1. (TCOs 1 and 2) Discuss the differences between federal court and the United States Tax Court for litigating tax issues. (Points : 20)
Question2.2. (TCOs 1, 2, 3, and 5) During the year, Marcus had the following transactions: Long-term loss on the sale of business use equipment: $6,000 Long-term loss on the sale of personal use camper: $2,000 Long-term gain on the sale of personal use boat: $1,000 Short-term loss on the sale of stock investment: $3,000 Long-term loss on the sale of land investment: $4,000 How are these transactions handled for income tax purposes? Explain your answer.
Question 3.3. Gladys owns a retail hardware store in Tangipahoa. She is considering opening a business in Hammond, a community located 25 miles away. She incurs expenses of $60,000 in 2011 in investigating the feasibility and desirability of doing so. What amount can Gladys deduct in 2011 if the business is
I. another retail hardware store which she opens in December 2011?
II. another retail hardware store which she decides against opening?
III. a video rental store which she opens in December 2011?
IV. video rental store which she decides against opening?
Question 4.4. In 2011, Jean earns a salary of $150,000 and invests $20,000 for a 20% interest in a partnership not subject to the passive loss rules. Through the use of $400,000 of nonrecourse financing, the partnership acquires assets worth $500,000. The activity produces a loss of $75,000, of which Jean's share is $15,000. In 2012, Jean's share of the loss from the partnership is $7,500. How much of the loss from the partnership can Jean deduct?
Question 5.5. Rustin bought used, 7-year class property on May 15, 2011, for $500,000. Rustin elects § 179 and straight-line cost recovery. Rustin's taxable income would not create a limitation for purposes of the § 179 deduction. If Congress reenacts additional first-year depreciation for 2011, Rustin elects not to take additional first-year depreciation. Determine the write-off Rustin can take in 2011.
Question 6.6. Ollie owns a personal use car for which he originally paid $42,000. He trades the car in on a sports utility vehicle (SUV), paying the automobile dealer cash of $24,000. If the negotiated price of the SUV is $45,000, what is Ollie's recognized gain or loss and his adjusted basis for the SUV?
Question 7.7.Homer (age 68) and his wife Jean (age 70) file a joint return. They furnish all of the support of Luther (Homer's 90-year-old father), who lives with them. For 2011, they received $6,000 of interest income on city of Chicago bonds and interest income on corporate bonds of $48,000. Compute Homers and Jean's taxable income for 2011.
Question 8.8.Rachel lives and works in Chicago. She is the regional sales manager for a national fast food chain. Due to unusual developments, she is compelled to work six straight weeks in the St. Louis area. Instead of spending the weekend there, she flies home every Friday night and returns early Monday morning. The cost of coming home for the weekend approximates $500. Had she stayed in St. Louis, deductible meals and lodging would have been $600. How much, if any, may Rachel deduct as to each weekend?