Question 1

Discuss the tax planning techniques available to a U.S. citizen who is on a foreign job assignment.

Accepted Answer

The answer of Discuss the tax planning techniques available to...

Question 2

A net Sec. 1231 gain is treated as ordinary income to the extent of any nonrecaptured net Sec. 1231 losses for the preceding five years.

Accepted Answer

A net Sec. 1231 gain is treated as ordinary income to the extent of any nonrecaptured net Sec. 1231 losses for the preceding five years, as per IRS regulations.

Question 3

A taxpayer at risk for AMT should consider which of the following decisions?

Accepted Answer

The answer of A taxpayer at risk for AMT should...

Question 4

Why did Congress establish favorable treatment for 1231 assets?

Accepted Answer

Congress established favorable treatment for 1231 assets to allow larger deductions for losses, help business owners replace assets that had declined in value, and encourage the mobility of capital, thus all options are correct.

Question 5

Blair, whose tax rate is 24%, sells one tract of land at a gain of $29,000 and another tract of land at a gain of $11,000. Both tracts of land are Sec. 1231 property. She has never had any other Sec. 1231 transactions. How are the gains taxed?

Accepted Answer

Section 1231 gains are treated as long-term capital gains, which are taxed at a maximum rate of 15% for individuals in the 24% tax bracket.

Question 6

Discuss actions a taxpayer can take if it is anticipated that his income taxes will be substantially underpaid in order to minimize penalties.

Accepted Answer

The answer of Discuss actions a taxpayer can take if...

Question 7

Mark owns an unincorporated business and has $20,000 of Sec. 1231 gains and $22,000 of Sec. 1231 losses. He must report a net capital loss of $2,000 on his tax return.

Accepted Answer

When there is a net loss in Sec. 1231 gains and losses, the net loss is treated as an ordinary loss rather than a capital loss. Therefore, Mark would report a net ordinary loss of $2,000 on his tax return.

Question 8

Pierce has a $16,000 Sec. 1231 loss, a $12,000 Sec. 1231 gain, and a salary of $50,000. What is the treatment of these items in Pierce's AGI?

Accepted Answer

Section 1231 gains and losses are treated as ordinary gains and losses when the losses exceed the gains, resulting in Pierce's AGI being $46,000 ($50,000 salary - $16,000 loss + $12,000 gain).

Question 9

Form 6251, Alternative Minimum Tax, must be filed in any of the following situations except

Accepted Answer

Form 6251 is not required when the earned income tax credit exceeds the tentative minimum tax, as this situation does not trigger the need to calculate or pay the Alternative Minimum Tax.

Question 10

Jeremy has $18,000 of Sec. 1231 gains and $23,000 of Sec. 1231 losses. The gains and losses are characterized as

Accepted Answer

The answer of Jeremy has $18,000 of Sec. 1231 gains...

Question 11

A couple has filed a joint tax return since they were first married. Because of self- employment income and significant investment income, they have made joint quarterly estimated tax payments. Before year- end the couple has divorced, and they will each file their own individual returns. The estimated payments made jointly while still married earlier in the year will be divided evenly between the two individual returns.

Accepted Answer

The answer of A couple has filed a joint tax...

Question 12

Jillian, a single taxpayer, had the following sales of Sec. 1231 property this year: Sale of land A at a gain of $15,000
Sale of land B at a gain of $12,000 Sale of land C at a loss of $8,000
a. Assume Jillian has taxable income from other sources exceeding $500,000. What is the amount of her resultin liability on the property sales?
b. Assume instead that Jillian's taxable income from other sources is less than $15,000. What is the amount of he resulting tax liability on the property sales?
c. Assume instead that Jillian's taxable income from other sources is in the 24% tax bracket. What is the amount resulting tax liability on the property sales?

Accepted Answer

The answer of Jillian, a single taxpayer, had the following...

Question 13

Jaiyoun sells Sec. 1231 property this year, resulting in a $4,000 gain. This is the first time he has disposed of any Sec. 1231 property. Jaiyoun's tax rate is 10%. His tax on the Sec. 1231 gain will be

Accepted Answer

The gain is not taxable because it is the first time Jaiyoun has disposed of any Sec. 1231 property.

Question 14

Lucy, a noncorporate taxpayer, experienced the following Sec. 1231 gains and losses during the years 2013 through 2018. Her first disposition of a Sec. 1231 asset occurred in 2013. Assuming Lucy had no capital gains and losses during that time period, what is the tax treatment in each of the years listed?

Accepted Answer

The answer of Lucy, a noncorporate taxpayer, experienced the following...

Question 15

During the current year, Kayla recognizes a $40,000 Sec. 1231 gain on sale of land and a $22,000 Sec. 1231 loss on the sale of land. Prior to this, Kayla's only Sec. 1231 item was a $10,000 loss six years ago. Kayla is in the 24% marginal tax bracket. The amount of tax resulting from these transactions is

Accepted Answer

The answer of During the current year, Kayla recognizes a...

Question 16

Aamir has $25,000 of net Sec. 1231 gains this year on business assets. In addition, he incurred $18,000 of loss on the sale of stock held six months. Aamir will include in his AGI

Accepted Answer

The net Sec. 1231 gain is an ordinary gain. The loss on the sale of stock is a short-term capital loss. The net capital gain is $25,000 - $18,000 = $7,000.

Question 17

During the current year, Danika recognizes a $30,000 Sec. 1231 gain and a $22,000 Sec. 1231 loss. Prior to this, Danika's only Sec. 1231 item was a $15,000 loss two years ago. Danika must report a(n)

Accepted Answer

The answer of During the current year, Danika recognizes a...

Question 18

During the current year, George recognizes a $30,000 Sec. 1231 gain on sale of land and a $18,000 Sec. 1231 loss on the sale of land. Prior to this, George's only Sec. 1231 item was a $14,000 loss six years ago. George must report a

Accepted Answer

The answer of During the current year, George recognizes a...

Question 19

An individual taxpayer who is self- employed and an active investor has qualified for foreign tax credits, nonrefundable personal tax credits and general business credits. Because he knows there are differing limitations on the application of these credits, with resulting interrelated aspects, he wants to know the appropriate order for their application. The appropriate order of the application of these three classes of tax credits is as follow:

Accepted Answer

The answer of An individual taxpayer who is self- employed...

Question 20

In 2018, Thomas, a single taxpayer who has a marginal tax rate of 10%, sells land that is Sec. 1231 property at a gain of $4,000. If he has no other 1231 transactions or capital asset transactions and has no nonrecaptured 1231 gain, Thomas will pay no tax on the $4,000 gain.

Accepted Answer

Sec. 1231 gains are taxed at a maximum rate of 25%. However, if the taxpayer has no other 1231 transactions or capital asset transactions and has no nonrecaptured 1231 gain, then the Sec. 1231 gain is taxed at the taxpayer's ordinary income tax rate. In this case, Thomas's marginal tax rate is 10%, so he will pay no tax on the $4,000 gain.

Quiz 16: Tax Deductions and Travel Expenses for Employees and Self-Employed Individuals