121 Midterm 2 Fall 12

The allowance would have been $8.5Million if they would have had consistency on the ratio from 2003 in 2004. As a result, the pre-tax income increase is $2.6 Million due to the changed ratio in 1982.

Taxable income includes a deduction for $40,000 of depreciation that exceeds the depreciation allowed for E&P purposes.

From the information that was provided, the income was derived from the business and this gross income is taxable pursuant to Code§1.61-3(a). He is subject to self-employment tax, since the total amount of income that will come through to his personal tax income of half of the self-employment tax liability.

b. Ken sold 1,000 shares of stock for $32 a share. He inherited the stock two years ago. His tax basis (or investment) in the

Under the Reg. §1.47-3(f) (5) (ii), the transferor of the section 38 property in any taxable year dose not retain a substantial interest in the trade or business directly or indirectly. According to this code, the transferor does not need to make the payment for tax of the interest during the property transaction only if the property can be qualified to “section 38 property” which indicate property (1) with respect to which depreciation is allowable to the taxpayer (2) has an estimated useful life of 3 years or more (3) which is tangible personal property or other tangible property. In this case, the machinery purchased by the individual two years ago can be applied for the “section 38 property” which also means the transferor does not need to pay for the interest happened during the transaction. And because of the gift of stock made by the individual caused a reduction in his interest. Which occurred at a time when the useful lives were just taken into account in computing the credit about the “section 38 property”. Unless his remain interest is a substantial interest, the section 47(b) would no longer be applicable and total

into a newer home that is located in the suburbs further from his job. The old house was purchased for $140,000 and has a market value of

The proposition has created an imbalance in the real estate market in California when compared to other states. For instance, in 2003, Warren Buffet claimed that he paid only 0.056% or $2,264 in property taxes for his $4 million home California, whereas he paid 2.9% or 14,410 for his $0.5 million home in Nebraska (Buffett, 2003). For investors, this means that California is a preferred location since they are likely to pay very low taxes on their property.

John and Jane own and rent out a duplex in Atlanta. They are getting older now and are planning to retire and to move to Miami. John and Jane would like to sell the Atlanta Duplex and purchase a small commercial building next to the lovely condo they bought on the beach. The main issue is John and Jane can only afford to buy this building if they are able to capture all of the existing equity in their Atlanta duplex. To avoid (defer) a taxable event when they sell their duplex John and Jane can utilize Section 1031 of the IRC. There are, however, a few hoops that John and Jane must jump through to qualify.

He also obtains real estate appraisals which indicate that the existing pool increases the value of the

(Code §219(c )) With the lease payment and the IRA’s John will have deductions of $52,000 against the $300,000 and an additional deduction of paying half of the self employment tax. ()

2. Edgar Co. acquired 60% of Kindall Co. on January 1, 2009. During 2009, Edgar made several sales of inventory to Kindall. The cost and selling price of the goods were $140,000 and $200,000, respectively. Kindall still owned one-fourth of the goods at

Learning to me is allowing your brain to receive information and then applying in to your life experiences. I feel like face to face learning is better, however, online is more convenient. I prefer face to face because it offers a more personal relationship with your classmates and your professor. Although it is not practical for my life, I do wish I could attend classes in a regular environment. Online provides me that much needed space and opportunity to move at my own pace. Now that I have taken this class, I know that while I am receiving information I will be more aware of the information being delivered because I will now be more intentional with receiving the information.

deduction in its draft tax return, resulting in a $40 reduction to taxes payable. There is uncertainty over

The $320,000, on the other hand, is a fixed cost associated with the proposed addition.

Because it is the comparison of income, the loss of Deyonne cannot be deducted from the total amount of his income.