Assessment 6 Problems: Applying the IRS Code
Assessment 6 Problems: Applying the IRS Code.
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In a Word document, provide complete answers with explanations to the problems below.
Problem 1
In 2014, Matthew contributes equipment with an adjusted basis of $40,000 and a FMV of $36,000 to Construction Limited Partnership (CLP) in return for a 3% limited partnership interest. Matthew’s share of CLP income and losses for the year were as follows:
Interest $ 1,000
Dividends 600
Capital gains 1,800
Ordinary loss (8,650)
CLP had no liabilities. What are Matthew’s initial basis, allowed losses, and ending at-risk amount?
Assessment 6 Problems: Applying the IRS Code.
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Problem 2
During the current year, Ben worked 1,500 hours as a tax consultant and 500 hours as a real estate agent. His one other employee (his wife) worked 350 hours in the real estate business. Ben earned $60,000 as a tax consultant, and together the couple lost $18,000 in the real estate business. How should Ben treat the loss on his federal income tax return?
Problem 3
Assessment 6 Problems: Applying the IRS Code.
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Chrystal died owning an interest in a passive activity property. The property had an adjusted basis of $270,000, a fair market value of $284,000, and suspended losses of $25,000. What can be deducted on her final income tax return?
Problem 4
Howard has a $76,000 loss from an investment in a partnership in which he does not participate. His basis in the interest is $70,000.
a. How much of the loss is disallowed by the at-risk rules?
b. How much of the loss is disallowed by the passive loss rules?
Problem 5
Roberta gave her daughter a passive activity last year that had an adjusted basis of $37,500. The activity had suspended losses of $17,500 and a fair market value of $60,000. In the current year, her daughter realized income of $9,000 from the passive activity. What is the tax effect on Roberta and her daughter last year and in the current year?
Problems are continued on the next page.
Assessment 6 Problems: Applying the IRS Code.
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Problem 6
Create a table for the answer to this problem. Include these categories: AMT; Regular Tax: Adjustment.
Charles had the following itemized deductions in 2014:
State income taxes $3,000
Charitable contributions 4,900
Mortgage interest (personal residence) 14,000
Medical expenses [$8,000-(7.5% ×$75,000)] 2,375
Miscellaneous [$3,200-(2%×$75,000)] 1,700
a. What are Charles’ itemized deductions for AMT purposes?
b. What is the amount of the AMT adjustment?