Concept explainers
State whether the equipment is a capital asset.
Explanation of Solution
Capital Assets: Capital assets are held by assesse, whether associated with business or profession or not associated with business or profession. It comprises all kinds of assets like property, tangible, intangible, movable or immovable.
Initially, Person H should ascertain whether these assets are used in a business. As Person H is a farmer, the assumption appears to be reasonable that Person H is in the farming business. As a result, the
Want to see more full solutions like this?
Chapter 17 Solutions
Individual Income Taxes
- Chuck sold a tractor to a dealer for $16,000. He bought the tractor for $25,500 several years ago and has claimed $12,000 of depreciation deduction on the tractor. What is the amount and character of his gain or loss from the sale of the tractor?arrow_forwardLiv wishes to acquire some undeveloped land as an investment. She is unable to pay the whole purchasing price. Instead, Olivia pays the landowner $51,900 in exchange for a four-year option to purchase the land for $1,038,000. Olivia sells the option for $64,875, fourteen months after obtaining it. What is Olivia's capital gain, and what is the nature of it? She has made a $ long-term taxable profit.arrow_forwardSally is an employee of Blue Corporation. Last year, she purchased a very expensive computer with her own funds. She used the computer 100% for business purposes. During the current year, the computer was completely destroyed in a fire. Blue Corporation did not reimburse her for her loss. Discuss whether Sally’s loss will create or increase Sally’s net operating loss. How does Sally treat the loss (carryback or/and carryforward periods)? If a taxpayer who sustains a casualty loss in an area designated by the President of the United States as a disaster area, he or she may take the loss in the year in which the loss occurred or elect to take the loss in the previous year. Identify factors that should be considered in deciding in which year to take the lossarrow_forward
- Please answer step by step with explanation.arrow_forwardZeke, a wealthy farmer, constructed a barn in March 1986 for $10,000. He claimed $6,500 of accelerated depreciation while straight-line depreciation would have been only $5,600. He sells the barn for $8,900. If he had no other ID: 4548905 ection 1231 transactions, what gain would be recognized from this sale? Include both the amount and the nature of the gain.arrow_forwardCallie Cooper purchased two pieces of property in 1990: Property Q cost $15,000 and Property R cost $30,000. In 2020, when Callie died, she left the property to her daughter, Christy. At that time, Property Q had appreciated in value to $80,000 while Property R had declined in value, now worth only $10,000. What is Christy’s basis in each piece of property? What are the tax consequences of the changes in value of the properties from the time of original purchase to the death of Callie?arrow_forward
- In a community property state, John marries Patricia prior to marriage John owned an SUV during the marriage John bought a Buick. John and Patricia bought a second property with money earned from Patricia's job. Each individual received a motorcycle from Patricia's uncle as a gift. What is community property in this marraige?arrow_forwardJune and Henry Martin, a married couple, purchased property jointly for $200,000 ten years before Henry's death. At the time of Henry's death, the property was worth $360,000. What is June's basis in the property after Henry's death? DO NOT USE DOLLAR SIGNS OR COMMAS IN YOUR ANSWER!arrow_forwardOlivia wishes to purchase some undeveloped land for investment purposes. She is unable to pay the whole purchasing price. Instead, Olivia pays the landowner $51,900 in exchange for the right to purchase the land for $1,038,000 at any time over the following four years. Olivia sells the option for $64,875, 14 months after obtaining it. What is the size and nature of Olivia's gain or loss? She has a $ lengthy capital gain.arrow_forward
- Kristen owns two properties that she doesn’t want anymore. Property A she purchased for $20,000 and is now worth $14,000 and will likely decline in value over time. Property B she purchased for $20,000 and is now worth $50,000. She wants to make a gift to her granddaughter. If she doesn’t gift a property, she is going to sell it. Assume she does not want to give more than the annual exclusion amount? Kristen owns two properties. Property A she purchased for $20,000 and is now worth $14,000 and will likely decline in value over time. Property B she purchased for $20,000 and is now worth $50,000. Kristen is terminally ill and has 6 months to live. Kristen knows that she does not want the properties and that her daughter does not want them either. Her daughter will inherit all of her property. What should Kristen do with the properties?arrow_forwardMs. Suzanne Morphy is a full time architect. She is also sells vegetables on the side from a small farm she runs in her backyard. In 2018, the first year of operation, she had a loss of $43500 and deducted the maximum allowable amount. What is the amount of her farm loss carryover to future years that can be applied against future farm income?arrow_forwardSix years ago, Donna purchased land as an investment. The land cost $150,000 and is now worth $480,000. Donna plans to transfer the land to Development Corporation, which will subdivide it and sell individual tracts. Development's income on the land sales will be ordinary in character. Read the requirements. Requirement a. What are the tax consequences of the asset transfer and land sales if Donna contributes the land to Development in exchange for all its stock? on the transfer of land to Development Corporation. Donna recognizes no gain or loss Development's basis in the land will be $ 150,000. All gain on the subsequent sales will be to Development. This alternative results in the pre-contribution gain post-contribution profit earned from subdividing the land ordinary income that accrued prior to Donna's transfer and the being taxed at a 21% tax rate. Requirement b. In what alternative ways can the transaction be structured to achieve more favorable tax results? Assume Donna's…arrow_forward
- Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT