Individual Income Taxes
43rd Edition
ISBN: 9780357109731
Author: Hoffman
Publisher: CENGAGE LEARNING - CONSIGNMENT
expand_more
expand_more
format_list_bulleted
Question
Chapter 6, Problem 20DQ
To determine
Give an advice for Person K and Person A regarding the manner in which they should respond and find out if there is any relevant tax issues.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Karen and Andy own a beach house. They have an agreement with a rental agent to rent it up to 200 days per year. For the past three
years, the agent has been successful in renting it for 200 days. Karen and Andy use the beach house for one week during the summer and
one week during Thanksgiving. Their daughter, Sarah, a college student, has asked if she and some friends can use the beach house for
the week of spring break. Advise Karen and Andy on how they should respond, and identify any relevant tax issues.
If the residence is rented for
100 X days or more in a year and is not used for personal purposes for more than the
greater
14 days or
10 % of the total days rented, the residence is treated as rental
property. The expenses must be allocated between personal and rental days if there are any personal use days during the year.
In prior years, the beach house has been classified as rental
property, since the personal use did not exceed
limits outlined above. Thus, if the total…
Mark Rosenberg and Trina Adams are to be married in two months. Both are employed full time and currently have their own apartments. Once married, they will move into Trina's apartment because it is larger. They plan to use Mark's rent money to begin saving for a down payment on a home to be purchased in four or five years. Mark has a checking account at a branch of a large regional commercial bank near his workplace where he deposits his paychecks. He also has three savings accounts-one at his bank and two small accounts at a savings and loan association near where he went to college. Mark pays about $30 per month in fees on his various accounts. In addition, he has a $10,000 certificate of deposit (CD) from an inheritance; this CD will mature in five months. Trina has her paycheck directly deposited into her share draft account at the credit union where she works. She has a savings account at the credit union as well as a money market account at a stock brokerage firm that was set up…
Carey and Pat were good friends and neighbors in an upscale neighborhood near several highly rated golf courses in Arizona. During the winter, both Carey and Pat decided to rent their homes (at a premium) to groups of golfers from the New York area who wanted to get out of the snow and enjoy sunshine and golf for a couple of weeks during the winter. While their homes were rented, Carey and Pat vacationed together in Cancun. In January 2020, Carey rented his home for 14 days and received $14,000 in rent. Pat also rented his home for the same 14 days and received $16,000 in rent. Near the end of the 14-day rental period, Pat got a call from the renters, who wanted to extend their stay for one day. Pat agreed to the extension and charged the group $2,000 for the extra day. When preparing his 2020 tax return, Pat discovered that taxpayers who rent their home for more than 14 days are required to report all of their rental income on their tax returns. Pat didn’t think it was fair that he…
Chapter 6 Solutions
Individual Income Taxes
Ch. 6 - Prob. 1DQCh. 6 - Prob. 2DQCh. 6 - Classify each of the following expenditures paid...Ch. 6 - Prob. 4DQCh. 6 - Prob. 5DQCh. 6 - Prob. 6DQCh. 6 - Prob. 7DQCh. 6 - Prob. 8DQCh. 6 - Prob. 9DQCh. 6 - Prob. 10DQ
Ch. 6 - Prob. 11DQCh. 6 - Prob. 12DQCh. 6 - Prob. 13DQCh. 6 - Prob. 14DQCh. 6 - Linda operates an illegal gambling operation....Ch. 6 - Prob. 16DQCh. 6 - Melissa, the owner of a sole proprietorship, does...Ch. 6 - Prob. 18DQCh. 6 - Blaze operates a restaurant in Cleveland. He...Ch. 6 - Prob. 20DQCh. 6 - Prob. 21DQCh. 6 - Ray loses his job as a result of a corporate...Ch. 6 - Lavinia incurs various legal fees in obtaining a...Ch. 6 - Prob. 24DQCh. 6 - Prob. 25DQCh. 6 - Shanna, a calendar year and cash basis taxpayer,...Ch. 6 - Prob. 27CECh. 6 - Maud, a calendar year taxpayer, is the owner of a...Ch. 6 - Vella owns and operates an illegal gambling...Ch. 6 - Printer Company pays a 25,000 annual membership...Ch. 6 - Stanford owns and operates two dry cleaning...Ch. 6 - Tobias has a brokerage account and buys on the...Ch. 6 - Prob. 33PCh. 6 - Prob. 34PCh. 6 - Janice, age 32, earns 50,000 working in 2019. She...Ch. 6 - Prob. 36PCh. 6 - Prob. 37PCh. 6 - Duck, an accrual basis corporation, sponsored a...Ch. 6 - Prob. 39PCh. 6 - Prob. 40PCh. 6 - Prob. 41PCh. 6 - Prob. 42PCh. 6 - Terry traveled to a neighboring state to...Ch. 6 - Prob. 44PCh. 6 - Prob. 45PCh. 6 - Prob. 46PCh. 6 - Prob. 47PCh. 6 - Prob. 48PCh. 6 - Prob. 49PCh. 6 - Prob. 50PCh. 6 - Prob. 51PCh. 6 - Brittany Callihan sold stock (basis of 184,000) to...Ch. 6 - Prob. 53PCh. 6 - Prob. 54PCh. 6 - Prob. 55PCh. 6 - Prob. 56PCh. 6 - Prob. 57CPCh. 6 - Prob. 58CPCh. 6 - Prob. 1RPCh. 6 - Prob. 2RPCh. 6 - Prob. 3RPCh. 6 - Which of the following is a deduction for AGI? a....Ch. 6 - Which of the following is not a deduction for AGI?...Ch. 6 - David is a CPA and enjoys playing the lottery....Ch. 6 - Prob. 4CPACh. 6 - Prob. 5CPACh. 6 - Prob. 6CPA
Knowledge Booster
Similar questions
- Dave and Ellen are newly married and living in their first house. The yearly premium on their homeowner's insurance policy is $450 for the coverage they need. Their insurance company offers an annual discount of 5 percent if they install dead-bolt locks on all exterior doors. The couple can also receive an annual discount of 2 percent if they install smoke detectors on each floor. They have contacted a locksmith, who will provide and install dead-bolt locks on the two exterior doors for $60 each. At the local hardware store, smoke detectors cost $8 each, and the new house has two floors. Dave and Ellen can install the smoke detectors themselves. a. What discount will Dave and Ellen receive if they install the dead-bolt locks? (Round your answer to 2 decimal places.) Annual discount for dead-bolt locks b. What discount will Dave and Ellen receive if they install smoke detectors? Annual discount for smoke detectorsarrow_forwardDave and Ellen are newly married and living in their first house. The yearly premium on their homeowner's insurance policy is $450 for the coverage they need. Their insurance company offers a discount of 5 percent if they install dead-bolt locks on all exterior doors. The couple can also receive a discount of 2 percent if they install smoke detectors on each floor. They have contacted a locksmith, who will provide and install dead-bolt locks on the two exterior doors for $50 each. At the local hardware store, smoke detectors cost $7 each, and the new house has two floors. Dave and Ellen can install the smoke detectors themselves. a. Assuming their insurance rates remain the same, how many years will it take Dave and Ellen to earn back in discounts the cost of the dead-bolts? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Recovery period b. How many years will it take Dave and Ellen to earn back in discounts the cost of the smoke detectors? (Do not…arrow_forwardMichiko and Saul are planning to attend the same university next year. The university estimates tuition, books, fees, and living costs to be 12,000 per year. Michikos father has agreed to give her the 12,000 she needs to attend the university. Saul has obtained a job at the university that will pay him 14,000 per year. After discussing their respective arrangements, Michiko figures that Saul will be better off than she will. What, if anything, is wrong with Michikos thinking?arrow_forward
- Hassad owns a rental house on Lake Tahoe. He uses a real estate firm to screen prospective renters, but he makes the final decision on all rentals. He also is responsible for setting the weekly rental price of the house. During the current year, the house rents for 1,500 per week. Hassad pays a commission of 150 and a cleaning fee of 75 for each week the property is rented. During the current year, he incurs the following additional expenses related to the property: a. What is the proper tax treatment if Hassad rents the house for only 1 week (7 days) and uses it 50 days for personal purposes? b. What is the proper tax treatment if Hassad rents the house for 8 weeks (56 days) and uses it 44 days for personal purposes? c. What is the proper tax treatment if Hassad rents the house for 25 weeks (175 days) and uses it 15 days for personal purposes?arrow_forwardMr. Sweeney has a 12-year-old nephew, Todd, who is trying to save up for a $300 bike. Mr. Sweeney wishes to help Todd, but he also wants to teach him a lesson in hard work and the value of money. Mr. Sweeney and Todd strike the following bargain: each week, Todd will mow the lawn for Mr. Sweeney, and in return, Mr. Sweeney will deposit $25 in Todd's savings account, which pays an annual percentage interest rate of 5.2%. How many months will it take Todd to save up enough money to buy the bike? Assume there are 4 weeks in a month. a. 2.50 months O b. 2.15 months C. 3.02 months d. 3.53 months e. 4.08 monthsarrow_forwardNancy owns two houses overlooking the Grand Sports Stadium. In 2001, Nancy leased one of the houses for a term of 15 years to Babu, a soccer fan who wanted to be able to watch soccer matches from the verandah overlooking the stadium. Nancy began to live in the second house. In January, 2013, Nancy made an agreement with Cama to let her own house for a week in February while she was away overseas, so that Cama could view the Melanesian Cup, which was to be held in the stadium that month. Cama paid Nancy $200 in advance. Just before the match was to be held, the stadium was destroyed by fire and the match was cancelled Discuss Cama’s rights and obligations under the contract using relevant casesarrow_forward
- Nancy owns two houses overlooking the Grand Sports Stadium. In 2001, Nancy leased one of the houses for a term of 15 years to Babu, a soccer fan who wanted to be able to watch soccer matches from the veranda overlooking the stadium. Nancy began to live in the second house. In January, 2013, Nancy made an agreement with Cama to let her own house for a week in February while she was away overseas, so that Cama could view the Melanesian Cup, which was to be held in the stadium that month. Cama paid Nancy $200 in advance. Just before the match was to be held, the stadium was destroyed by fire and the match was cancelled. Discuss Cama’s rights and obligations.arrow_forwardKatie and Alan are avid boaters and water skiers. They also enjoy parasailing. This year, they started a new parasailing venture to give rides to patrons. Katie and Alan are both employed full-time in other pursuits, but they take patrons out during the summer months, on weekends and holidays. Alan has attended classes on boat operation and parasailing instruction. Katie and Alan have owned a boat for four years, but because of the heavy usage this summer, they replaced their old boat in July. They plan on replacing their boat with a new one every two years now. They use their boat in the parasailing activity and for recreational purposes. This year, Katie and Alan earned $5,400 from chartering activities and incurred $11,600 of expenses associated with their boating and parasailing. What tax issues should Katie and Alan consider?arrow_forwardSeveral years ago, Junior acquired a home that he vacationed in part of the time and rented out part of the time. During the current year, Junior: Personally stayed in the home for 22 days. Rented it to his favorite brother at a discount for 10 days. Rented it to his least-favorite brother for 8 days at the full market rate. Rented it to his friend at a discounted rate for 4 days. Rented the home to third parties for 58 days at the market rate. Did repair and maintenance work on the home for 2 days. Marketed the property and made it available for rent for 150 days during the year (but did not rent it out). How many days of personal use and how many days of rental use did Junior experience on the property during the year? Days of personal use: Days of rental use:arrow_forward
- Ringo owns 5 acres of rental property. Yoko rents the property to graze cows for one year and pays the rent with autographed copies of old records autographed by her late husband John. The lease called for rent of $10,000. How much income will Ringo recognize?arrow_forwardSeveral years ago, Junior acquired a home that he vacationed in part of the time and rented out part of the time. During the current year Junior: Personally stayed in the home for 29 days. Rented it to his favorite brother at a discount for 35 days. Rented it to his least favorite brother for 9 days at the full market rate. Rented it to his friend at a discounted rate for 13 days. Rented the home to third parties for 75 days at the market rate. Did repair and maintenance work on the home for 2 days. Marketed the property and made it available for rent 166 days (but not actually rented out), during the year (in addition to the days mentioned above). How many days of personal use and how many days of rental use did Junior experience on the property during the year? Days of personal use Days of rental usearrow_forwardIncome Profile Adjusted Budget Employment Income Interest/Dividends Other TOTAL INCOME Essential Expenses Mortgage/Rent Utilities Telephone Groceries Child Care Pet Care Clothing Transportation Gas/Fuel Insurance Health club dues Life Insurance Medicine Veterinarian Savings Non-Essential Expenses Entertainment Dining Out Vacation Subscriptions Other TOTAL Expenses Surplus/Shortagearrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT
Individual Income Taxes
Accounting
ISBN:9780357109731
Author:Hoffman
Publisher:CENGAGE LEARNING - CONSIGNMENT