Exam 4: Additional Income Part 2

For the current year, Robert, a single taxpayer, earned wages of $235,000 from Big Shot Corporation.He also received interest income of $1,000 from Little Credit Union.Robert had a $9,000 loss from his rental property which he actively manages.$2,000 of income was also reported on his Schedule K-1 from ABC Limited Partnership.Neither the rental property nor the partnership investment has passive losses carried over from prior years.Since Robert is not an active participant in a retirement plan, he decides to contribute $5,500 to his IRA. a.Calculate Robert's adjusted gross income using the above information. b.How much is Robert's unallowed loss from his passive investments? c.What happens to the unallowed passive loss? d.Calculate Robert's adjusted gross income assuming his wages were only $35,000.

Lester rents his vacation home for 6 months and lives in the home during the other 6 months of 2018.The gross rental income from the home is $4,500.For the entire year, real estate taxes are $800, interest is $3,000, utilities and maintenance expenses are $2,200, and depreciation expense on the entire home would be $4,000.What is Lester's allowable net loss from renting his vacation home?

Net operating losses in 2018 may be carried forward indefinitely.

What are capital assets?

Nick received a gift of stock from his father.Nick's father had purchased the stock 2 years earlier and his father's basis in the stock was $30,000.On the date of the gift, the stock had a fair market value of $25,000. a.If Nick sells the stock for $33,000, calculate the amount of Nick's gain or loss on the transaction. b.If Nick sells the stock for $22,000, calculate the amount of Nick's gain or loss on the transaction. c.If Nick sells the stock for $27,000, calculate the amount of Nick's gain or loss on the transaction.

If a taxpayer sells his personal residence and purchases a new residence, realized gain may be recognized.

Mike owns a house that he rents out for $1,000 per month.His expenses for the 2018 tax year are as follows: Real estate taxes \ 1,300 Mortgage interest 4,400 Insurance 600 General repairs 640 Mike bought the property in September of 2009, and his basis for depreciation on the house is $137,500.He uses straight-line depreciation with a 27 ½-year life, so the depreciation on the house is $5,000.Mike does not use a property manager and handles all aspects of the rental activity himself. a.Calculate Mike's net income or loss from renting the house if his gross rental income is $12,000 ($1,000 × 12 months). b.Is the income or loss on Mike's rental considered to be active, passive, or portfolio income?

For the current tax year, Morgan had $25,000 of ordinary income.In addition, he had an $1,900 long-term capital loss and a $1,600 short-term capital loss.What will be the amount of Morgan's capital loss carryforward to the next year?

An artist's painting is not a capital asset when held by the artist.

Gary has qualified business income of $40,000 in 2018.His taxable income without net capital gains is $28,000.Gary's QBI deduction for 2018 is?

Taxpayers are required to offset net short-term capital losses with net long-term capital gains.

Norm is a real estate professional with a real estate trade or business as defined in the tax law.He has $150,000 of business income and $50,000 of losses from actively managed real estate rentals.How much of the $50,000 in losses is he allowed to claim on his tax return?

Which of the following is a capital asset?

The adjusted basis of an asset may be determined by the:

Net losses on the rental of vacation homes are limited to 15 percent of total gross income.

In the current year, 70-year-old Jeanette sells her personal residence of the last 40 years for $365,000.Jeanette's basis in her residence is $70,000.The expenses associated with the sale of her home total $20,000.Jeanette decides to move in with her daughter rather than purchase a new residence.Calculate Jeanette's realized gain and recognized gain on the sale of her residence. a.Realized gain b.Recognized gain

Which of the following can be used to offset a passive loss?

During 2018, William sold the following capital assets: Description DatePurchased Date Sold Sales Pr: ABC Stock 05-05-2014 08-03-2018 \ 500 123 Bond Fund 11-07-2017 02-25-2018 \ 2,000 Dune buggy 06-12-2013 09-29-2018 \ 2,400 Land held as an investment 10-09-2005 04-21-2018 \ 4,000 Calculate the following: a.Total short-term capital gain/loss realized for tax purposes b.Total long-term capital gain/loss realized for tax purposes c.Deductible capital gain/loss d.The amount and nature (short-term or long-term) of his capital loss carryforward e.Assuming that William has no capital gain or loss for 2019, how much can he deduct in 2019 and what is the amount and nature of any carryforward to 2020?

In 2018, Kelly has qualified business income from her Schedule C small business of $178,000.She files jointly with her spouse and their taxable income is $214,000.They have no capital gains or qualified dividends in 2018.If Kelly's business is a service business (e.g., accounting), what is Kelly's 2018 QBI deduction?

Bill is the owner of a house with two identical apartments.He resides in one apartment and rents the other apartment to a tenant.The tenant made timely monthly rental payments of $550 per month for the months of January through December 2018.The following expenses were incurred on the entire building: Utilities \ 3,600 Maintenance and repairs 900 Insurance 500 In addition, depreciation allocable to the rented apartment is $1,500.What amount should Bill report as net rental income for 2018?