David is a college professor who does some consulting work on the side. He uses 25% of his home exclusively for the consulting practice. He is single and 63 years old. His AGI (without consideration of consulting income) is $45,000. Other information follows:
Income from consulting business $4000
Consulting expenses other than
home office 1500
Total cost relating to home:
Interest and Taxes 6500
Utilities 1500
Maintenance and Repairs 450
Depreciation (business part only) 1500
Calculate David’s AGI.___________________________
#43: Janet purchased her personal residence in 2006 for $250,000. In January 2016, she converted it to rental property. The fair market value at the time of conversion was $210,000.
Determine the amount of cost recovery that can be taken in 2016. _________
Determine the amount of cost recovery that could be taken in 2016 if the fair market value of the property were $350,000: ___________________________
CHAPTER 7:
#49:Ricardo acquired a warehouse for business purposes on August 30, 1997. The building cost $400,000. He took $226,900 of depreciation on the building and then sold it for $500,000 on July 1, 2016. What are the amount and nature of Ricardo’s gain or loss on the sale of the warehouse?
- a) What is the adjusted basis for the warehouse?
- b) What amount of the gain or loss is realized on the sale of the warehouse?
- c) What amount of the gain or loss is unrecaptured?
- d) At what rate is the unrecaptured gain or loss taxed?
- e) What amount of gain or loss qualifies as a § 1231 gain or loss?
#51: In 2016 Rosalva sold stock considered short-term for a gain of $875 and stock considered long-term for a loss of $3,400. She also had a $3,000 short-term loss carryover from 2015 and a $1,240 long-term loss carryover from 2014.
What amount will be shown as a short-term gain (loss) for 2016? ___________
What amount will be shown as a long-term gain (loss) for 2016? __________
How much of the loss is deductible in 2016? _____________
What is the amount of long-term carryover to 2017?
CHAPTER 8:
#37: Matt and Marie own a vacation home at the beach. During the year, they rented the house for 42 days (6 weeks) at $890 per week and used it for personal use for 58 days. The total costs of maintaining the home are as follows:
Mortgage Interest $4200
Property Taxes 700
Insurance 1200
Utilities 3200
Repairs 1900
Depreciation 5500
What is the proper tax treatment of this information on their tax return using the Tax Court method?
Are there options available for how to allocate the expenses between personal and rental use? Explain.
What is the proper tax treatment of the rental income and expenses if Matt and Marie rented the house for only 14 days?
#38:
- Janet owns a home at the lake. She incurs the following expenses:
MORTGAGE INTEREST 1300
PROPERTY TAXES 800
INSURANCE 1500
UTILITIES 1800
REPAIRS 300
DEPRECIATION 4000
What is the proper treatment of the rental income and expenses in each of the following cases? Use the Tax Court allocation method, if applicable.
CASE RENTAL DAYS PERSONAL
INCOME RENTED -USE DAYS
A $9000 45 10
B 12000 55 25
C 6000 10 30
D 22000 365 –0–