Exam 16: Tax Deductions and Travel Expenses for Employees and Self-Employed Individuals

The building used in Manuel's business was condemned by the city of Mobile. Manuel received a condemnation award of $220,000. He paid $800 in lawyer's fees and $600 for an appraisal of the property. Manuel's adjusted basis in the building was $120,000. Manuel reinvests in similar property costing $200,000, and Manuel makes the proper election regarding the property. Manuel's basis in the new building is

The Pass- Through Model applies to a sole proprietorship.

A taxpayer supports an elderly relative who satisfies the Sec. 152 criteria for "qualifying relative." The taxpayer may claim a $500 tax credit.

Dinah owned land with a FMV of $130,000 (adjusted basis $120,000) which is investment property (a capital asset). Dinah owned a second tract of land, a 1231 asset, with a FMV of $46,000 (adjusted basis $50,000). Both tracts were acquired in 2001 and condemned by the state this year. The state paid an amount equal to FMV. If there are no other transactions involving capital assets or 1231 assets, Dinah must report on her current year return

During the current year, Ivan begins construction of an office building and a hotel. He incurs $10,000 in property taxes during the construction of the office building and $15,000 for the hotel. Which of the following statements is true of the property taxes during the construction period?

A corporation is owned 70% by Jones and 30% by Smith. Jones owns 70 shares with a cost of $100 each. Smith owns 30 shares with a cost of $100 per share. The company redeems 20 shares from Jones at a redemption price of $400 per share. No stock is redeemed from Smith. This is not a redemption to pay death taxes, and it is not a partial liquidation. What is the tax impact on Jones?

The holding period for boot property received begins on the day after the date of the exchange.

In April 2018, Emma acquired a machine for $60,000 for use in her business. The machine is classified as 7- year property. Emma does not expense the asset under Sec. 179 or bonus depreciation. Emma's depreciation on the machine for 2018 is

Gains realized from property transactions are included in gross income unless a nonrecognition rule applies.

Indicate with a "yes" or a "no" which of the following are like- kind exchanges. a. Computer used in trade or business for office furniture used in trade or business. b. Apartment building held as an investment for an office building used in trade or business. c. Land used in trade or business for equipment used in trade or business. d. Printer used in trade or business for printer used for personal purposes. e. Exchange of improved real estate held for investment for unimproved real estate held for investment.

H (age 50) and W (age 48) are married but only W is employed. She is not covered by a retirement plan at work. She earns $75,000 during the year and they have combined AGI of $78,000 before any IRA contribution. In 2018, the maximum amount together they may contribute to tax deductible IRAs is

Louisiana Land Corporation reported the following results for the current year: What is the amount of the taxable income for the current year?

In February 2018, the storage building used in Amelia's business is damaged by a windstorm. It had an adjusted basis of $150,000 at that time. Due to changing insurance companies, the building had been appraised recently, with a resulting FMV of $200,000. After the storm, the building appraised at $120,000. Amelia has received no insurance reimbursement by December 31, but expects to recover 90 percent of the loss. In the subsequent year, the insurance company pays Amelia $50,000. Amelia's AGI is $85,000 in 2018, and her 2019 AGI is $80,000. Amelia suffers no other casualty losses in either year. Amelia may deduct

William and Kate married in 2018 and purchased a new home together. Each had owned and lived in separate residences for the past 5 years. William's adjusted basis in his old residence was $200,000; Kate's adjusted basis in her old residence was $120,000. In late 2018, William sells his residence for $500,000 while Kate sells her residence for $190,000. What is the total gain to be excluded from these transactions in 2018?

Which of the following statements is false?

Is it possible for the Tax Court to intentionally issue conflicting decisions?

A taxpayer incurs a net operating loss in the current year. With respect to the application of the NOL,

A single taxpayer earns a salary of $6,000. If he is taxed with a 10% flat rate, he has $5,400 of after- tax dollars available to invest.

Identify which of the following statements is true.

Ordinary losses and separately stated deduction and loss items that exceed a partner's basis carry over indefinitely until the partner has a positive partnership basis.