Chapter 5 Spring 12

Chapter 5 Spring 12 - Why is this solution different than...

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Burkett – Tax I – Chapter 5 1 Hobby Deductions – 3 Tier (Ex. 38, p. 24-25) B is a physician with a $100K AGI. She has a farm as a hobby and generates gross income of $18,000 Expenses for current year are: Property taxes $ 6,000 Labor, feed & vet bills 10,000 Depreciation 4,000 20,000 Net Income <$2,000> N e t D e d u c t i o n Gross income $ 18,000 Deductions: Tier 1: Business expense or itemized deduction Tier 2: Business expense if not hobby Tier 3: Depreciation expense Carryover of limited deductions?
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Burkett – Tax I – Chapter 5 2 Vacation Home Deductions (Ex. 40, p. 26) L owns a cabin she uses 20 days for family vacation & rents for 40 days. She receives $5,500 in gross rental income; Expenses for current year: Interest & property tax $6,000 Utilities, insurance & repairs 1,500 D e p r e c i a t i o n 4 , 5 0 0 Amount & type of deduction? Gross rental income $5,500 Deductions: Tier 1: Rental or itemized Tier 2: Rental if not vacation home Tier 3: Depreciation
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Unformatted text preview: Why is this solution different than the one in the book? Burkett Tax I Chapter 5 3 Home Office Deductions (Ex. 42, pp. 25-26) K uses 300 sq feet of her 2,500 sq foot home as her primary business location. Her gross income from her business is $21,000 Expenses for current year: Unrelated to home office $17,800 Interest &amp; property tax 15,000 Utilities, insurance &amp; repairs 8,000 D e p r e c i a t i o n 4 , Amount &amp; type of deduction? Net income before home office deductions: Home office deductions: Tier 1: Business or itemized Tier 2: Office expenses not otherwise allowable Tier 3: Depreciation Burkett Tax I Chapter 5 4 RELATED PARTY SALE P sells land w/ $45,000 basis to PTA Partnership for $35,000. P has a 60% Capital &amp; Profits interest in PTA. Loss recognized by P? PTA later sells the land for: $47,000 $40,000 $30,000 Gain recognized by PTA? Would you answers be different if P owned a 49% interest in PTA?...
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Chapter 5 Spring 12 - Why is this solution different than...

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