Assessment 6 Problems: Applying the IRS Code

Assessment 6 Problems: Applying the IRS Code.

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In a Word document, provide complete answers with explanations to the problems below.

Problem 1

In 2014, Matthew contributes equipment with an adjusted basis of $40,000 and a FMV of $36,000 to Construction Limited Partnership (CLP) in return for a 3% limited partnership interest. Matthew’s share of CLP income and losses for the year were as follows:

Interest $ 1,000

Dividends 600

Capital gains 1,800

Ordinary loss (8,650)

CLP had no liabilities. What are Matthew’s initial basis, allowed losses, and ending at-risk amount?

Assessment 6 Problems: Applying the IRS Code.

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Problem 2

During the current year, Ben worked 1,500 hours as a tax consultant and 500 hours as a real estate agent. His one other employee (his wife) worked 350 hours in the real estate business. Ben earned $60,000 as a tax consultant, and together the couple lost $18,000 in the real estate business. How should Ben treat the loss on his federal income tax return?

Problem 3

Assessment 6 Problems: Applying the IRS Code.

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Chrystal died owning an interest in a passive activity property. The property had an adjusted basis of $270,000, a fair market value of $284,000, and suspended losses of $25,000. What can be deducted on her final income tax return?

Problem 4

Howard has a $76,000 loss from an investment in a partnership in which he does not participate. His basis in the interest is $70,000.

a. How much of the loss is disallowed by the at-risk rules?

b. How much of the loss is disallowed by the passive loss rules?

Problem 5

Roberta gave her daughter a passive activity last year that had an adjusted basis of $37,500. The activity had suspended losses of $17,500 and a fair market value of $60,000. In the current year, her daughter realized income of $9,000 from the passive activity. What is the tax effect on Roberta and her daughter last year and in the current year?

Problems are continued on the next page.

Assessment 6 Problems: Applying the IRS Code.

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Problem 6

Create a table for the answer to this problem. Include these categories: AMT; Regular Tax: Adjustment.

Charles had the following itemized deductions in 2014:

State income taxes $3,000

Charitable contributions 4,900

Mortgage interest (personal residence) 14,000

Medical expenses [$8,000-(7.5% ×$75,000)] 2,375

Miscellaneous [$3,200-(2%×$75,000)] 1,700

a. What are Charles’ itemized deductions for AMT purposes?

b. What is the amount of the AMT adjustment?

Assessment 6 Problems: Applying the IRS Code.

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