Required Information[The following Information applies to the questions displayed below.]Rania contributed equipment worth $120,000, purchased 9 months ago for $136,500 cash and usedIn her sole proprietorship, to Sand Creek LLC in exchange for a 35 percent profits and capital InterestIn the LLC. Rania agreed to guarantee all $10,200 of Sand Creek's accounts payable, but she did notguarantee any portion of the $60,000 nonrecourse mortgage securing Sand Creek's office building.Other than the accounts payable and mortgage, Sand Creek does not have any liabilities to othercreditors.a. What is Rania's Initial tax basis in her LLC Interest?Tax basis

Step 1:a)Computation of initial Tax basis as follows : ParticularsAmount($)Explanation…

Answered: Required Information [The following…

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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Z owns a rental building (its only asset) with a gross fair market value of $5,000 subject to the non-recourse mortgage of $2,000. Z’s adjusted basis for this building is $1,500. All of Z’s stock is owned by C, whose basis for his stock in Z is $500. Z had 1,000 of E&P. Z is on the accrual method of accounting and reports on the calendar year. Assume that the corporate tax payable by Z on $3,500 gained is $735 and on $3,000 gained is $630. Z sells the building, subject to the mortgage, to D in the current year for $3,000 in cash. Z then liquidates, distributing all of the cash (remaining after paying its taxes) to C in cancellation of C’s stock in the current year. a. Z’s gain on the sale of the building is $1,500. b. Z’s E&P goes over to purchaser, D, if D is a corporation. c. Section 331 treats C as selling its stock to Z. d. None of the above
The Lyns live in their own home at 40 Cavin Ave, on which they have a mortgage balance of $2,000,000. This property has been appraised at $8,500,000 and is now up for sale at its current market value. A purchaser has been identified but the proceeds from the sale is not due to be paid to the Lyns until November30, 2020. In the meantime the Lyns have contracted to purchase a new home at Wex Haven for $17,000, 000, although this property is valued at only $16,000,000. The sale agreement on this property requires a deposit of 20% on signing which will take place on June 1, 2020, with the balance which will not be covered by a mortgage, payable in 30 days after signing. Based on their high salaries, North Caribbean Building Society have pre-approved the Lyns for a 25-year mortgage of 75% of purchase price or value, whichever is less, up to a maximum of $20,000,000. This will attract an interest rate of 5.50% per annum with monthly compounding and will be disbursed on September 30,…
Peter transfers a rental apartment building with an adjusted basis of $2,500,000, after straight line depreciation, to Franny for an $8,000,000, 25 year note with adequate stated interest. Question: On what amount is interest owed under 453A(c) for the year of sale if none of the principle of the installment obligation has been paid?
Lorissa owes Waterbury State Bank $200,000. During the current year, she isunable to make the required payments on the loan and negotiates the followingterms to extinguish the debt. Lorissa transfers to Waterbury ownership ofinvestment property with a value of $90,000 and a basis of $55,000, and commonstock with a value of $50,000 and a basis of $70,000. Lorissa also pays Waterbury$5,000 cash, and Waterbury forgives the remaining amount of debt. Before theagreement, Lorissa's assets are $290,000, and her liabilities are $440,000.Determine how much gross income Lorissa has from the extinguishment of the debt.
LO.5Miller owns a personal residence with a fair market value of $195,000 and an outstanding first mortgage of $157,500, which was used entirely to acquire the residence. This year, Miller gets a home equity loan of $10,000 to purchase a new fishing boat. How much of this mortgage debt is treated as qualified residence indebtedness?
Bob, not a dealer, sold an apartment building for $600,000. His adjusted basis in the building was $350,000 and it was subject to $40,000 of depreciation recapture. Bob received $150,000 in the year of sale, the buyer assumed Bob’s mortgage payable of $240,000, and the buyer gave Bob an 8% (the current Federal rate) note of $210,000 due in five years. The interest on the note was payable each June 30, beginning in the year following the year of the sale. Bob incurred $30,000 of selling expenses which he paid in the year of sale. Compute Bob’s installment sales gain that should be reported in the year of sale.
LO.5Miller owns a personal residence with a fair market value of $195,000 and an outstanding first mortgage of $157,500, which was used entirely to acquire the residence. This year, Miller gets a home equity loan of $10,000 to purchase a new fishing boat. How much of this mortgage debt is treated as qualified residence indebtedness?
Margaret Lindley paid $15,160 of interest on her $301,600 acquisition debt for her home (fair market value of $501,600), $4,160 of interest on her $30,160 home- equity debt used to buy a new boat and car, $1,160 of credit card interest, and $3,160 of margin interest for the purchase of stock. Assume that Margaret Lindley has $10,160 of interest income this year and no investment expenses. How much of the interest expense may she deduct this year? Multiple Choice O₁ O $23,640 $22,480 $19,320 $18,320 None of the choices are correct.
74 01:14:02 eBook For tax purposes, a dwelling unit is a residence if the taxpayer's number of personal-use days of the unit is more than 10 days. True or False True False
Connie recently provided legal services to the Winterhaven LLC and received a 20 percent interest in the LLC as compensation. Winterhaven currently has $50,000 of accounts payable and no other debt. The current fair market value of Winterhaven’s capital is $200,000. If Connie receives a 20 percent profits interest only, how much income must she report?
28. John Jay paid interest expense of $12,000 on his personal residence original first mortgage this year and $5,000 on a $100,000 home equity credit line also secured by a mortgage on his home Half of the home equity credit line loan proceeds were used to put a new roof on the home and the other half was used to purchase a new car. Assuming the acquisition and home equity limits are not exceeded, how much of the total interest expense is deductible on John's Schedule A as qualified home mortgage interest? O$17,000 O$14,500. O$12,000 29 The Browns borrowed $30,000, secured by their home, to pay their son's college tuition. At the time of the loan, the fair market value of their home was $400,000, and it was unencumbered by other debt. The interest on the loan is treated for itemized deductions as ODeductible points. ONon-deductible home equity (mortgage) interest. ODeductible home equity (mortgage) interest.
Leticia purchased a home on July 1, 2017, for $240,000. She paid $216,000 down and financed the remaining $24,000. On January 1, 2019, when the outstanding balance of her mortgage was $18,000 and her home was valued at $360,000, Leticia refinanced her home for $240,000. With the $240,000 loan, she paid off the remaining $18,000 balance of her original mortgage, she used $39,000 to substantially improve her home, and she used the remaining $183,000 for purposes unrelated to her home. During 2021, Leticia made interest-only payments of $20,000 on the loan. What amount of the $20,000 interest expense is Leticia allowed to deduct in year 2021? (Enter only numbers with no dollar signs or other punctuation.)

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