Discuss matts optimal tax-planning strategy

Assignment Help Taxation

Reference no: EM132490049

Part 1:

Question 1. Which concept (chapter 2 concepts) is behind the rationale for nonrecognition of property transactions?

Question 2. Like-kind property is real property held for investment or use in a trade or business exchanged for real property held for investment or use in a trade or business. Taxpayers must defer gain or loss realized on the exchange of like-kind property.
a. True
b. False

Question 3. The following exchanges never qualify for like-kind exchange treatment:
• Exchanges involving personal use property
• Exchanges of stocks, bonds, and inventories
• Exchanges of intangible property

a. True
b. False

Question 4. In each of the following cases, determine the amount of realized gain or loss and the recognized gain or loss:

a. Silvia sells her house for $100,000, and she pays $8,000 in commissions on the sale. She paid $110,000 for the house 2 years earlier.

b. In July 2019, Carmen, who is single, is transferred to Dallas. She had purchased a new home in June 2011 for $130,000. Carmen sells the house for $165,000 and pays a commission of $10,000 on the sale. She meets the ownership and use tests.

c. Conrad is single and sells his principal residence for $350,000. He pays selling expenses of $20,000. Conrad purchased the house for $65,000 in 1986.

Part 2:

Question 1. The tax rate upon disposition of an asset could differ based on the type of gain or loss the asset held. These types include:
a. Transactional gains and losses, Capital gains and losses, Section 1231 gains and losses, and Personal use gains and losses
b. Ordinary gains and losses, Capital gains and losses, Section 1231 gains and losses, and Personal use gains and losses
c. Ordinary gains and losses, Transactional gains and losses, Section 1231 gains and losses, and Personal use gains and losses
d. None of the above

Question 2. Dallas Wildcat Drilling Co. sells an oil-drilling rig for $3,000,000. The drilling rig was purchased in 2013 for $2,000,000. Depreciation deductions of $1,200,000 have been taken up to the time of sale. What amount and character of gain will Dallas report from the sale of this asset?

Question 3. Matt has a substantial portfolio of securities. As of December 2, of the current year, Matt has a net capital gain position of $22,000. Discuss Matt's optimal tax-planning strategy for capital gains and losses.

Question 4. To calculate the gain, you must know the gross sales price (from which you will subtract the adjusted basis. The gross sales price is the price agreed upon by the seller and the buyer adjusted by:
a. Cash and F M V of property or services received
b. Seller's debt is assumed by or paid by the buyer
c. Decreased by amounts given to the buyer by the seller
d. All of the above

Question 5. The holding period for capital assets is how long the taxpayer owned the asset
• Long-term means the asset was held for more than 12 months
• Short-term means the asset was held for less than12 months
a. True
b. False

Part 3:

Question 1. Jason purchases a patent at a cost of $24,000. The patent has 8 years of legal life remaining from the date of purchase.
a. The patent is an intangible so it is amortized for cost recovery
b. Jason can only recover his cost when he sells the patent
c. Both statements are correct.

d. Neither statement is correct.

Question 2. Which of the following would not be considered listed property for depreciation purposes?
a. A camera owned and used by a taxpayer in his real estate business
b. Boat owned and used by a taxpayer in her fishing business
c. Taxpayer's automobile that he uses 30 percent for business purposes
d. All of the given are listed property.

Question 3. The depreciation rules under Section 179 are taxpayer favorable and are generally for small businesses.
a. True
b. False

Question 4. Under Bonus Depreciation, which was part of the tax reform act under Trump's administration, Taxpayers are allowed to claim 100 percent of property acquired and placed into service after September 27, 2017 and before January 1, 2023.
a. True
b. False

Question 5. Taxpayers generally want to take as much depreciation expense as possible in the earliest possible years due to the time value of money.
a. True
b. False

Reference no: EM132490049

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