John Smith tax issue:
1a). How is the $300,000 treated for purposes of federal income tax? The $300,000 that John Smith received would be treated as income. According to the IRS, income is classified as “earned income includes all the taxable income and wages you get from working,” such as:
• wages, salaries, tips, and other taxable employee pay;
• union strike benefits;
• long-term disability benefits received prior to minimum retirement age;
• net earnings from self-employment, such as own or operate a business; and
• gross income received as statutory employee.
John Smith will be taxed on his income of $300,000 regardless if he received the amount as a lump sum or in annuity. The constructive receipt doctrine states that “…
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John will also have to measure his interest expense and compare it to buying or leasing. If John goes with leasing the business building he can still claim deductions for his rent. However, if John purchased the building for his business he would be able to claim interest as part of his deductions as well as any maintenance costs, taxes, and depreciation. It may be in the best interest of John to continue leasing the business space.
Jane Smith tax issues:
2a). What are the difference tax consequences between paying down the mortgage (debt) and assuming a new mortgage (debt) for federal income tax purposes? If Jane and John Smith were refinanced their home, they wouldn’t be able to claim the entire amount of their refinance as a deduction. In other words, they would lose tax deduction on their loan when their mortgage is paid in full. On the other hand, if Jane and John Smith were to hold onto their mortgage and not pay it off they would be able to receive certain tax deductions for it. For example, their mortgage interest is a part of tax deduction that they can claim every year. The couple will have to analyze every advantages and disadvantages to paying down the mortgage and assuming a new mortgage before being able to take further action.
2b). Can John and Jane Smith utilize a 1031 tax exchange to buy a more expensive house using additional money from John’s case? Being able to invest in a new home is a great investment and tax savings purposes for John
c. Fill out the Refund section by performing the calculations if the IRS owes Jessie Robinson money. Do not fill out the bank account information section.
to be approved for a mortgage. Some of these home owners may have walked away from their
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.
The investigation brought about the dissolution of the firm. Mr. Lomanno became fearful that this investigation would expose his embezzlement scheme. He decided to seek legal advice and he contacted a criminal attorney. The matter was taken up with the office of the US Attorney. He confessed for all his wrong doings and was offered a plea bargain which had a condition that he file his returns for the year 1986, 1987, and 1988 which had not being filed. The income from embezzlement was reported as “other income” and was in tunes of $45,007 for 1987 and $15,005 for 1988. Because he did not want the petitioner to know about this, he prepared the returns alone and tried to hand them in unsigned. The officers saw the unsigned part and wanted it signed. He went ahead and forged the signature of the petitioner. The petitioner came to learn of her husband’s embezzlement in the year 1990 through a probation officer and through a letter received from IRS revenue agent. The couple divorced in 1991. Mrs. Lomanno petitioned to be exempted from the tax return payments. In this case, the petitioner filed a subject motion for attorney’s fees and litigation costs.
Working under the assumption that Adrian is a cash basis taxpayer, one can refer to Treasury Regulation sec. 1451-1(a), which states that under the cash receipts and disbursements method of accounting, such an amount is includible in gross income when actually or constructively received.
Ken will need to include this amount as income. Ken will not be able to use the deduction for gambling loses.
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
Home ownership is the American dream! It is one of the most costly purchases an individual or family can make in their lifetime. Some people save until they have cash to purchase however, many people borrow money from a bank or lending institution; when a person borrows money to purchase a home the loan is called a mortgage. The lender is called the mortgagee and the borrower is called the mortgagor; banks have several different types of mortgages: fixed rate mortgage, adjustable rate mortgage, investment mortgage and much more. Borrowers have to undergo the lender underwriting process to show financial capability of repaying the mortgage (Makarov & Plantin, 2013). In this article I will use a fictitious person named “Julianna,” she is in the process of buying her first home at age 30; I will be her lender and will use mathematical procedures to find out what is her down payment, principle, installment payment, points (closing cost), mortgage maturity value and total interest paid.
T, an individual taxpayer, plans to incorporate his farming and ranching activities, currently operated as a sole proprietorship. His primary purpose of incorporating is to transfer a portion of his ownership in land to his son and daughter. T believes that gifts of stock rather than land will keep his business intact. Included in the property he plans to transfer is machinery purchased two years earlier.
19) In the current year, Bonnie, who is single, sells stock valued at $60,000 to Linda for $15,000. Later that year, Bonnie gives Linda $25,000 in cash. Bonnie's taxable gifts from these transfers total
-Spouse B’s $8,000/month for 11 months of income from work because these are taxable wages that are paid to Spouse be for employment.
3. Allen visits Reno, Nevada, once a year to gamble. This year his gambling loss was $25,000. He commented to you, “At least I didn’t have to pay for my airfare and hotel room. The casino paid that because I am such a good customer. That was worth at least $3,000. “What are the relevant tax issues for Allen?
2(a) Jane inquired what the tax treatment difference if any there is in paying down a mortgage and assuming a new mortgage in terms of federal taxes.
“When you rent, you write your monthly check and that money is gone forever. But when you own your home, you can deduct the cost of your mortgage loan interest from federal income taxes, and usually from your state taxes” (Home Buyers Guide, p4). Buying a home can be alarming, if you are not prepared, whether for the first time or even for the fifth time. If you take time before going into the process to gain the knowledge needed, one might see that
The statement of reserves should be reviewed, since the acquisition of the tavern, through the purchase of the seller’s interest, results in the buyer, Ms. Growne accepting both known and unknown liabilities of the business prior to her ownership. In addition, by reviewing the financial statements to look at the net operating gain or loss, Ms. Growne can determine if there is a loss she can offset against her other sources of income. For some individuals, the idea of being able to offset other income with these losses incurred prior to ownership is appealing, due to the tax benefit that may result. However, if the buyer does not have significate income to be offset or is not in a higher tax brackets, this benefit of the acquisition through interest becomes less attractive. In addition, if the sellers basis in the assets are significantly less than the assets fair market value, the buyer is likely to incur greater gains on the assets in the future, resulting in a higher taxable income and leading to negative tax implication. In contrast, if the assets of the business were purchased, the buyer would not be susceptible to prior liabilities and the seller must examine their basis for each asset, compare it with the assets current market value, and incur any applicable gains or losses, intern shifting the tax consequences of an increase in