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

An individual taxpayer who is not a dealer in real estate plans to subdivide a parcel of land into four lots and sell them at a substantial gain. The parcel of land had been held six years. In order to qualify for capital gain treatment, the individual must satisfy all of the requirements except

Interest is not imputed on a gift loan between two individuals totaling $15,000 except when the borrowed funds are used to purchase income- producing property.

In order to fully defer the gain realized on the involuntary conversion of property, the taxpayer must acquire qualifying replacement property costing at least as much as the cost of the original property.

The basis of non- like- kind property received is the basis in the hands of the transferor at the date of the exchange.

Payments from an annuity purchased from an insurance company are not taxable until the taxpayer has recovered the purchase price of the annuity.

Constance, who is single, lives in an area that suffered a major hurricane which was declared a federal disaster. Her car sustained $6,200 in damages. Constance does not expect to recover any of the loss from her insurance company. Constance's 2018 AGI is $31,000. Her casualty loss is $3,000; she has other itemized deductions of $5,200. In 2019, Constance's insurance company reimburses her $2,800. Constance's 2019 AGI is $28,000. As a result, Constance must

On July 25, 2017, Marilyn gives stock with a FMV of $7,500 and a basis of $5,000 to her nephew Darryl. Marilyn had purchased the stock on March 18, 2017. Darryl sold the stock on April 18, 2018 for $7,800. As a result of the sale, what will Darryl report on his 2018 tax return?

Lloyd purchased 100 shares of Gold Corporation common stock for $20 per share for a total basis of $2,000. Seve years later, on May 1 of the current year, Lloyd sells all 100 shares for $500. On May 29 of the current year, Lloyd purchases 30 shares of Gold Corporation common stock for $180. a. How much loss is Lloyd allowed to recognize? b. What is Lloyd's basis in the 30 new shares?

Oscar and Diane separated in June of this year although they continue to live in the same town. They have twin sons, Blake and Cliff, who remain in the family home with Diane. Oscar's income this year was $45,000 while Diane worked only part- time and made $15,000. Oscar also gambles heavily but told Diane that he had no winnings this year. What tax issues should they consider?

The all- events test requires that the accrual- basis taxpayer report income when all events have occurred that fix the taxpayer's right to the income and when the amount can be determined with reasonable accuracy.

Sally divorced her husband three years ago and has not remarried. Since the divorce she has maintained her home in which she and her now sixteen- year- old daughter reside. The daughter is a qualified child. Sally signed the daughter's dependent status over to her ex- spouse by filing the appropriate IRS form. What is Sally's filing status for the current year?

A taxpayer purchased a factory building in 1985 for $800,000. After claiming ACRS- accelerated depreciation of $800,000, she sells the asset for $1,000,000 during the current year. No payment is received during the current year, and the $1,000,000 balance to be paid with interest at the interest rate in four annual payments beginning one year from date of sale. The installment sales method is adopted. How much ordinary income is recognized in the current year?

All of the following qualify as a like- kind exchange except

Interest expense incurred in the taxpayer's trade or business is deductible as a for AGI deduction without limitation if the taxpayer materially participates in the business.

Abby owns a condominium in the Great Smokey Mountains. During the year, Abby uses the condo a total of 21 days. The condo is also rented to tourists for a total of 79 days and generates rental income of $12,500. Abby incurs the following expenses: Using the IRS method of allocating expenses, the amount of depreciation that Abby may take with respect to the property will be

Lloyd Corporation, a calendar- year, accrual- basis taxpayer, pays its insurance premium each year on June 1, the anniversary of the policy. The premium paid this year is $9,600 while last year's was $9,000. How much is Lloyd's deduction for insurance this year?

Corporations may be taxed on less than 100% of dividends received due to the dividends- received deduction, while individuals are taxed on all of their dividend income.

What does the statute of limitations mean? Describe the different statutes of limitations that apply to tax returns.

Chi transfers assets with a $150,000 FMV (basis $80,000) and $100,000 of business- related liabilities to a corporation in exchange for 100% of the corporation's stock with a FMV of $50,000. The corporation assumes the $100,000 mortgage. a. What is the amount of gain recognized by Chi? b. What is the adjusted basis of the stock received by Chi? c. What is the basis of the assets to the corporation?

Which statement is correct?