Individual Income Taxes
43rd Edition
ISBN: 9780357109731
Author: Hoffman
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Question
Chapter 18, Problem 55P
To determine
Comment to minimize the present value of the tax liability for Person C and Person M.
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1. In 2020, Chris sold a painting to Bernie for
$40,000. Chris received $10,00 in 2020 and
will receive $30,000 in 2021. Chris bought the
painting in 2016 for $15,00O. Bernie did not
pay Chris $30,000 when it was due, and after
numerous attempts to collect (and $1,000 in
expenses), Chris repossessed the paining in
2021. The painting was worth $45,000 when
repossessed. "What is Chris's recognized gain
in 2020?
a. $25,000
b. $10,000
c. $6,250
What are the results of the repossession to
Chris?
a. $45,000 LTCG; basis = $45,000
b. $33,750 LTCG; basis = $45,000
c. $33,750 LTCG; basis = $44,00
d. $32,750 LTCG; basis = $45,000
In 2019 Lulu Lowman sold her personal residence for $300,000 that she owned and lived in since 2009. When selling the property in 2019, Lulu paid the real estate agents a commission of $18,000. In 2009, Lulu had paid $200,000 for the home and currently owes $110,000 on the mortgage. Over the years, Lulu updated the kitchen and bathrooms, amounting to $44,000. When she decided to sell the home, she spent $2,000 to paint the interior, spruce up the landscaping and steam clean the carpets. What is Lulu’s (a) amount realized, (b) adjusted basis, (c) gain or loss realized, and (d) gain or loss recognized. Explain.
Steve Drake sells a rental house on January 1, 2022, and receives $100,000 cash and a note for
$50,000 at 7-percent interest. The purchaser also assumes the mortgage on the property of $30,000.
Steve's original cost for the house was $175,000 on January 1, 2014, and accumulated depreciation
was $30,000 on the date of sale. He collects only the $100,000 down payment in the year of sale. a. If
Steve elects to recognize the total gain on the property in the year of sale, calculate the taxable gain.
b. Assuming Steve uses the installment sale method, complete Form 6252 on Page 8-57 for the year of
the sale. c. Assuming Steve collects $5,000 (not including interest) of the note principal in the year
following the year of sale, calculate the amount of income recognized in that year under the
installment sale method
Chapter 18 Solutions
Individual Income Taxes
Ch. 18 - Prob. 1DQCh. 18 - Prob. 2DQCh. 18 - Prob. 3DQCh. 18 - Prob. 4DQCh. 18 - Prob. 5DQCh. 18 - Prob. 6DQCh. 18 - Prob. 7DQCh. 18 - LO.2 In 2019, the taxpayer became ineligible to...Ch. 18 - LO.2 Osprey Corporation, an accrual basis...Ch. 18 - Prob. 10DQ
Ch. 18 - Prob. 11DQCh. 18 - Prob. 12DQCh. 18 - LO.2 Emerald Motors is an automobile dealer. The...Ch. 18 - Prob. 14DQCh. 18 - Prob. 15DQCh. 18 - Prob. 16DQCh. 18 - Prob. 17DQCh. 18 - LO.4, 7 In December 2019, Carl Corporation sold...Ch. 18 - LO.2, 5 What are the similarities between the crop...Ch. 18 - Prob. 20DQCh. 18 - Prob. 21DQCh. 18 - Prob. 22DQCh. 18 - LO.6 Largo Company is an engineering consulting...Ch. 18 - Prob. 24DQCh. 18 - Prob. 25DQCh. 18 - Prob. 26DQCh. 18 - Prob. 27CECh. 18 - LO.2 Gaffney Corporation is a wholesale...Ch. 18 - Prob. 29CECh. 18 - LO.2 In 2019, Chaya Corporation, an accrual basis,...Ch. 18 - Prob. 31CECh. 18 - Prob. 32CECh. 18 - Prob. 33CECh. 18 - Prob. 34CECh. 18 - Prob. 35CECh. 18 - Prob. 36CECh. 18 - Prob. 37CECh. 18 - Prob. 38CECh. 18 - Prob. 39PCh. 18 - Prob. 40PCh. 18 - Prob. 41PCh. 18 - In 2018, Juan entered into a contract to write a...Ch. 18 - Prob. 43PCh. 18 - Compute Marys income or deductions for 2019 using...Ch. 18 - What accounting method (cash or accrual) would you...Ch. 18 - Blue Company, an architectural firm, has a...Ch. 18 - How do the all events and economic performance...Ch. 18 - Ross Company is a C corporation providing property...Ch. 18 - Prob. 49PCh. 18 - Prob. 50PCh. 18 - Floyd, a cash basis taxpayer, has received an...Ch. 18 - Prob. 52PCh. 18 - Prob. 53PCh. 18 - On June 30, 2019, Kelly sold property for 240,000...Ch. 18 - Prob. 55PCh. 18 - Prob. 56PCh. 18 - Prob. 57PCh. 18 - Prob. 58PCh. 18 - Prob. 59PCh. 18 - Ostrich Company makes gasoline storage tanks....Ch. 18 - Prob. 61PCh. 18 - Grouse Company is a furniture retailer whose...Ch. 18 - Lavender Manufacturing Company began business in...Ch. 18 - Silver Creek Ranch LLC is a small, family-owned...Ch. 18 - In 2019, Gail changed from the lower of cost or...Ch. 18 - At the end of 2020, Magenta Manufacturing Company...Ch. 18 - Prob. 67PCh. 18 - Prob. 68PCh. 18 - Prob. 69PCh. 18 - Prob. 1RPCh. 18 - Prob. 2RPCh. 18 - Prob. 3RPCh. 18 - Paula has sales that qualify to be reported on the...
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Similar questions
- On June 30, 2019, Kelly sold property for 240,000 cash and a 960,000 note due on September 30, 2020. The note will also pay 6% interest, which is slightly higher than the Federal rate. Kellys cost of the property was 400,000. She is concerned that Congress may increase the tax rate that will apply when the note is collected. Kellys after-tax rate of return on investments is 6%. a. What can Kelly do to avoid the expected higher tax rate? b. Assuming that Kellys marginal combined Federal and state tax rate is 25% in 2019, how much would the tax rates need to increase to make the option identified in part (a) advisable?arrow_forwardMinnie owns a qualified annuity that cost 78,000. The annuity is to pay Minnie 650 per month for life after she reaches age 65. Minnie turns 65 on September 28, 2019, and receives her first payment on November 1, 2019. a. How much gross income does Minnie have from the annuity payments she receives in 2019? b. Shortly after receiving her payment on October 1, 2034, Minnie is killed in an automobile accident. How does the executor of Minnies estate account for the annuity on her return for the year 2034? c. Assume that the accident does not occur until November 1, 2043. How does the executor of Minnies estate account for the annuity on her 2043 return?arrow_forwardPatrick and Eva are planning to divorce in 2019. Patrick has offered to pay Eva 12,000 each year until their 11-year-old daughter reaches age 21. Alternatively, Patrick will transfer to Eva common stock that he owns with a fair market value of 100,000. What factors should Eva and Patrick consider in deciding between these two options?arrow_forward
- Brian acquired a rental house in 2004 for a cost of $80,000. Straight-line depreciation on the property of $26,000 has been claimed by Brian. In January 2020, he sells the property for $120,000, receiving $20,000 cash on March 1 and the buyer's note for $100,000 at 10 percent interest. The note is payable at $10,000 per year for 10 years, with the first payment to be received 1 year after the date of sale. Calculate his taxable gain under the installment method for the year of sale of the rental house. In your computations, round any division to two decimal places. Gain reportable in 2020 is $fill in the blank 1.arrow_forwardBrian acquired a rental house in 2003 for a cost of $80,000. Straight-line depreciation on the property of $26,000 has been claimed by Brian. In January 2019, he sells the property for $120,000, receiving $20,000 cash on March 1 and the buyer's note for $100,000 at 10 percent interest. The note is payable at $10,000 per year for 10 years, with the first payment to be received 1 year after the date of sale. Calculate his taxable gain under the installment method for the year of sale of the rental house. In your computations, round any division to two decimal places. Gain reportable in 2019 is $.arrow_forwardSteve Drake sells a rental house on January 1, 2019, and receives $100,000 cash and a note for $50,000 at 7 percent interest. The purchaser also assumes the mortgage on the property of $25,000. Steve's original cost for the house was $170,000 on January 1, 2011 and accumulated depreciation was $27,000 on the date of sale. He collects only the $100,000 down payment in the year of sale. c. Assuming Steve collects $5,000 (not including interest) of the note principal in the year following the year of sale, calculate the amount of income recognized in that year under the installment sale methodarrow_forward
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