Income Tax Fundamentals 2020
38th Edition
ISBN: 9780357391129
Author: WHITTENBURG
Publisher: Cengage
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Question
Chapter 10, Problem 15P
To determine
Introduction:
The amount that V has at risk in the LLC immediately after making the capital contribution.
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Joe and Clara contribute property to form JC Partnership on January 1,
2019. Joe contributes land with a basis and FMV of $60,000. The land is
encumbered by a $35,000 loan. Clara on the other hand contributed
$25,000 cash. During 2019, JC Partnership borrowed $100,000 to
construct a parking lot on the land. At the end of 2019, JC Partnership had
payables of $10,000 owing to various suppliers. During 2020, JC
Partnership paid back all of its loans and payables outstanding and made a
distribution to Joe of $120,000 and to Clara of $90,000. JC Partnership had
a total net income of $150,000 for 2020. There was zero net income in
2019.
Required:
First, calculate each of Joe's and Clara's basis in the partnership as of
December 31, 2019. Second, calculate Joe's and Clara's basis in the
partnership as of December 31, 2020. Include the tax effects to each
partner of the distributions made in 2020. (Show your work)
Ted Coverdale and Jim Kulak set up a new limited liability company on May 16, 2020. Ted contributes a warehouse and land worth a combined $1,098,000. Market value of the warehouse is $264,000. Jim contributes $893,000 in cash. Write the journal entry to record the contributions to the LLC.
Jessica purchased a home on January 1, 2021, for $750,000 by making a down payment of $300,000 and financing the remaining $450,000 with a loan, secured by the residence, at 6 percent. During 2021 and 2022, Jessica made interest-only payments on this loan of $27,000 (each year). On July 1, 2021, when her home was worth $750,000, Jessica borrowed an additional $187,500 secured by the home at an interest rate of 8 percent. During 2021, she made interest-only payments on the second loan in the amount of $7,500. During 2022, she made interest-only payments on the second loan in the amount of $15,000. What is the maximum amount of the $42,000 interest expense Jessica paid during 2022 that she may deduct as an itemized deduction if she used the proceeds of the second loan to finish the basement in her home and landscape her yard? (Assume not married filing separately.)
Chapter 10 Solutions
Income Tax Fundamentals 2020
Ch. 10 - Which of the following may not be treated as a...Ch. 10 - Prob. 2MCQCh. 10 - Prob. 3MCQCh. 10 - Prob. 4MCQCh. 10 - Prob. 5MCQCh. 10 - Prob. 6MCQCh. 10 - Abigail contributes land with an adjusted basis of...Ch. 10 - Prob. 8MCQCh. 10 - Prob. 9MCQCh. 10 - Prob. 10MCQ
Ch. 10 - Prob. 11MCQCh. 10 - Prob. 12MCQCh. 10 - Prob. 13MCQCh. 10 - Prob. 14MCQCh. 10 - Prob. 15MCQCh. 10 - Prob. 16MCQCh. 10 - Kendra is an attorney and owns 60 percent of a law...Ch. 10 - Prob. 18MCQCh. 10 - In 2019, Gloria, a single taxpayer, receives a...Ch. 10 - Prob. 20MCQCh. 10 - Prob. 21MCQCh. 10 - Prob. 22MCQCh. 10 - Prob. 23MCQCh. 10 - Prob. 1PCh. 10 - Prob. 2PCh. 10 - Prob. 3PCh. 10 - Prob. 4PCh. 10 - Prob. 5PCh. 10 - Prob. 6PCh. 10 - Prob. 7PCh. 10 - Prob. 9PCh. 10 - Prob. 10PCh. 10 - Prob. 11PCh. 10 - Prob. 12PCh. 10 - Prob. 13PCh. 10 - Prob. 14PCh. 10 - Prob. 15PCh. 10 - Prob. 16P
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