$220,000. What is their excluded gain? How much must they recognize?(Points : 17)Question 4.4. (TCO G) John Davis, a professional dentist, raises horses under circumstances that would indicate that the activity is a hobby. His adjusted gross income for the year is $100,000, and he has $2,000 of other miscellaneous itemized deductions, all of which are subject to the two-percent floor. During the taxable year, the cost for feeding horses was $3,000. The income from the sale of horses was $2,800.
(a) Under the hobby loss rule, to what extent is the expense of $3,000 deductible?(b) Under the two-percent-of-adjusted-gross-income limitation, how much is the overall deductible amount of his itemized deductions?(Points : 17)Question 5.5. (TCO I) Amos, a single individual with a salary of $50,000, incurred and paid the following expenses during the year:Medical expenses: $5,000Alimony: $14,000Casualty loss (after $100 floor): $1,000State income taxes: $4,000Moving expenses: $1,500Contribution to a traditional IRA: $2,000Student loan interest: $1,200Analyze the above expenses, and determine which ones are deductible for AGI. Please support your position.(Points :17)Question 6.6. (TCO I) Carl had the following transactions for 2012:Salary: $55,000Damage award (compensatory) for city bus accident: $20,000Loss on sale of stock investment: $4,500Loan from father to purchase auto: $10,000Alimony paid to ex-wife: $11,000What is Carl's AGI for 2012?(Points : 17)Question 7.7. (TCO F) Pam owns a sole proprietorship, and Kevin is the sole shareholder of a C (regular) corporation. Each business sustained a $16,000 operating loss and a $2,500 capital loss for the year. Evaluate how these losses will affect the taxable income of the two owners?(Points : 17)Question 8.8. (TCO B) John forms a corporation and transfers property having a basis to him of $18,000 and a fair market value of $26,000 to the corporation for 1,000 shares of $10 par stock. One year later, Hal transfers property having a basis to him of $2,500 and a fair market value of $3,500 for 100 shares of the stock. Hal is not related to John. The corporation issued no other stock.(a) How much gain does John recognize on his exchange? What is the basis to John of his 1,000 shares?(b) What gain or loss is recognized by the corporation when it issues its shares to John? What is the basis to the corporation of the property it received from John?(c) How much gain does Hal recognize on his exchange? What is the basis to Hal of his 100 shares?(Points : 17)Question 9.9. (TCO F) In 2012, OK Company had a net loss of $82,000 from operations. Jane owns OK Company and works 20 hours a week in the business. She has a large amount of income from other sources and is in the 35% marginal tax bracket. Would Jane's tax situation be better if OK Company were a proprietorship or a C corporation? Explain why.(Points : 17)Question 10.10. (TCO H) On May 18, 2012, Sara purchased 30 shares of ABC stock for $210, and on October 29, 2012, she purchased 90 additional shares for $900. On November 28, 2012, she sold 48 shares, which could not be specifically identified, for $576, and on December 8, 2012, she sold another 25 shares for $150. What is her recognized gain or loss?(Points : 17)
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- Winter '11
- Finance, Taxation in the United States