ACC 401 Week 3

# ACC 401 Week 3

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ACC 401 Week 3

ACC 401 Week 3 Quiz

Assignment

Real Estate for Home and Business. From Chapter 6, complete Problem 39 and Problem 43. From Chapter 7, complete Problem 49 and Problem 51. From Chapter 8, complete Problem 37 and Problem 38.

Chapter 6, complete Problem 39 and Problem 43

1. 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$4,000

Consulting expenses other than home office 1,500

Total costs relating to home:

Interest and taxes 6,500

Utilities 1,500

Maintenance and repairs 450

Calculate Davids AGI.

1. Janet purchased her personal residence in 2001 for $250,000. In January 2010 she converted it to rental property. The fair market value at the time of conversion was$210,000.

a. Determine the amount of cost recovery that can be taken in 2010:_________________

b. Determine the amount of cost recovery that could be taken in 2010 if the fair market value of the property were $350,000:_____________________ Chapter 7, complete Problem 49 and Problem 51 1. Ricardo acquired a warehouse for business purposes on August 30, 1992. The building cost$400,000. He took $226,900 of depreciation on the building, and then sold it for$500,000 on July 1, 2010. What are the amount and nature of Ricardos gain or loss on the sale of the warehouse?

2. In 2010, 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 2009 and a$1,240 long-term loss carryover from 2009.

a. What amount will be shown as a short-term gain (loss) for 2010?

b. What amount will be shown as a long-term gain (loss) for 2010?

c. Will there be a carryover to 2011? If so, what are the nature and amount of the carryover?

d. Prepare a Schedule D. (Detailed stock information has been omitted; use reasonable assumptions.)

Chapter 8, complete Problem 37 and Problem 38

1. 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$4,200

Property taxes 700

Insurance 1,200

Utilities 3,200

Repairs 1,900

Depreciation 5,500

a. What is the proper tax treatment of this information on their tax return using the Tax Court method?

b. Is there an option for how to allocate the expense between personal and rental use? Explain.

c. What is the proper tax treatment if Matt and Marie rented the house for only 14 days?

1. Janet owns a home at the lake. She incurs the following expenses:

Mortgage interest$1,300 Property taxes 800 Insurance 1,500 Utilities 1,800 Repairs 300 Depreciation 4,000 What is the proper treatment of these expenses in each of the following cases? Use the Tax Court allocation method, if applicable. CaseRental IncomeDays RentedPersonal Use Days A$9,0004510

B12,0005525

C 6,0001030

D22,0003650

Discussion Questions

Self-Employed Business Income & Capital Gains. From Chapter 6, complete discussion question 1, question 2, question 9, and question 15 and post to the discussion board by day 3. From Chapter 7, complete question 1, question 2, question 8, and question 12.

Chapter 6, complete discussion question 1, question 2, question 9, and question 15

1. Discuss the definition of a trade or business. Why does it matter whether a taxpayer is classified as an employee or as self-employed?

2. Discuss the concepts of ordinary, necessary, and reasonable in relation to trade or business expenses.

3. Discuss the concept of electing 179 expense. Does the election allow a larger expense deduction in the year of asset acquisition?

4. Why were the hobby loss rules established? What factors determine whether an activity is a trade or business or a hobby? Is any one factor controlling?

Chapter 7, complete question 1, question 2, question 8, and question 12

1. How are the terms basis, adjusted basis, and fair market value defined as they apply to the calculation of gains and losses?

2. What is meant by the terms realized gain (loss) and recognized gain (loss) as they apply to the sale of assets by a taxpayer?

3. What are the different classifications of capital assets? Define each classification and explain the difference in the preferential tax treatment (the rate at which the gains are taxed).

4. How is a net capital loss treated? Include in your answer a discussion of how a net capital loss is treated in relation to other income.

Rental Property & Royalties. From Chapter 8 complete problem 33, problem 34, and problem 35 and post to the discussion board by day 3.

1. Ramone is a tax attorney and he also owns an office building that he rents for $8,500/month. He is responsible for paying all taxes and expenses relating to the buildings operation and maintenance. Is Ramone engaged in the trade or business of renting real estate? 2. Kelvin owns and lives in a duplex. He rents the other unit for$750 per month. He incurs the following expenses during the current year for the entire property:

Mortgage interest$7,500 Property taxes 2,000 Utilities 1,500 Fixed light fixture in rental unit 100 Fixed dishwasher in personal unit 250 Painted entire exterior 1,300 Insurance 1,800 Depreciation (entire structure) 7,000 How are the expenditures treated for tax purposes? On what tax form(s) are these amounts reported? 1. In the current year, Sandra rented her vacation home for 75 days, used it for personal use for 22 days, and left it vacant for the remainder of the year. Her income and expenses are as follows: Rental income$15,000

Real estate taxes 2,000

Utilities 1,500

Mortgage interest 3,800

Depreciation 7,200

Repairs and Maintenance 1,300

What is Sandras net income or loss from the activity? Use the Tax Court method.

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Excerpt from file: Week 3 Assignment - Real Estate for Home and Business - ACC401 Federal Income Taxes I ACC 401 Real Estate for Home and Business. From Chapter 6, complete Problem 39 and Problem 43. From Chapter 7, complete Problem 49 and Problem 51. From Chapter 8, complete Problem 37 and Problem 38. Chapter 6,

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