Magnum is single. He has some stock that he bought for $5.00 many years ago which is now worth $30,000, and he would like to sell it. He has no other capital gains or losses. It is Nov 30, 2018. Magnum will have taxable income of $150,000 in 2018 (before this capital gain). He anticipates having taxable income of $450,000 (before this capital gain) and no other possible capital gains or losses in 2019. What might be a good end year tax planning strategy for Magnum?

OneClass: Magnum is single. He has some stock that he bought for $5.00 many years ago which is now wo...

1.Assume that Timberline Corporation has 2016 taxable income of $240,000 before the Â§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 Â§179 expense Timberline may deduct for 2016? What is Timberlineâs Â§179 carryforward to 2017, if any?

b. What would Timberlineâs maximum depreciation expense be for 2016 assuming no bonus depreciation?

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2).]Hans runs a sole proprietorship. Hans (a single individual) reported the following net Â§1231 gains and losses since he began business:

Year	Net Â§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.

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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?

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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?

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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?

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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?

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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 Â§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 Â§1231 gain/loss and the net ordinary gain/loss Moab will recognize on its tax return. Moab also has $2,000 of nonrecaptured Â§1231 losses from previous years.

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mauveeagle340

During the current year, Marlene, Nancy and Olive formed a new SCorporation. Solely in exchange for stock, Marlene and Nancycontributed appreciated property, while Olive contributed services.The exchanges of Marlene and Nancy will be nontaxable if:

		Olive receives 30% of the stock
		Olive receives 80% of the stock
		Olive receives 15% of the stock
		Marlene and Nancy together receive 50% of the stock

In June of 2018, Alice acquired heronly machine for $30,000 to use in her business. The machine isclassified as 5-year property. Aliceâs maximum depreciation(including bonus) on the machine this year is:

		$30,000
		$12,000
		$6,000
		$18,000

Cactus Corporation, an S Corporation, had accumulated earningsand profits of $200,000 at the beginning of the tax year. Tex andShirley each own 50% of the stock. During the current year Cactushad $100,000 of ordinary income and distributed $10,000 to Tex and$10,000 to Shirley. What is Tex's taxable income for the currentyear?

		$10,000
		$0
		$100,000
		$50,000

Bristol Corporation was formed as an S Corporation on January 1,2014 and elected S corporation status at that date. Bristol has hadthe same 25 shareholders throughout its existence and has one classof stock. Bristol's S election will terminate if it:

		10% of the shareholders vote to revoke the election
		to purchase 10 shares
		Allows a variation in the voting rights of the stock
		Increases the number of shareholders to 125

On February 10, 2018, Ace Corporation, a new calendar yearcorporation, elected S corporation status and all shareholdersconsented to the election. There was no change in its shareholdersduring the current year. Ace met all eligibility requirements foran S corporation during the preelection portion of the year. Whatis the earliest date on which Ace can be recognized as an Scorporation?

		February 10, 2018
		January 1, 2019
		February 10, 2019
		January 1, 2018

In March of 2017 Frederick acquired an passenger automobile for$45,000 and used the automobile 85% for business. Themaximum depreciation deduction for 2017 is:

		$3,160
		$11,160
		$8,928
		$9,486

In August of 2017, Joseph acquires andplaces into services business equipment costing $300,000. Theequipment is classified as 5-year recovery property. No otheracquisitions are made during the year. Joseph elects to expense themaximum amount under Sec. 179. Josephâs total deductions for theyear are

		$60,000
		$500,000
		$100,000
		$300,000

For the current tax year, VBN, an S Corporation distributes$100,000 to its sole shareholder, Raymond. His basis in the stockwas $140,000 before the distribution. VBN had once been a regular CCorporation and had remaining accumulated earnings and profits(E&P) from those years of $70,000. However, VBN has no balancein its accumulated adjustment account. How should the distributionof $100,000 be handled?

$100,000 as a taxable distribution

$70,000 as a taxable dividend, and $30,000 has a non taxablereturn of capital

$50,000 as a taxable dividend, and $100,000 as a non taxablereturn of capital

$70,000 as a taxable dividend; and $30,000 as a capital gain

Stahl, an individual who owns 100% of Talon, an S corporation,had a basis of $50,000 at the first of the year. During the yearTalon reported the following: Ordinary Loss of $10,000; Municipalinterest income of $8,000, Long term capital gain of $4,000; andLong term capital loss of $9,000. What was Stahl's basis in Talonat year end?

		$56,000
		$65,000
		$53,000
		$43,000

Gross Receipts of $70,000; Tax Exempt Interest Income of $4,000;Dividends of $10,000; Supplies Expense of $3,000; and UtilitiesExpense of $1,500. What amount is the S Corporation's ordinarytaxable income?

		$75,500
		$79,500
		$70,000
		$65,500

Bob and Sam each owned 50% of Lostalot, an S Corporation. Bob'sbasis is $30,000 and Sam's basis is $15,000. The corporation hasoperating loss for the current year of $50,000. Howmuch loss can each shareholder deduct in the current year assumingthey materially participate in the business:

		Bob: $25,000; Sam: $15,000
		Bob: $0; Sam: $0
		Bob: $25,000; Sam: $25,000
		Bob: $30,000; Sam: $15,000

Terra Corporation, a calendar-yeartaxpayer, purchases and places into service in 2017 machinery witha 7-year life that cost $650,000. The mid-quarter convention doesnot apply. Terraâs taxable income for the year before the Sec. 179deduction is $700,000. What is Terraâs total maximum depreciationdeduction related to this property?

		$585,718
		$521,345
		$92,885
		$500,000

Identify which of the following statements is false.

		The PTI (previously taxed income) represents the balance ofundistributed net income which were already taxed.
		The AAA balance can be negative, but the shareholder's basis inthe S corporation stock cannot be less than zero.
		Tax exempt income increase the AAA and the basis of the Scorporation stock.
		An S Corporation may or may not have accumulated Earnings andProfits Elaine owns an unincorporated manufacturing business. In 2017,she purchases and places in service $600,000 of qualifying fiveyear equipment for use in her business. Her taxable income from thebusiness before any section 179 deduction is $100,000. Which of thefollowing statements is true?

Elaine cannot deduct any Section 179 deduction for 2017

Elaine can deduct $100,000 as a Section 179 deduction in 2017with a $400,000 carryover to next year.

Elaine can deduct $100,000 as a Section 179 deduction in 2017with a $500,000 carryover to the next year

Elaine can deduct $500,000 as a section 179 deduction in2017

Charles, an individual, owned 100% of the Alpha, an Scorporation. At the first of the year, Charles' basis in Alpha was$25,000. In the current year, Alpha realized ordinary income of$1,000; and a long term capital gain of $3,000. Alpha distributed$25,000 to Charles at the end of the year. What amount of the$25,000 is taxable to Charles?

		$0
		$7,000
		$1,000
		$25,000

ACCT3201 Tax Return Problem #3

Edgar and Molene Moab are married, do not itemize, and Edgar owns a high-tech biking business. Both are under age 65 and have no dependents. They live at 1234 University Drive, Apt. 13, Lawrenceville, GA 30043. Prepare their 2016 tax return.

Forms required: Form 1040

Form 4797

Schedule D

Schedule D worksheet

Form 8824 for like-kind exchange

Form 6252 for installment sales

Form 4797 is used for the sale of business property. Part III, Form 4797, is used for Â§1231 assets disposed of at a gain. Part I, Form 4797, is used for non-depreciable Â§1231 assets [usually land] and Â§1231 assets disposed of at a loss. Part II, Form 4797, is used for business assets not held for one year. There is an example of Form 4797 and Schedule D on Pages 11-21 to 11-23.

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 Â§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.

Moab 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.

Part (2) From the recognized gains/losses determined in part 1, determine the net Â§1231 gain/loss and the net ordinary gain/loss Moab will recognize on its tax return. Moab, Inc. also has $2,000 of nonrecaptured Â§1231 losses from previous years.

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