South-Western Federal Taxation 2019: Individual Income Taxes (Intuit ProConnect Tax Online 2017 & RIA Checkpoint 1 term (6 months) Printed Access Card)
42nd Edition
ISBN: 9781337702546
Author: James C. Young, William H. Hoffman, William A. Raabe, David M. Maloney, Annette Nellen
Publisher: Cengage Learning
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Question
Chapter 4, Problem 51P
To determine
Identify the tax consequences to Person V and Incorporation V, if the loans are considered as: a. employer-employee loan, b. corporation-shareholder loan.
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Vito is the sole shareholder of Vito, Inc. He is also employed by the corporation. On June 30, 2020, Vito borrowed $8,000 from Vito, Inc., and on July 1, 2021, he borrowed an additional $10,000. Both loans were due on demand. No interest was charged on the loans, and the Federal rate was 4% for all relevant dates. Vito used the money to purchase a boat, and he had $2,500 of investment income.
Determine the tax consequences to Vito and Vito, Inc., in each of the following situations.
A. Loans are considered employer-employee loans.
In 2020, Vito has $ XXX?? of ??? and Vito, Inc. has $ XXX?? of ???
In 2021, Vito has $ XXX?? of ??? and Vito, Inc. has $ XXX?? of ???
B. Loans are considered corporation-shareholder loans.
In 2020, Vito has $ XXX?? of ??? and Vito, Inc. has $ XXX?? of ???
In 2021, Vito has $ XXX?? of ??? and Vito, Inc. has $ XXX?? of ???
The amount is unknown and the options for ??? are included in the image.
During the current year, 2022, Travis takes out a $40,000 loan, using stock he owns as collateral. He uses $10,000 to purchase a car, which he uses 100% for personal use. He uses the remaining funds to purchase stocks and bonds. He pays $3,200 interest on the loan. Travis also reports the following for the year:
AGI without any investment income $130,000 State income taxes paid 8,400Dividend income (qualified dividends) 10,000 Interest income 2,100
Qualified residence interest 7,800Investment expenses (exclusive of interest) 8,000 Net short-term capital gains 7,300Net long-term capital gain 8,600Travis is single. What is his net taxable income?
This year Randy paid $28,000 of interest on his residence. (Randy borrowed $450,000 to buy his residence, which is currently worth $500,000.) Randy also paid $2,500 of interest on his car loan and $4,200 of margin interest to his stockbroker (investment interest expense). How much of this interest expense can Randy deduct as an itemized deduction under the following circumstances?
Randy received $2,200 of interest this year and no other investment income or expenses. His AGI is $75,000.
Chapter 4 Solutions
South-Western Federal Taxation 2019: Individual Income Taxes (Intuit ProConnect Tax Online 2017 & RIA Checkpoint 1 term (6 months) Printed Access Card)
Ch. 4 - According to the Supreme Court, would it be good...Ch. 4 - Prob. 2DQCh. 4 - Prob. 3DQCh. 4 - Ben lost his job when his employer moved its...Ch. 4 - Prob. 5DQCh. 4 - Prob. 6DQCh. 4 - Prob. 7DQCh. 4 - A Series EE U.S. government savings bond accrues...Ch. 4 - The taxpayer performs services with payment due...Ch. 4 - Prob. 10DQ
Ch. 4 - Wade paid 7,000 for an automobile that needed...Ch. 4 - Prob. 12DQCh. 4 - Prob. 13DQCh. 4 - A divorce agreement entered into in 2017 requires...Ch. 4 - Prob. 15DQCh. 4 - Prob. 16DQCh. 4 - Prob. 17DQCh. 4 - Prob. 18DQCh. 4 - Prob. 19DQCh. 4 - Prob. 20DQCh. 4 - Prob. 21CECh. 4 - Bigham Corporation, an accrual basis calendar year...Ch. 4 - LO.3 Simba and Zola are married but file separate...Ch. 4 - Casper and Cecile divorced in 2018. As part of the...Ch. 4 - Prob. 25CECh. 4 - Prob. 26CECh. 4 - Prob. 27CECh. 4 - Prob. 28PCh. 4 - Prob. 29PCh. 4 - Determine the taxpayers gross income for tax...Ch. 4 - Prob. 31PCh. 4 - Determine the taxpayers gross income for tax...Ch. 4 - Prob. 33PCh. 4 - Your client is a partnership, ARP Associates,...Ch. 4 - Prob. 35PCh. 4 - Prob. 36PCh. 4 - Prob. 37PCh. 4 - Prob. 38PCh. 4 - Prob. 39PCh. 4 - Prob. 40PCh. 4 - Prob. 41PCh. 4 - Prob. 42PCh. 4 - Prob. 43PCh. 4 - Prob. 44PCh. 4 - Prob. 45PCh. 4 - Prob. 46PCh. 4 - Prob. 47PCh. 4 - Prob. 48PCh. 4 - Prob. 49PCh. 4 - Prob. 50PCh. 4 - Prob. 51PCh. 4 - Prob. 52PCh. 4 - For each of the following, determine the amount...Ch. 4 - Prob. 54PCh. 4 - Prob. 55PCh. 4 - Prob. 56PCh. 4 - Prob. 57PCh. 4 - Donna does not think she has an income tax problem...Ch. 4 - Prob. 1RPCh. 4 - Prob. 2RPCh. 4 - Prob. 3RPCh. 4 - Prob. 1CPACh. 4 - Fred and Wilma were divorced in year 1 (before...Ch. 4 - Bill and Jane Jones were divorced on January 1,...Ch. 4 - Jake pays the following amounts to his former...Ch. 4 - Mary purchased an annuity that pays her 500 per...
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Similar questions
- During 2019, John was the chief executive officer and a share- holder of Maze, Inc. He owned 60% of the outstanding stock of Maze. In 2016, John and Maze, as co-borrowers, obtained a 100,000 loan from United National Bank. This loan was secured by Johns personal residence. Although Maze was listed as a co-borrower, John repaid the loan in full in 2019. On Mazes Form 1120 tax returns, no loans from shareholders were reported. Discuss whether John is entitled to a bad debt deduction for the amount of the payment on the loan. Partial list of research aids: U S. v. Genere, 405 U.S. 93 (1972). Date H. Sundby, T.C.Memo. 2003-204. Arrigoni v. Comm., 73 T.C. 792 (1980). Estate of Herbert M. Rapoport, T.C.Memo. 1982-584. Clifford L. Brody and Barbara.I DeClerk, T.C. Summary Opinion, 2004-149.arrow_forwardMatthew borrows $265,000 to invest in bonds. During the current year, his interest on the loan is $26,500. Matthew's taxable interest income from the bonds is $15,900. This is Matthew's only investment income and he has no other investment expenses other than the interest on the loan. a. Calculate Matthew's itemized deduction for investment interest expense for this year. b. Is Matthew entitled to a deduction (related to the investment interest expense) in future years?Yes , the unused deduction of _______ may be carried forward as an investment interest deduction in future yearsarrow_forwardWally is employed as an executive with Pay More Incorporated. To entice Wally to work for Pay More, the corporation loaned him $20,000 at the beginning of the year at a simple interest rate of 1 percent. Wally would have paid interest of $2,400 this year if the interest rate on the loan had been set at the prevailing federal interest rate. Required: Wally used the funds as a down payment on a speedboat and repaid the $20,000 loan (including $200 of interest) at year-end. a-1. Does this loan result in any income to either party? a-2. Indicate the amount below. Assume instead that Pay More forgave the loan and interest on December 31. What amount of gross income does Wally recognize this year?arrow_forward
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