CONCEPTS IN FED.TAX.,2020-W/ACCESS
20th Edition
ISBN: 9780357110362
Author: Murphy
Publisher: CENGAGE L
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Chapter 2, Problem 68IIP
To determine
Identify the tax issue posed by the facts presented and ascertain the possible tax consequence of each issue identified.
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In 2019, Juan entered into a contract to write a book. The publisher advanced Juan $50,000, which was to be recovered out of future royalties. If the book was not completed by the end of 2020, however, Juan would be required to repay the publisher for the advance. Juan did not complete the book in 2020, and in accor- dance with the agreement, he repaid the $50,000 to the publisher in 2021. Juan is a cash basis taxpayer. What are the tax consequences to Juan of the repayment under the following assumptions?
a. Juan’s marginal tax rate was 15% in 2019 and 35% in 2021.
b. Juan’s marginal tax rate was 35% in 2019 and 12% in 2021.
In 2020, Juan entered into a contract to write a book. The publisher advanced Juan $50,000, which was to be recovered out of future
royalties. If the book was not completed by the end of 2021, however, Juan would be required to repay the publisher for the advance. Juan
did not complete the book in 2021, and in accordance with the agreement, he repaid the $50,000 to the publisher in 2022. Juan is a cash
basis taxpayer.
a. What are the tax consequences to Juan of the repayment assuming Juan's marginal tax rate is 15% in 2020 and 35% in 2022?
Indicate whether the following statements are "Correct" or "Incorrect".
• Juan could elect to include the $50,000 advance as gross income in either 2020 or 2021.
• In 2021, he would be allowed a deduction for $7,500.
Since he can defer reporting the advance until it is earned, he has no income when the
advance is received. Therefore, he has no offsetting deduction when the advance is repaid.
• The deduction in 2022 would reduce his taxes by $17,500.…
Suzy sells an office building and the associated land on May 10, 2022. Under the terms of the sales contract, Suzy is to receive $450,000 in cash. The purchaser is to assume Suzy's mortgage of $175,000 on the property. To assist the purchaser, Suzy agrees to pay $12,000 of the purchaser's closing costs and the broker's
commission on the sale is $37,500. What is the amount realized by Suzy from this sale?
O $625,000
O $400,500
O $450,000
O $575,500
Chapter 2 Solutions
CONCEPTS IN FED.TAX.,2020-W/ACCESS
Ch. 2 - Prob. 1DQCh. 2 - Prob. 2DQCh. 2 - What is an arms-length transaction? What is its...Ch. 2 - Prob. 4DQCh. 2 - Prob. 5DQCh. 2 - Prob. 6DQCh. 2 - Prob. 7DQCh. 2 - Prob. 8DQCh. 2 - Prob. 9DQCh. 2 - Prob. 10DQ
Ch. 2 - Prob. 11DQCh. 2 - Prob. 12DQCh. 2 - Prob. 13DQCh. 2 - Prob. 14DQCh. 2 - Prob. 15DQCh. 2 - Prob. 16DQCh. 2 - Prob. 17DQCh. 2 - Prob. 18PCh. 2 - Prob. 19PCh. 2 - Sheila, a single taxpayer, is a retired computer...Ch. 2 - Prob. 21PCh. 2 - Prob. 22PCh. 2 - Prob. 23PCh. 2 - Prob. 24PCh. 2 - Prob. 25PCh. 2 - Prob. 26PCh. 2 - Prob. 27PCh. 2 - Prob. 28PCh. 2 - Prob. 29PCh. 2 - Prob. 30PCh. 2 - Prob. 31PCh. 2 - Prob. 32PCh. 2 - Prob. 33PCh. 2 - Prob. 34PCh. 2 - Prob. 35PCh. 2 - Prob. 36PCh. 2 - Prob. 37PCh. 2 - Prob. 38PCh. 2 - Prob. 39PCh. 2 - Prob. 40PCh. 2 - Chelsea, who is single, purchases land for...Ch. 2 - Prob. 42PCh. 2 - Prob. 43PCh. 2 - Prob. 44PCh. 2 - Prob. 45PCh. 2 - Prob. 46PCh. 2 - Prob. 47PCh. 2 - Prob. 48PCh. 2 - Prob. 49PCh. 2 - Prob. 50PCh. 2 - Prob. 51PCh. 2 - Prob. 52PCh. 2 - Prob. 53PCh. 2 - Prob. 54PCh. 2 - Prob. 55PCh. 2 - Prob. 56PCh. 2 - Prob. 57PCh. 2 - Prob. 58PCh. 2 - Prob. 59PCh. 2 - Prob. 60PCh. 2 - Determine the taxpayers adjusted basis in each of...Ch. 2 - Prob. 62PCh. 2 - Prob. 63IIPCh. 2 - Prob. 64IIPCh. 2 - Prob. 65IIPCh. 2 - Jerry and his wife, Joanie, own a successful...Ch. 2 - Prob. 67IIPCh. 2 - Prob. 68IIPCh. 2 - Prob. 69IIPCh. 2 - Prob. 70IIPCh. 2 - Prob. 71IIPCh. 2 - Prob. 79DCCh. 2 - Prob. 80DCCh. 2 - Prob. 81TPC
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