Reference no: EM131997159

Questions -

Q1. Kathleen pays $3,000 mortgage interest on the home that she and her husband lives in. Kathleen and her husband live with Molly, Kathleen's mother. The title to the home is in Kathleen's name. However, the mortgage is Molly's obligation. Kathleen claims Molly as her dependent on her current tax return. What tax issues should Kathleen consider?

Q2. Katie and Alan are avid boaters and water skiers. They also enjoy parasailing. This year, they started a new parasailing venture to give rides to patrons. Katie and Alan are both employed full-time in other pursuits, but they take patrons out during the summer months, on weekends and holidays. Alan has attended classes on boat operation and the heavy usage this summer, they replaced their old boat in July. They plan on replacing their boat with a new one every two years now. They use their boat in the parasailing activity and for recreational purposes. This year, Katie and Alan earned $5,400 from chartering activities and incurred $11,600 of expenses associated with their boating and parasailing. What tax issues should Katie and Alan consider?