Chap7%20HW%20Solutions

Chap7%20HW%20Solutions - 104 CCH Federal Taxation-Basic...

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104 CCH Federal Taxation—Basic Principles taxpayer, (2) as a place of business which is used by patients, clients, or customers, and (3) in the case of a separate structure which is not attached to the dwelling unit, in connection with the taxpayer's trade or business. If the taxpayer is an employee, the exclusive use test must be for the convenience of the employer and not merely for the convenience of the employee. The Taxpayer Relief Act of 1997 expanded the definition of ‘‘principal place of business'' for tax years beginning after December 31, 1998. ¶7371 Vacation Home Expenses Special rules limit the amount of rental expenses deductions that may be taken by an individual taxpayer (investor) on a residence that is rented out for part of a year and used for personal purposes during other parts of the year. If a personal residence is rented out less than 15 days during the year, any rental income received is excluded from gross income and no rental expense deductions are allowed. If a residence is rented out during the year for more than 14 days, then the property will either be a personal residence or rental property (which could provide a deductible loss subject to the passive loss rules). ANSWER TO KEYSTONE PROBLEM—CHAPTER 7 (¶7371.) Kim's taxable income for 2005 is a ($40,700) loss, and her net operating loss deduction is $34,000, computed as follows: Income Salary. .............................................................. $15,000 Dividends. ........................................................... 1,500 Business loss. ................................................ $35,000 (72,000) (37,000) Business casualty. ..................................................... (12,000) Passive loss deduction. 0 Adjusted Gross Income. ................................................... ($32,500) Less: Standard deduction. (5,000) Personal exemption . .................................................. (3,200) Taxable Income. .......................................................... ($40,700) Net Operating Loss Deduction Taxable Income. ($40,700) Add: Personal exemption . 3,200 Nonbusiness expenses in excess of nonbusiness income: Standard deduction. ......................................... $5,000 Dividends . (1,500) 3,500 Net Operating Loss Deduction. ............................................. ($34,000) ANSWERS TO QUESTIONS—CHAPTER 7 Topical List of Questions 1. Tax Shelters: Definition (¶7001, ¶7125, and ¶7201) 2. Tax Shelters: Usage (¶7001) 3. At-Risk Rules: At Risk Defined (¶7125) 4. At-Risk Rules: Nonrecourse Loans (¶7125) Chapter 7
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Instructor's Manual 105 5. Passive Losses: General Rule for Deductions (¶7201) 6. Passive Losses: Application of Rules (¶7201) 7. Passive Losses: Classification of Income (¶7205) 8. Passive Losses: Pre-enactment and Post-enactment Interests (¶7211) 9. Passive Losses: Suspended Losses Defined (¶7215) 10. Passive Losses: Suspended Losses—Transfers on Death (¶7225) 11. Passive Losses: Suspended Losses—Transfers by Gift (¶7225) 12. Passive Losses: Taxpayers Subject to Rules (¶7231) 13. Passive Losses: Material Participation Defined (¶7235) 14. Passive Losses: Material Participation Tests (¶7235) 15. Passive Losses: Significant Participation (¶7235) 16. Passive Losses: Undertakings and Separate Source of Income Production (¶7261) 17. Passive Losses: Rental Operations (¶7273) 18. Passive Losses: Real Estate Activities (¶7261) 19. Passive Losses: Nonrental Activities (¶7261) 20. Passive Losses: Nonrental Property Tests (¶7273) 21. Passive Losses: Rental Real Estate Activities—Offset (¶7281) 22. Passive Losses: Rental Real Estate Activities—Active Participation (¶7281) 23. Passive Losses: Change of Activity Status (¶7287) 24. Business Casualty Losses: Deductions (¶7301) 25.
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This homework help was uploaded on 04/09/2008 for the course ACCT Acct 308 taught by Professor Lau during the Summer '06 term at CSU Fullerton.

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Chap7%20HW%20Solutions - 104 CCH Federal Taxation-Basic...

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