federal taxation problems 459318

Chapter 8 home work

31. On November 4, 2009, Blue Company acquired an asset (27.5-year residential real property) for $200,000 for use in its business. In 2009 and 2010, respectively, Blue took $642 and $5128 of cost recovery. These amounts were incorrect because Blue applied wrong percentage (i.e. those for 39-year rather than 27.5-year). Blue should have taken $910 and $7272 cost recovery in 2009 and 2010. On January 1, 2011, the asset was sold for $180000. Calculate the gain or loss on the sale of the asset in 2011.

34. Western acquires used office machine (seven-tear class asset) on November 2, 2011, for $75000. This is the only asset acquired by western during the year. He does not elect immediate expensing under ss179. On September 15, 2012, western sells the machine.

a. determine Weston’s cost recovery for 2011

b. determine Weston’s cost recovery for 2012

38. On April 3, 2011, Terry purchased and placed in service a building. The building cost $2 million. An appraisal determined that 25% of the total cost was attributed to the value of the land. The bottom floor of the building is leased to a retail business for $32000. The other floors of the building are rental apts. With the annual rent of $160000. Determine Terry’s cost recovery for 2011.

39. On May 5, 2011, Christy purchased and placed in service a hotel. The hotel cost$1.8 million. Calculate Christy’s cost recovery for 2011. For 2021.

41. on April 20, 2011, Ralph purchased new equipment to be used in his farming business. The cost of the equipment is $150000. Ralph does not elect immediate expensing under ss 179; nor does he elect to not have the uniform capitalization rules apply. Compute Ralph’s cost recovery for 2011.

46. Olga is proprietor of small business. In 2011, the business income, before consideration of any cost recovery or ss 179 deduction, is $750000. Olga spends $2,050,000 on new seven-year class assets and elects to take the ss 179 deduction on them. She elects not to take additional first year depreciation. Olga’s cost recovery deduction for 2011, except for the cost recovery with respect to the new seven-year assets is $95000. Determine Olga’s total cost recovery for 2011 with respect to the seven-year assets and the amount of any ss 179 carry forward.

49. On October 15, 2011, John purchased and placed in service a used car. The purchase price was $25000. This was the only business use asset john acquired in 2011. He used the car 80% of the time for business and 20% for personal use. John used the statutory percentage method of cost recovery. He elects not to take additional first-year depreciation. Calculate the total deduction John may take for 2011 with respect to the car.

52. on may 28, 2011, Mary purchased and placed in service a new $20000 car. The car was used 60% for business, 20% for production of income, and 20% for personal use in 2011. In 2012, the usage changed to 40% for business, 30% for production of income, and 30% for personal use. Mary did not elect immediate expensing under ss 179. She elects not to take additional first-year depreciation. Compute the cost recovery and any cost recovery recapture in 2012.

54. Dennis Harding is considering acquiring a new automobile that he will use 100% for business. The purchase price of the automobile would be $35000. If Dennis leased the car for five years , the lease payments would be $375 per month. Dennis will acquire the car on January 1, 2011. The inclusion dollar amounts from the IRS table for the next five years are $40, $87, $130, $156, and $179. Dennis desires to know the effect on his adjusted gross income of purchasing versus leasing the car for the next five years. He elects not to take additional first-year depreciation. Write a letter to Dennis and present your calculations. Also, prepare a memo for the tax files. His address is 150 Avenue I, Memphis, TN 38112.

57. Mike Saxon is negotiating the purchase of a business. The final purchase price has been agreed upon, but the allocation of the purchase price to the assets is still being discussed. Appraisals on a warehouse range from $1.2 million to $1.5 million. If a value of $1.2 million is used for a warehouse, the remainder of the purchase price, $800,000 , will be allocated to goodwill. If $1.5 million is allocated to the warehouse, goodwill be $500,000. Mike wants to know what affect each alternative will have on cost recovery and amortization during the first year. Under the agreement, Mike will take over the business on January 1 of next year. Write a letter to Mike in which you present your calculations and recommendation. Also, prepare a memo for the tax files. Mikes address is 200 Rolling Hills Drive, Shavertown, PA 18708.