Reference no: EM132464713

Question 1. Tony Morrison, president of Swinging Door Company. Has/had a difficult year as luck would have it. Tony has no insurance coverage. Tonys adjusted gross income for the year is $250,000

This year Tony's office was burglarized, his new answering machine purchased for $500. Was stolen after 1 week. The next morning Tony missed several calls that he estimated cost him $5,000 in loss of business.

For personal use Tony bought a new auto during the summer for $50,000 and drove to Miami Beach for an America Legion convetion. On the way to the convention Tony ran into a tree, partially wrecking his automobile. After the wretch the car was worth $20,000. Repairs cost $30,000. Tony has no collision coverage on the car.

In December Tony sold his home for $300,000, although he had originally bought it for $500,000. At the settlement for his home on December 31, Tony read the Wall Street Journal while waiting for the purchasers to arrive. He noted that his 100 shares of Magic Barker stock had dropped $1,000 in value since he had purchased the stock.

Is Tony allowed to take a deduction for each of the following incidents, and of so, how much?
a. theft of the answering machine
b. b. loss of business
c. auto collision
d. loss on the sale of his home
e. loss in value of magic barker stock

Question 2. Mr. T is involved in an accident with his van, which he uses in his business. Its adjusted basis was 10,000. Its value before the accident was $9,000. After the accident, it was worth $2,000. Determine the amount of Mr. T's deductible loss
9.Marjorie lends her friend Tommy $10,000 to purchase a new machine for his manufacturing corporation. Marjorie is not in the business of lending money and makes the loan a personal favor. She receives interest at the rate of 12 percent per year, and she has a signed note from him both personally and as president of the closely held business. Tommy's business goes bankrupt when there is still 7,300 due on the balance of the obligation and Tommy has no assets with which to pay the debt.
a. Would Marjorie treat this as a business or nonbusiness bad debt? Why?
b. When can she deduct the amount.
c. If the corporation had borrowed the money from a bank to finance the machinery and Tommy's accountant, Bill, had guaranteed the debt, what would the tax result of Bill's payment on the guarantee be.

Question 3. Explain how a taxpayer treats a bad debt loss arising from the guarantee of a loan in the following circumstances:
a. IT arises directly from the guarantors trade or business
b. B. The transaction was entered into by the lender for a nonbusiness-related investment
c. The loan was made for personal reasons and is not legally enforceable

Question 4. Explain the general tax treatment of the following expenses incurred by Larry Lotus this year:
a. homeowners insurance premiums
b. personal life insurance premiums
c. commuting expenses for traveling to and from the office
d. expenses for groceries and utilities

Question 5. Does the above the line deduction for health insurance costs of a self employed taxpayer apply to long term care insurance?

Question 6. Cecil owns a building in Philadelphia. The city makes an assessment to rework the water and sewage pipes as well as to widen the sidewalks in front of his building. He deducts the amount of the assessment. Is the IRS likely to challenge this deduction? Explain

Question 7. What is the general limitation on the deduction for investment interest?
b. How does a taxpayer compute net investment income

Question 8. Explain the requirements for deduction points upon origination of a mortgage loan

Question 9. What is the general rule for deductibility of interest and expenses relating to tax exempt income?

Question 10. What are the basic requirements for the deductibility of charitable contributions

Question 11. Robert Rhine day had an adjusted gross income this year of $100,000. He made 10,000 square feet of office space available to the Heart fund free of charge for the entire year. He could have rented this space for $79,000. How much may he deduct on this year's income tax? Explain Ignore any unreimbursed out of pocket expenses

Question 12. As the end of this year approaches, Gladstone will consider the following donations. State whether each item would be deductible and if so the amount of each deduction. Assume that Gladstone's adjusted gross income for this year is $200.000. For purposes of this question, ignore the overall limitation on itemized deductions under IRC Sec 68, discussed in chapter
a.$3,000 in cash to Hughie and Louie, two needy neighbors
b. $2000 to the Valley Stream Chamber of Commerce
c. Use of San Lamente, Gladstones mansion, for an American Red Cross regional conference. Gladstone volunteers about 60 hours a year in his position as head of the Red Cross Speakers Bureau.
d.$5,000 in cash to the salvation Army
e. stock he purchased several years ago for $15,000 now worth $20,000 to the United Way
f. various famous papers and letters written by Gladstone many years are valued today at $25,000, to Donald University, Gladstone expended $100 for the production of these papers and letters.
g.$5000 to oxford University England
h.$200,000 to a trust that will provide income to gladstones mother life. At her death, the assets in the trust are to be paid to Slipperly Rock University. The bank, as trustee, has power to invade the trust principal to provide for Gladstonws mothers health or welfare.
i. a $10,000 paid up life insurance policy on Gladstones life to the Springs Charity inc, whose literature states that all contributions to the organization are tax deductible. Would your answer be the same if Gladstone merely names Clear Springs as revocable beneficiary, Explain.
j. a life insurance policy with a cash surrender value of $8,500 to Daley Hospital. The new premiums with a cash surrender value of $8,500 to Daly Hospital. The net premiums paid for the policy have amount to $6800

Question 13. There are limitations on deductions for gifts of capital on deductions for gifts of capital gain property by individual donors to qualified public charities. Explain these limitations where the gift property is either in the form of intangible personal property or real property.

Question 14. Explain the special election that individual donors may make to increase the current deductible limit for contributions of capital gain property that is either tangible personal property or real property.

Question 15. What is the maximum deduction allowed an individual taxpayer for charitable gifts of tangible personal property that are
a. use related
b. use unrelated

Question 16. Describe the requirements that each of the following kinds of trusts mist meet in order for a remainder interest in donated property to be deductible
a. annuity trusts
b. unit rusts
c. pooled income fund

Question 17. a. How is a gift of a life insurance policy valued when the value of the policy net premium payments
b. How is a gift of life insurance policy valued when the net premium payments exceed the value of the life insurance policy?
c. What is the maximum charitable deduction allowed for a paid up or a single premium policy
d. what is the maximum charitable deduction allowed for a newly issued policy
18. Tony Morrison, president of Swinging Door Company. Has/had a difficult year as luck would have it. Tony has no insurance coverage. Tonys adjusted gross income for the year is $250,000
This year Tony's office was burglarized, his new answering machine purchased for $500. Was stolen after 1 week. The next morning Tony missed several calls that he estimated cost him $5,000 in loss of business.
For personal use Tony bought a new auto during the summer for $50,000 and drove to Miami Beach for an America Legion convetion. On the way to the convention Tony ran into a tree, partially wrecking his automobile. After the wrech the car was worth $20,000. Repairs cost $30,000. Tony has no collison coverage on the car.
In Decemvber Tony sold his home for $300,000, although he had originally bought it for $500,000. At the settlemet for his home on December 31, Tony read the Wall Street Journal while waiting for the purchasers to arrive. He noted that his 100 shares of Magic Barker stock had dropped $1,000 in value since he had purchased the stock.
Is Tony allowed to take a deduction for each of the following incidents, and of so, how much?
f. theft of the answering machine
g. b. loss of business
h. auto collison
i. loss on the sale of his home
j. loss in value of magic barker stock

Question 18. Mr. T is involved in an accident with his van, which he uses in his business. Its adjusted basis was 10,000. Its value before the accident was $9,000. After the accident, it was worth $2,000. Determine the amount of Mr. T's deductible loss

Question 19. Marjorie lends her friend Tommy $10,000 to purchase a new machine for his manufacturing corporation. Marjorie is not in the business of lending money and makes the loan a personal favor. She receives interest at the rate of 12 percent per year, and she has a signed note from him both personally and as president of the closely held business. Tommys business goes bankrupt when there is still 7,300 due on the balance of the obligation and Tommy has no assets with which to pay the debt.
a.Would Marjorie treat this as a business or nonbusiness bad debt? Why?
b. When can she deduct the amount.
c.If the corporation had borrowed the money from a bank to finance the machinery and Tommys accountant, Bill, had guaranteed the debt, what would the tax result of Bill's payment on the guarantee be.

Question 20. Explain how a taxpayer treats a bad debt loss arising from the guarantee of a loan in the following circumstances:
A. IT arises directly from the guarantors trade or business
B. The transaction was entered into by the lender for a nonbusiness-related investment
C. The loan was made for personal reasons and is not legally enforceable

Note: Answer ONLY odd number questions.

Attachment:- Taxation file.rar