her Long Term Capital Loss on this sale.7) Doris acquired a machine at a cost of $30,000 for use in her business, and she placedit in service on April 1, 2014. The machine is depreciated under MACRS, with a 7-yearrecovery period. This machine was the only asset Doris purchased this year. Doris electsto expense $25,000 of the acquisition cost under IRC Sec. 179.a) What is Doris’s total depreciation deduction for the machine in 2014?b) Doris then sells the machine on October 5, 2016 for $8,000. Calculate Doris’sdepreciation deductions for 2014 through 2016, the adjusted basis of the machineon October 5, 2016, and the gain or loss on the sale.8) Walter swaps his warehouse for Sally’s office building, and the exchange qualifies asa like-kind exchange. Walter’s adjusted basis for the warehouse is $500,000 and thewarehouse is subject to a liability of $150,000. The FMV of Sally’s office building is$740,000 and it is subject to a liability of $95,000. Each asset is transferred subject to theliability. What is Walter’s recognized gain, if any, on the transaction; and what is hisbasis in the office building?9) A taxpayer sold for $250,000 equipment that had an adjusted basis of $220,000.Through the date of the sale, the taxpayer had deducted $40,000 of depreciation. Of thisamount, $27,000 was in excess of straight-line depreciation. What amount of gain wouldbe recaptured under Section 1245 (Gain from Dispositions of Certain DepreciableProperty)?$40,000$27,000$13,000$30,00010) In 2015, David, a single 18-year old taxpayer, received a salary of $3,600 andinterest income of $1,800. He had $600 in itemized deductions. Calculate David’staxable income assuming he is (a) self-supporting and (b) a dependent of his parents.11) Jack and Jill are a married couple with one dependent child. In 2015, their salariestotaled $105,000, and they suffered a capital loss of $10,000. They also received $2,000of tax-exempt interest. They paid home mortgage interest of $12,000, state income taxesof $5,000, and medical expenses of $3,500. They also contributed $5,000 to charity, andmade a $10,000 deductible IRA contribution. On their 2015 Married Filing Joint taxreturn what is their (a) adjusted gross income; (b) their total itemized deductions; (c) theamount of their exemptions; and (d) their taxable income.12) Wendy is a single taxpayer, whose salary was $62,000 in 2015. In that year, she alsosuffered a $6,000 short-term capital loss. Her itemized deductions for the year totaled$5,000. What are Wendy’s 2015 (a) adjusted gross income; (b) taxable income; and (c)tax liability?13) During 2015, Bertha incurred the following costs associated with her beachfrontcondominium in Myrtle Beach:InsuranceRepairs & maintenanceMortgage interestProperty taxesUtilities$ 8006003,5001,500900Bertha could also have deducted a total of $13,000 in depreciation if the property hadbeen acquired and used only for investment purposes. However, during the year, Berthaused the condominium 28 days for a much needed vacation. She rented it out for 90 daysduring the year, which resulted in total gross income of $10,000. Bertha elected to useTax Court (Bolton rule) method for allocating mortgage interest and property taxes torental income.(a) What total deduction amount (i) for AGI and (ii) from AGI may Bertha claimfor the above condominium costs during 2015? Explain.(b) What is the effect of the above costs on Bertha’s basis in her condominium?14) During 2015, Linda suffered serious injuries in an automobile accident. She incurredthe following costs as a result:Doctor billsHospital billsPhysical therapy to recover full mobilityTransportation to/from hospital and doctor’s office$15,70010,3005,000200Linda is single with no dependents. Her 2015 salary was $68,000. She paid $1,000 inmedical and dental insurance premiums, which were withheld from her salary on an after-tax basis, $4,250 in mortgage interest on her personal residence, and $1,500 in interest onher car loan. She was reimbursed for $15,000 in medical expenses by her health insurer.Calculate her 2015 taxable income.15) Lucy owns 150 shares of Apex Corp., a publicly traded company, which Lucypurchased on January 1, Year 1, for $15,000. On January 1, Year 3, Apex declared a 2-for-1 stock split when the fair market value (FMV) of the stock was $140 per share.Immediately following the split, the FMV of Apex stock was $65 per share. On February1, Year 3, Lucy had her broker sell 120 shares of the Apex stock she received in the splitwhen the FMV of the stock was $70 per share. What amount should Lucy recognize aslong-term capital gain income on her Form 1040, U.S. Individual Income Tax Return, forYear 3?16) In the current year, Cline sold land with a basis of $60,000 to Johnson for $100,000.Johnson paid $20,000 down and agreed to pay $16,000 per year, plus interest, for thenext five years, beginning in the second year. Under the installment method, what gainshould Cline include in gross income in the year following the year of sale?17) Betty files as head of household in 2015. She had taxable income of $80,000,including the sale of stock she held for investment for two years for a $15,000 gain. Bettysold no other assets during the year, and she did not have any capital loss carryovers.What is Betty’s 2015 tax liability?What would Betty’s 2015 tax liability be if he had held the stock for 10 months?18) Regina, a calendar-year taxpayer, purchased used furniture and fixtures for use in herbusiness and placed the property in service on September 1, 2015. The furniture andfixtures cost $46,000 and represented Regina’s only acquisition of depreciable propertyduring the year. Regina did not elect to expense any part of the cost of the propertyunder Sec. 179. What is the amount of Regina’s depreciation deduction for the furnitureand fixtures under the Modified Accelerated Cost Recovery System (MACRS) for 2015?$ 2,667$ 6,573$ 8,000$16,00019) Baxley owned a parcel of investment real estate that had an adjusted basis of$35,000 and a fair market value of $50,000. During 2015, Baxley exchanged hisinvestment real estate for the items of property listed below.Land to be held for investment (fair market value)A used motorcycle Baxley will use for recreation (fair market value)Cash$45,0003,5001,500What is Baxley’s recognized gain and basis in his new investment real estate?20) Josephus, an unmarried taxpayer filing single with no dependents, has AGI of$200,000 and reports the following items in 2015:Taxable incomeTax preferencesAMT Adjustments related to itemized deductionsRegular tax liabilityWhat is Josephus’s AMT liability for 2015?$160,00010,00030,00037,871

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