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- Unfortunately, Betty’s business was not profitable. She decided to sell the business andseek work in a different industry. She sold her business in May 2020 after spending$22,000 on advertising the sale with an estate agent. Unfortunately, the sales proceedswere not sufficient to discharge her existing bank loan and she was required to makeregular monthly interest payments on the outstanding balance.Please discuss whether the advertising expenses would be deductibleElsie had an AGI of $105,000 in 2018. All of her income was from wages. Elsie owned a rental house and actively participated in the management of the rental house. The rental house generated losses of $25,000 in 2018. Elsie has over $100,000 at risk. What amount of the $25,000 loss can Elsie deduct in 2018?Karyn loaned $32,000 to her co-worker to begin a new business several years ago. If her co worker declares bankruptcy on june 22 of the current year, how much of the bad debt loss will Karyn be able to deduct this year?
- Mrs. S borrowed P20,000.00 from PG. She and her 19-year-old son, Mario, signed the promissory note for the loan, which note did not say anything about the capacity of the signers. Mrs. S made partial payments little by little. After several years, she died leaving a balance of P10,000.00 on the note. PG demanded payment from Mario who refused to pay. When sued for the amount, Mario raised the defense that when he signed the note he was still a minor. Should the defense be sustained? Why?During 2016, Becky loans her brother Ken $5,000, which he intends to use to establish a small business. Because Ken has no other assets and needs cash to establish the business, the agreement provides that Ken will repay the debt if (and when) sufficient funds are generated from the business. Becky and Ken do not establish an interest rate. The business is unsuccessful, and Ken is forced to file for bankruptcy in 2017. By the end of 2017, it is estimated that the creditors will receive only 20% of the amount owed. In 2018 the bankruptcy proceedings are closed, and the creditors receive 10% of the amount due on the debt. Requirement What is Becky's bad debt deduction for 2017? For 2018? (Enter a "0" if no bad debt deduction can be taken.) Becky's bad debt deduction will be for 2017 and for 2018.Kate acquires a principal residence in 2017 for $200,000 secured by a $180,000 mortgage. In 2021, Kate catches the coronavirus and misses work for 3 months. Her employer stops paying her after 10 days. In 2021 when the mortgage balance is $170,000, Kate and the bank revise her terms and lower the loan balance to $150,000. The market value of the home remains above $200,000. How much cancellation of debt income will Kate recognize?
- Rania contributed equipment worth $195,000, purchased 9 months ago for $228,000 cash and used in her sole proprietorship, to Sand Creek LLC in exchange for a 20 percent profits and capital interest in the LLC. Rania agreed to guarantee all $18,500 of Sand Creek's accounts payable, but she did not guarantee any portion of the $97,500 nonrecourse mortgage securing Sand Creek's office building. Other than the accounts payable and mortgage, Sand Creek does not have any liabilities to other creditors. a. What is Rania's initial tax basis in her LLC interest?Mary owns a home with a with a replacement value of $331,195. She purchased home insurance in the amount of $200,000, and therefore does not meet the 80% rule. If Mary's deductible is $3,000 and a BBQ fire caused $75,000 worth of damage, how much will Mary have to pay herself?Laurel contributed equipment worth $200,000, purchased 10 months ago for $250,000 cash and used in her sole proprietorship, to Sand Creek LLC in exchange for a 15 percent profits and capital interest in the LLC. Laurel agreed to guarantee all $15,000 of Sand Creek’s accounts payable, but she did not guarantee any portion of the $100,000 nonrecourse mortgage securing Sand Creek’s office building. Other than the accounts payable and mortgage, Sand Creek does not owe any debts to other creditors.a. What is Laurel’s initial tax basis in her LLC interest? b. What is Laurel’s holding period in her interest? c. What is Sand Creek’s initial basis in the contributed property? d. What is Sand Creek’s holding period in the contributed property?
- Alysa and Todd purchased a home in 1999 for $80,000 with no down payment. In 2004, they were able to refinance their mortgage on the home for $140,000. They reinvested $75,000 into the home, adding a new addition and making upgrades. In 2006, the couple sold the home for $320,000. What was the value of Alysa and Todd's equity in 2006? $250,000 $180,000 $240,000 $60,000.Jimmy has fallen on hard times recently. Last year he borrowed $343,000 and added an additional $73,000 of his own funds to purchase $416,000 of undeveloped real estate. This year the value of the real estate dropped dramatically, and Jimmy’s lender agreed to reduce the loan amount to $316,000. For each of the following independent situations, indicate the amount Jimmy must include in gross income: (Leave no answer blank. Enter zero if applicable.) Problem 5-60 Part-c (Algo) c. The real estate is worth $277,800 and Jimmy has $47,200 in other assets but no other liabilities. Amount Included in Gross IncomeLaurel contributed equipment worth $120,000, purchased 9 months ago for $136,500 cash and used in her sole proprietorship, to Sand Creek LLC in exchange for a 35 percent profits and capital interest in the LLC. Laurel agreed to guarantee all $10,200 of Sand Creek’s accounts payable, but she did not guarantee any portion of the $60,000 nonrecourse mortgage securing Sand Creek’s office building. Other than the accounts payable and mortgage, Sand Creek does not owe any debts to other creditors. a. What is Laurel’s initial tax basis in her LLC interest? b. Laurel’s holding period begins the day the LLC interest is acquired. True or False. c. What is Sand Creek’s initial basis in the contributed property? d.What is Sand Creek’s holding period in the contributed property?
