Aca1 Task 2 Individual Federal Tax Return

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

Note: (1) The building is subject to a nonrecourse liability of $10,000, which is assumed by the partnership.

In summary, John and Jane would not be able to use 1031 tax exchange to purchase the new more expensive home. Due to the gain of buying an expensive house, it would not be considered “like-kind”. The additional money that is paid to acquire this

A corporation that distributes property that has appreciated in value must recognize a gain at the time of distribution. The corporation is treated as if it had sold the property. The gain equals the property 's fair market value less its adjusted basis. Code Sec. (b). However, the corporation does not recognize a loss if the property had declined in value. Also, the corporation recognizes no gain or loss if t distributes its own stock rights to its shareholders. Code Sec. (a). The character of the recognized gain depends on the property distributed; thus it may be ordinary income, capital gain, or Section 1231 gain.

In 2013 Marianne sold land, building and equipment with a combined basis of $150,000 to an unrelated third party and in return received an installment note of $80,000 per year for five years. Of the $250,000 gain on sale, $150,000 was classified as Section 1245 gain and the remaining $100,000 was Section 1231 gain. In 2013, Marianne had a capital loss carryover of $60,000, $50,000 of which she used to offset her Section 1231 gain; she recognized no Section 1245 gain. The following year she recognized $40,000 of 1245 gain and $10,000 of Section 1231 gain which she promptly offset with the last $10,000 of the capital loss carryover. In 2015, she recognized $50,000 Section 1245 gain and no Section 1231 gain.

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.

Passive activity is an activity in which an investor can earn profit from an activity in which he/she does not physically participate, including rentals and limited partnerships. In this scenario the couple has one rental property from which they received revenue that can be classified as passive income. The passive income has generated a net loss of $6,200. Since the couple has hired a realty company to manage their rental property then the loss must be carried over to the following year. These losses are reported on Form 8582. The $44,000 profit earned from the sale of the third rental property also needs to be reported but will be taxed as Long Term Capital Gains and will be entered as “Other gains or (losses)” using Form 4797.

From the two filing statuses that the couple can use, the most advantageous for them would be married filing jointly and not married filing separately.

The log maintained by the couple indicates that the couple used 14 guaranteed personal days. If even 1 out of the 28 days that the couple partially or fully worked on the house is considered a personal day than the 14-day provision is violated. However, if none of those days turn out to be considered personal days then the loss in excess over rental income can be deducted according to section 280A. Section 183(a) permits no allowable deductions for activities not found to be engaged in for profit. However, we found that the Harrell’s activities are found to be engaged in for profit and should therefore be allowed these deductions.

The other option afforded to the Ouray’s is to file separately as a married couple. Filing separately can be advantages under special circumstances. However, if the couple was to file separately, there are several restrictions. First being, that if one spouse cannot demonstrate more than one-half of a child’s support is provided by them, a multiple-support agreement must be filed. Next, if one taxpayer itemizes their deductions they must both take itemized deduction and same goes if one person takes a standard deduction, the other must as well. If filing status was to be separate, neither spouse can claim the earned income credit and the credit for child and dependent care expenses. Next, no deduction is allowed for the interest paid on educations loans, and only $1,500 of excess capital losses can be claimed by each person.

This year, you sold your former primary residence (which was purchased in 2010), and were concerned about the tax effects that this sale would have on your return. Although the sale of your home resulted in a realized gain, it will not increase your gross income on your 2014 tax return. This is because the amount of gain you earned on the sale falls inside the allowable excludable limit offered for taxpayers selling their personal residences. Additionally, though taxpayers are typically required to repay the amount of the First-Time Homebuyer Tax Credit claimed in the year of purchase when their home is sold, you are not required to. This is because an exception was made for homebuyers in 2009 and 2010, for which the recapture of the credit was waived.

The taxpayer elects the benefits of the relief within two years once the audit of the joint tax return began.

Section 1231 property is mainly personal depreciable property used in a trade or business that is held for more than one year. Section 1231 property also includes livestock and natural resources but does not include inventory and property held for sale in the ordinary course of business. For example, a forklift purchased by a wholesaler to move pallets is section 1231 property. If the same company purchases the same forklift with the intention to resell it to another business, because they sell forklifts, cannot treat it as section 1231 property but rather inventory. A company that recognizes a loss on section 1231 property treats this loss as an ordinary loss. Gains are split into two categories: Section 1231 gains and Section 1245 gains.

A married couple can choose whether to file joint or separate. They are able to do the with-and-without calculation and figure out which is more beneficial to them so I would leave as is for

Net book value at end of year 1 is $8,793. Less what you received on the sale $7,500. Gives you a disposal loss of $1,293 using the straight-line method of depreciation. You then add the disposal loss from the previous years depreciation $1,880, which results in a total income statement impact of $3,173.