5-44 Solution - Chapter I:5 I:0-44 a b c $2,850 $4,250...

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Chapter I:5 I:0-44 a. $2,850 (15% x $19,000) NCG and ANCG amount is $19,000 b. $4,250 [($7,000 x 35%) + ($12,000 x 15%)] c. $3,760 [($7,000 x 28%) + ($12,000 x 15%)] I:5-1
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I:0-47 Find the selling price (SP) such that the selling price less the tax on the LTCG is $120,000. SP - [.15 x (SP - $50,000)] = $120,000 SP - .15SP + $7,500 = $120,000 .85SP = $112,500 SP = $132,353 p. I:5-17. I:0-48 Situation 1 Situation 2 Situation 3 Situation 4 AGI after considering capital gains and losses NSTCG (NSTCL) NLTCG (NLTCL) $45,000 4,000 1,000 $58,000 ( 3,000) 11,000 $59,000 1,000 ( 2,000) $67,000* (9,000) 5,000 *$1,000 STCL is a carryforward. pp. I:5-16 through I:5-18. I:0-49 2003 2004 2005 2006 AGI STCL to be carried forward LTCL to be carried forward $37,000 1,000 -- $47,000 -- 7,000 $57,000 800 $67,000 3,300 pp. I:5-18 and I:5-19. I:0-50 The loss due to Wolverine stock at one time would have been an ordinary loss since the security probably would not have been a capital asset due to the Corn Products doctrine. However, the Supreme Court's decision in 1988 in the Arkansas Best Corporation case severely limits the use of the ordinary loss exception in the case of stock or other assets that fall within the definition of a capital asset. As a result, the loss on the Wolverine stock is probably a capital loss. The loss due to the Spartan stock is a LTCL. The loss due to the Huron stock is ordinary since the stock is that of an affiliated corporation. p. I:5-22. I:5-2
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I:0-51 a. $3,432 ($20,000 - $16,568) b. $94 Cash Received Amortization of Discount Interest Income Basis of Bond 12-31-06 06-30-07 12-31-07 06-30-08 12-31-08 06-30-09 $900 900 900 900 900 $ 94 100 106 112 119 $ 994 1,000 1,006 1,012 1,019 $16,568 16,662 16,762 16,868 16,980 17,099 For the first semiannual period, Phil must recognize $94 of original issue discount as ordinary income. c. $1,994 ($994 + $1,000) d. $16,762 ($16,568 + $94 + $100). p. I:5-23. I:0-52 (a.) (b.) (c.) Amount Realized Adjusted Basis Realized and Recognized Gain or (Loss) Ordinary Gain Capital Gain or (Loss) $191,000 (184,000 ) $ 7,000 2,000* $ 5,000 $185,750 (184,000 ) $ 1,750 1,750 $ 0 $183,000 (184,000 ) $ 1,000 ($ 1,000 ) *The market discount of $16,000 accrued for the two years that Swen held the bond is $2,000 ($16,000 x 2 years/16 years). pp. I:5-23 and I:5-24. I:0-53 The $3,800 loss on the sale of the automobile is not deductible. Gary has an $11,700 STCG that is offset by $2,000 ($5,000 - $3,000 deduction in 2005) STCL carried forward from 2005. Thus, Gary has a $9,700 NSTCG. Gary's AGI is $59,700 ($50,000 + $9,700). pp. I:5-18 and I:5-19. I:5-3
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I:0-54 a. Amount realized $ 6,200 (20 x $310) Minus: Basis ( 5,000) STCG $ 1,200 b. $5,000 (20 X $250) STCL c. $11,000 LTCG Amount realized $100,000 (2,000 x $50) Minus: Basis ( 89,000 ) [(2,000 x $42) + $5,000] LTCG $ 11,000 pp. I:5-24 and I:5-25. I:0-55 a. $23,550 LTCG Amount realized $38,550 ($37,500 + $1,050) Minus: Basis (15,000 ) (500 x $30) LTCG $23,550 b. $1,050 STCG is recognized in 2007. pp. I:5-24 and I:5-25. I:0-56 Case A Case B Case C Case D Corporate Taxable Income $184,000 $115,000 $80,000* $90,000* *Net corporate capital losses are not deductible. pp. I:5-18 through I:5-21. I:0-57 a. $9,259 ($4,614 + $4,645) b. $4,677 c. $1,736 [$95,949 - ($92,277 + $614 + $645 + $677)]. p. I:5-23. I:0-58 a. $40,000 AGI without considering the gains and losses ( 3,000) Capital loss 14,000 Ordinary gain $51,000 AGI b. $40,000 AGI without considering the gains and losses I:5-4 Individual Taxable Income $184,000 $115,000 $77,000* * $87,000** ** Capital loss limited to $3,000.
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4,000 Net capital gain ($14,000 - $10,000) $44,000 AGI c. The answer in part (a) is the same. The AGI in part (b) is reduced by $2,500 to $41,500 since the net capital gain is $1,500 ($14,000 - $12,500). pp. I:5-16 through I:5-18.
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