week 4 you decide Essay

Capital gain or loss that happens to a dwelling that is a taxpayer’s main residence is

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.

c. The Johnsons own a piece of investment real estate. They paid $500 of real property taxes on the property and they incurred $200 of expenses in travel costs to see the property and to evaluate other similar potential investment properties.

Taxable earnings are: Spouse A's income from the partnership and the part time soccer referee job is included. Spouse B's earned income from the job as a controller counts as taxable income. The quarterly dividend from company E also falls under the income heading on the 1040 form. The capital loss is also included under income. The interest from the municipal bond is considered tax exempt for federal standards.

Katlyn reported $300 of net income from her sole proprietorship. She is not required to pay self-employment tax.

Interest income received by a cash basis taxpayer is generally reported in the tax year it is received.

Nothing is included in Decedent’s gross income, because under section 2035(d), Subsection (a) and paragraph (1) of subsection (c) shall not apply to any bona fide sale for an adequate and full consideration in money or money’s worth.

CONCLUSION: Jackie’s Social Security benefits must be reported as taxable income to the IRS, and the treatment heavily depends on her filing status. If Jackie files a joint return to

b. Can John and Jane Smith utilize a 1031 tax exchange to buy a more expensive house using

2(b) Jane has inquired about the 1031 tax exchange if they could use that plus some of John’s money from the case to purchase a more expensive house.

A2c. Profit or Loss from the Sale of Property: The taxpayer couple sold personal and rental property for this tax period. Both sales have potential gains. However, the gain from the sale of the personal residence qualifies for exclusion up to $500,000 under Section 121 as they lived in and used the residence at least two of the five years prior to the sale. The gain or loss is calculated as the sale price less selling costs and adjusted basis of the property. Proceeds from the sale of the rental property are taxable because it is an income producing property and would be considered normal income. However, Section 1231 designates that exchanges of business property held longer than one year may be considered a long-term capital gain if there is a gain realized and any loss would be considered an ordinary loss. Any depreciation taken in past tax years will need to be recaptured in the tax year of the sale.

Income Taxes: The owner of a Sole Proprietorship pays taxes in the earnings of the company as personal income.

John has income derived from a business and as such the gross income will be taxable (Code §1.61-3(a)) (Tax Almanac, 2005). This $300,000 taxable income will pass through to his personal taxes and is subject to self employment tax since he has an LLC. He

Issue e) What tax benefits would John realize if he invested $15,000 in Jane 's jewelry making?

2b). Can John and Jane Smith utilize a 1031 tax exchange to buy a more expensive house using additional money from John’s case?