Federal Tax Week 3 You Decide Essay

As for the combination of cash and new shares, shareholders can take part of their money

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.

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.

John and Jane own and rent out a duplex in Atlanta. They are getting older now and are planning to retire and to move to Miami. John and Jane would like to sell the Atlanta Duplex and purchase a small commercial building next to the lovely condo they bought on the beach. The main issue is John and Jane can only afford to buy this building if they are able to capture all of the existing equity in their Atlanta duplex. To avoid (defer) a taxable event when they sell their duplex John and Jane can utilize Section 1031 of the IRC. There are, however, a few hoops that John and Jane must jump through to qualify.

Once a gain or loss is recognized, a taxpayer must determine how the recognized gain or loss affects the taxpayer’s tax liability. The character depends on a combination of two factors: purpose or use of the asset and holding period. The purpose or use of the asset is important because the law does not treat all assets equally. The general use categories are: (1) trade or business, (2) for the production of income (rental activities), (3) investment, and (4) personal. Based on these criteria, we can categorize an asset into one of three groups: (1) ordinary, (2) capital, or (3) section 1231. Characterizing the gain or loss is important because all gains and losses are not equal. Ordinary gains and losses are taxed at ordinary income rates, regardless of the holding

Generally, a realized gain from sale of personal residence can be excluded from gross income under Exclusion 121. The amount realized is the selling price of the property less any disposition costs. The adjusted basis is then determined and the amount is subtracted from the realized sum. This will give you the amount of loss or gain from the sale of the property. Since the couple occupied the sold home for at least 2 of the last 5 years they fulfill the requirements for exclusion 121 treatment. The exclusion amount for the couple if filing jointly is $500.000 and the calculation would be as follows:

Income taxes- All income generated through a sole proprietorship is taxed by the Internal Revenue Service. This is reported on the owner's personal tax return.

INCOME TAXES – As a sole proprietor all business income or losses must be reported as personal income tax. The business itself is not taxed separately.

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.

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

The federal tax law clearly defines the word “individual” and “married couple.” The Tax Court introduces that petitioner and Mrs. Packard are the first-time homebuyer pursuant to paragraph (1) and paragraph (6) respectively, which is from the perspective of each individual. The Court of Appeals states that the Packards is a single inseparable unit for purposes of determining first-time homebuyer eligibility. In my opinion, I think the Court of Appeals is more clear and accurate in explaining the tax system.

During the transaction, if the transferor receives boot, section 351(b) requires them to recognize the gain (capital, long-term, or short-term) equal to the lessor of the gain that would be recognized under section 1001 if the transferor were treated as selling property transferred and the fair market value of the boot received. Under section 351(b)(2), no such loss of any realized loss to be recognized (4)(8).

The distribution of the net proceeds from the sale of the real estate will result in U.S. tax liability of $200K, which will be offset by attributes carried over from prior years.

The issue in this case is whether Jim proceeds from the sale of the town houses are ordinary income within Income Tax Assessment

Breaking down self-employment tax can be classified into two realms. First being in the form of an individual’s income derived by their trade or business and the second being the income or loss by the individual’s partnership of said trade or business. This self employment tax is levied on income in excess of $400 and is in exclusion of real estate rentals, dividends, interest, capital gains tax,