23. Iris, a calendar year cash basis taxpayer, owns and operates several TV rental outlets in Florida and wants to expandto other states. During the current year, she spends $14,000 to investigate TV rental stores in South Carolina and$9,000 to investigate TV rental stores in Georgia. She acquires the South Carolina operations but not the outlets inGeorgia. As for these expenses, Iris should:a. Capitalize $14,000 and not deduct $9,000.b. Expense $23,000 in the current year.c. Expense $9,000 in the current year and capitalize $14,000.d. Capitalize $9,1,000

Capital expenses are long-term investments made by a firm to acquire, enhance, or maintain physical…

Answered: 23. Iris, a calendar year cash basis…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Dexter owns a large tract of land and subdivides it for sale. Assume thatDexter meets all of the requirements of § 1237 and during the tax year sellsthe first eight lots to eight different buyers for $22,000 each. Dexter’s basis in eachlot sold is $15,000, and he incurs total selling expenses of $900 on each sale. Whatis the amount of Dexter’s capital gain and ordinary income? Formulate your answerby constructing a spreadsheet using a format similar to that found in Example 10.
The Wilmoths plan to purchase a house but want to determine the after-tax cost of financing its purchase. Given their projected taxable income, the Wilmoths are in the 24% Federal income tax bracket and the 8% state income tax bracket (i.e., an aggregate marginal tax bracket of 32%). Assume that the Wilmoths will benefit from itemizing their deductions for both Federal and state purposes. The total cash outlay during the first year of ownership will be $23,400 ($1,200 principal payments, $22,200 qualified residence interest payments). If required, round your interim calculation to nearest dollar. As a result, the initial year after-tax cost of financing the purchase of the home will be $fill in the blank 1
Marilyn owns land that she acquired three years ago as an investment for $250,000. She sells the land two years later for $300,000. How does the "recovery of capital doctrine" apply in computing Marylyn's gain or loss from the sales transaction? What is the correlation between "adjusted basis" and the "recovery of capital doctrine? Give an example how this doctrine prevents income from being taxes more than once.
During the current year, Kristina, a single taxpayer with no dependents, has a salary of $130,000. She has the following income and (losses) from passive activities in 2021: Rental House ($28,850) Restaurant ( 3,900) Golf Course 7,800 Kristina has suspended loss carryforwards into 2021 of ($2,500) on the rental house and ($11,400) on the restaurant. She has a gain of $6,700 from selling the restaurant in 2021. She actively manages the rental house and is the sole owner. 1. What is Kristina's AGI in 2021? 2. What, if any, are Kristina's suspended loss carryforwards by activity? If she does not have any, explain why. 3. Assume Kristina has no deductions For AGI, no qualified business income, and takes the standard deduction; what is her federal income tax liability for 2021?
Pear, an individual, plans to start a small business, which will operate as a corporation. In year 0, she expects the corporation to generate an ordinary loss of $950,000. Subsequently, she expects the corporation to be profitable, and projects ordinary profit of $1.425,000 in year 1, and $2,375.000 in year 2. Pear's personal marginal tax rate on ordinary income is 37%. Assuming a corporate tax rate of 21% and a 10% discount rate, calculate the present value of expected tax costs on the business earnings for the first 3 years of operations if the business does not make an S corporation election Assume the excess business loss limitation does not apply. Round your discount rate calculations to three decimal places. O sas3,623 O $896,325 O $1.128,600 O $502.640
Charlene owns a 70 percent interest in Maupin Mopeds, which is organizedas a partnership. She wants to open another business and needs office spacefor it. She has Maupin distribute a building worth $150,000 to her in lieu of her normal cash distribution. Maupin’s basis in the building is $55,000. Charlene’s basis in Maupin is $80,000. identify the tax issue(s) posed by the facts presented.Determine the possible tax consequences of each issue that you identify.
Kimberly is a self-employed taxpayer. She recently spent $3,300 for airfare to travel to Italy. What amount of the airfare is deductible in each of the following alternative scenarios? (Leave no answers blank. Enter zero if applicable.) a. Her trip was entirely for personal purposes. Deductible amount
3. Caitlyn is considering making a large charitable deduction this year. Her filing status is MFJ and their AGI is $60,000. She is deciding between these options. o Donating cash to her local church of $40,000. o Donating painting to her church. FMV of the painting is 40,000 and her basis in the painting is $100. She purchased it three years ago. The church will sell the painting. o Donating painting to the community art museum. FMV of the painting is $40,000 and her basis in the painting is $100. She purchased it three years ago. The art museum will display the painting. Evaluate all three of the options. What is the charitable contribution amount for each item? Which item would you recommend Caitlyn contribute and why?
Briana owns a second home that he rents to others. During the year, she used the second home for 50 days for personal use and for 100 days for rental use. She collected $20,000 of rental receipts during the year. Based on the number of rental and personal days, she allocated $7,000 of interest expense and property taxes, $10,000 of other expenses, and $4,000 of depreciation expense to the rental use. What is her net rental income this year?
During the current income tax year a taxpayer, Adele Ho, made a capital gain of $100,000 from the sale of land and a capital loss of $10,000 from the sale of shares. She also has prior year carry forward capital losses from the sale of shares that total $30,000. Adele elects to use the capital gains tax (CGT) discount method to determine her net capital gain. What is Adele’s assessable net capital gain for the current income tax year? a. $60,000 b. $30,000 c. $15,000 d. $45,000

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