Assets
Income & Gains
Deductions
Principles
Hodgepodge

### 100

How does the Code define a capital asset?
What is The Code does not define what a capital asset is, only what it is not.

Josh sold a piece of business equipment that had an adjusted basis to him of $50,000. In return for the equipment, Josh received$90,000 cash and a painting with a fair market value of $20,000 from the buyer. The buyer also assumed Josh's$25,000 loan on the equipment. Josh paid $5,000 in selling expenses. What is the amount of Josh's gain on the sale? What is$80,000 Amount realized of $135,000 ($90,000 cash + $20,000 art +$25,000 loan assumption) minus $50,000 adj. basis and$5,000 selling expense = $80,000. ### 100 Al and Amy file a joint return for the 2007 tax year. Their adjusted gross income is$80,000. They had net investment income of $9,000. In 2007, they had the following interest expenses: Personal credit card interest$4,000 Home mortgage interest $8,000 Investment interest (on loans used to buy stocks)$10,000 What is the interest deduction for Al and Amy for the 2007 tax year?
What is Investment interest is deducted to the extent of net investment income ($8,000) IRC sec. 163(d). Personal interest is not deductible. Therefore:$8,000 mortgage interest + $9,000 investment interest =$17,000. $1,000 of the$10,000 investment interest expense is carried forward.

### 100

Under the cash method of tax accounting, tax deductions are generally taken when:
What is when the payment is made

### 100

Jane purchased an annuity contract that pays her $800 per month. The annuity cost her$40,000 and it has an expected return of $100,000. How much of each monthly annuity payment is includible in Jane's gross income? What is$480 Exclusion ratio = 40,000 / 100,000 = 40%. Therefore, 60% of each annuity payment is included in gross income. $800 x .60 =$480.

### 200

What is "boot" and how is it treated in like-kind exchanges?
What is When property that is not like-kind (i.e., cash or other property, known as boot'') is received, then any realized gain is recognized to the extent of the boot received. If there is a realized loss in a boot received situation, such loss will not be recognized.

### 200

Ben's property, which has an adjusted basis of $85,000, is condemned by the state government. The authorities replace his property with other qualified property which cost them$120,000. What is Ben's recognized gain?
What is Sam recognizes $8,000 of taxable income. When a taxpayer's debt is forgiven (outside of bankruptcy), he recognizes income equal to the amount forgiven. ### 500 A business bad debt is deductible for tax purposes as a(n): What is as an ordinary business deduction. ### 500 Assignment of Income Doctrine (AID) and the "fruit-of-the-tree" doctrine. What is The taxpayer may not assign income to another, whether compensation, interest, rents, dividends, or any other form of income. Even if the right to the taxpayer's income has been assigned to and is in possession of another, it must be attributed and be included in the gross income of the taxpayer, not in the income of the assignee. Include Lucas vs. Earl ### 500 Jake, a single individual with a salary of$40,000, paid the following expenses during the year: Alimony: $8,000 Charitable contributions:$2,000 Casualty loss (after $100 floor):$1,000 Mortgage interest on personal residence: $3,000 Moving expenses:$1,500 Student loan interest: $1,000 Contribution to a traditional IRA:$2,000 Analyze the above expenses and determine which ones are deductible for AGI. Please support your position.
What is Only the following expenses are deductible for AGI: alimony, moving expenses, student loan interest, and contribution to traditional IRA. The other expenses, after applying any statutory floors, are deductions from AGI.