Individual Income Taxes
43rd Edition
ISBN: 9780357109731
Author: Hoffman
Publisher: CENGAGE LEARNING - CONSIGNMENT
expand_more
expand_more
format_list_bulleted
Question
Chapter 7, Problem 42P
To determine
State the implications of the loss for Person T and Person P.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
In the early part of 2021, the partners of Hugh, Jacobs, and Thomas sought assistance from a local accountant. They had begun a new
business in 2020 but had never used an accountant's services.
Hugh and Jacobs began the partnership by contributing $155,000 and $105,000 in cash, respectively. Hugh was to work occasionally
at the business, and Jacobs was to be employed full-time. They decided that year-end profits and losses should be assigned as
follows:
• Each partner was to be allocated 10 percent interest computed on the beginning capital balances for the period.
• A compensation allowance of $8,000 was to go to Hugh with a $25,000 amount assigned to Jacobs.
• Any remaining income would be split on a 4:6 basis to Hugh and Jacobs, respectively.
In 2020, revenues totaled $180,000, and expenses were $149,000 (not including the partners' compensation allowance). Hugh
withdrew cash of $9,000 during the year, and Jacobs took out $14,000. In addition, the business paid $8,000 for repairs…
In the early part of 2021, the partners of Hugh, Jacobs, and Thomas sought assistance from a local accountant. They had begun a new business in 2020 but had never used an accountant’s services.
Hugh and Jacobs began the partnership by contributing $125,000 and $75,000 in cash, respectively. Hugh was to work occasionally at the business, and Jacobs was to be employed full-time. They decided that year-end profits and losses should be assigned as follows:
Each partner was to be allocated 10 percent interest computed on the beginning capital balances for the period.
A compensation allowance of $7,000 was to go to Hugh with a $21,000 amount assigned to Jacobs.
Any remaining income would be split on a 4:6 basis to Hugh and Jacobs, respectively.
In 2020, revenues totaled $150,000, and expenses were $131,000 (not including the partners’ compensation allowance). Hugh withdrew cash of $7,000 during the year, and Jacobs took out $12,000. In addition, the business paid $8,000 for repairs…
In the early part of 2020, the partners of Manuel, Benjamin, and Solomn went to local accountant seeking assistance. They had begun a new business in 209 but had never previously used the services of accountant. Manuel and Benjamin began the partnership by contributing P 80,000 and P30,000 in cash, respectively. Manuel was to work occasionally at the business whereas Benjamin would be employed full time. They decided that year-end profits and losses should be assigned as follows:
- Each partner was to be allocated 10 percent interest computed on the beginning capital balance for the period.
- A compensation allowance of P5,000 was to go to Manuel with P20,000 amount assigned to Benjamin.
- Any remaining income would be split on a 4:6 basis to Manuel and Bejamin respectively.
In 2019, revenues totalled P90,000 with expenses reported as P64,000 (not including the compensation allowance assigned to the partners). Manuel withdrew cash of P8,000 during the year while Benjamin took out…
Chapter 7 Solutions
Individual Income Taxes
Ch. 7 - Prob. 1DQCh. 7 - Prob. 2DQCh. 7 - Prob. 3DQCh. 7 - Prob. 4DQCh. 7 - Many years ago, Jack purchased 400shares of Canary...Ch. 7 - Scan is in the business of buying and selling...Ch. 7 - Prob. 7DQCh. 7 - Prob. 8DQCh. 7 - Prob. 9DQCh. 7 - Prob. 10DQ
Ch. 7 - Prob. 11DQCh. 7 - Prob. 12DQCh. 7 - Prob. 13DQCh. 7 - Prob. 14DQCh. 7 - Prob. 15DQCh. 7 - Prob. 16DQCh. 7 - Prob. 17DQCh. 7 - Prob. 18DQCh. 7 - Prob. 19DQCh. 7 - Prob. 20DQCh. 7 - Last year Aleshia identified 15,000 as a...Ch. 7 - Prob. 22CECh. 7 - Prob. 23CECh. 7 - Prob. 24CECh. 7 - Prob. 25CECh. 7 - Belinda was involved in a boating accident in...Ch. 7 - Prob. 27CECh. 7 - Prob. 28CECh. 7 - Prob. 29CECh. 7 - Phillis and Trey are married and file a joint tax...Ch. 7 - Emily, who is single, sustains an NOL of 7,800 in...Ch. 7 - Prob. 32PCh. 7 - Monty loaned his friend Ned 20,000 three years...Ch. 7 - Sally is in the business of purchasing accounts...Ch. 7 - Prob. 35PCh. 7 - Prob. 36PCh. 7 - Olaf lives in the state of Minnesota. In 2019, a...Ch. 7 - Prob. 38PCh. 7 - On July 24 of the current year, Sam Smith was...Ch. 7 - Prob. 40PCh. 7 - During 2019, Leisel, a single taxpayer, operates a...Ch. 7 - Prob. 42PCh. 7 - Prob. 43PCh. 7 - Xinran, who is married and files a joint return,...Ch. 7 - During 2019, Rick and his wife, Sara, had the...Ch. 7 - Soong, single and age 32, had the following items...Ch. 7 - Prob. 47PCh. 7 - Prob. 48PCh. 7 - Assume that in addition to the information in...Ch. 7 - Jed, age 55, is married with no children. During...Ch. 7 - Prob. 51CPCh. 7 - Mason Phillips, age 45, and his wife, Ruth, live...Ch. 7 - During 2019, John was the chief executive officer...Ch. 7 - Prob. 2RP
Knowledge Booster
Similar questions
- Sherry Lockey, who is single, has a new limited partnership investment in a commercial rental project in which she has no personal involvement. During 2021, her share of the partnership loss equals $15,000. Sherry also has a new rental house that she actively manages, and this activity generated a $9,000 loss for 2021. Sherry had no passive loss carryover from prior years. If Sherry's modified adjusted gross income before passive losses is $138,000, calculate the deduction amounts for Sherry's 2021 tax return using Form 8582 (page 1). If an amount box does not require an entry or the answer is zero, enter "0". Note: If required, use the minus sign to enter a "loss" as a negative number on the lines 1d, 3d, 4, and 16. However, per the instructions on the tax return, enter all numbers in Part II as positive amounts. Form 8582 Department of the Treasury Internal Revenue Service (99) Name(s) shown on return Sherry Lockey Part I 2021 Passive Activity Loss Caution: Complete Parts IV and V…arrow_forwardIn 2018, Kirk invested $50,000 in a general partnership in which he materially participates (passive activity loss limits do not apply). The business incurs a first-year loss in 2018, and Kirk’s share of the business’ deductible loss was $27,000. What amount of the $27,000 loss is allowed under the at-risk rules in 2018? Enter the allowed loss amount as a positive number.arrow_forwardKATY, a sole proprietor wanted to expand her profitable business but she does not have enough resources. So, she thought of inviting PERRY to join her and formed a partnership on April 1, 2020. Just before admission, KATY had the following assets and liability accounts: Cash - ₱420,000; Accounts receivable -₱380,000; Inventories -₱250,000;Notes payable -₱100,000. PERRY agreed to contribute cash equal to 30% of KATY’s capital after considering the following adjustments: (a) 2% allowance for bad debts should be recognized, (b) the inventories have fair market value equal to 120% of the balance. How much should Perry contribute to the partnership?arrow_forward
- KATY, a sole proprietor wanted to expand her profitable business but she does not have enough resources. So, she thought of inviting PERRY to join her and formed a partnership on April 1, 2020. Just before admission, KATY had the following assets and liability accounts: Cash - ₱420,000; Accounts receivable -₱380,000; Inventories -₱250,000; Notes payable -₱100,000. PERRY agreed to contribute cash equal to 30% of KATY’s capital after considering the following adjustments: (a) 2% allowance for bad debts should be recognized, (b) the inventories have fair market value equal to 120% of the balance. How much is the total assets of the partnership after the formation? *arrow_forwardGlen,Dale,and Al are partners who own Fizz.Glen made a capital contribution of $5000,Dale's was $15 000,and Al's was $10 000.Glen is a general partner and he oversees the management of the Fizz business.The partnership borrowed $30 000 from the bank.The partners have no agreement relating to the sharing of profits and losses.Fizz became insolvent and unable to repay the loan.The bank sued Dale personally and recovered the full $30 000 from him.Dale then sued Glen.When Dale's lawyer provided him with advice,what amount did she likely indicate he would be able to legally recover from Glen? A) $5000 B) $10 000 C) $15 000 D) $20 000arrow_forward9. Angela and Thomas are planning to start a new business. Thomas will invest cash in the business but not be involved in day-to-day operations. Angela plans to work full-time overseeing business operations. The two currently project that the business will generate $200,000 of annual taxable income before consideration of any payments to Angela for her services. Both agree that Angela's services are worth $100,000 Angela and Thomas plan to form a passthrough entity but are unsure whether to choose a partnership or an S corporation. In either case, they will be equal owners of the entity. Given their other sources of income, both Thomas and Angela have a 37 percent marginal tax rate on ordinary income. (Ignore any payroll or self employment tax consequences.) a. If the business is operated as a partnership, calculate ordinary income allocated to each owner, and explain the treatment by the partnership and by Angela of her $100,000 payment for services. b. If the business is operated as…arrow_forward
- At the end of 2015, Klaproth finds himself in a difficult situation. He is a partner in a residential construction company, and the housing market has been adversely impacted by interest rates, mortgage defaults, and a surplus of existing homes for sale. As a result, Klaproth and certain other partners are considering ceasing operations as of year-end 2015 and liquidating the partnership. Values of liquidated net assets are estimated to be as follows:Item Book Value Market ValueCash . . . . . . . . . . . . . . . . . . . . . . . . $ 120,000 $ 120,000Noncash assets . . . . . . . . . . . . . . . . 1,500,000 1,380,000Liabilities . . . . . . . . . . . . . . . . . . . . . 1,400,000 1,350,000Klaproth, capital . . . . . . . . . . . . . . . 110,000Stone, capital . . . . . . . . . . . . . . . . . 20,000Jackson, capital . . .…arrow_forwardJack and Jill decided to pool their money and start a water delivery business. Since they trust each other so much, they did not draw up any legal documents for the business. During the first year of business, they earned $50,000 which was net of $10,000 paid to Jill as a guaranteed payment. During the second year of business, they decided to limit their liability exposure by forming an LLC. Was a partnership formed during the first year? If a partnership was formed, how much income will be taxed at the partnership level? For the second year, do they need to file a partnership tax return?arrow_forwardOn January 2, 2021, Abel, Cain and Josuah formed a partnership. Abel contributed cash of P 100,000 and a delivery equipment that originally costs him P 120,000, but with a secondhand value of P500,000. Cain contributed P 160,000 in cash. Josuah, whose family sells office equipment, contributed P 50,000 in cash and office equipment that cost his family's dealership P 100,000 but with a regular selling price of P 120,000,the partnership reported net income of P 120,000. On December 31, 2021, what would be the capital balance of the partners? Abel Php257,000 Cain Php200,000 A Josuah Php192,500 Abel Php187,500 Cain Php200,000 Josuah Php212,500 Abel Php190,000 (c) cain Php200,000 Josuah Php210,000 Abel Php260,000 D Cain Php200,000 Josuah Php190,000arrow_forward
- In 2021, Lena invests $30,000 for a 20% limited partnership interest in an activity in which she is NOT a material participant. Lena's share of the partnership losses is $40,000 in 2021. Her income consists of income from her medical practice in the amount of $250,000 and $4,000 from another passive activity. (a) How much loss from the activity is allowable under the at-risk rules? (b) How much loss from the activity is deductible under the passive loss rules?arrow_forwardFiona purchased 200 shares of Oxygon stock for $11 a share on August 11, 2020. On July 28, 2021, the price had fallen to $8. Concerned that the price might decline further, Fiona sold all her shares that day. She later regretted this move, and on August 7, 2021, she repurchased the stock when it was $10 a share. What is Fiona's 2021 capital gain or loss on these transactions? No gain or loss will be reported. $100 short-term loss. $200 short-term loss. $300 short-term loss.arrow_forwardIn 2021, Lena invests $30,000 for a 20% limited partnership interest in an activity in which she is NOT a material participant. Lena's share of the partnership losses is $40,000 in 2021. Her income consists of income from her medical practice in the amount of $250,000 and $4,000 from another passive activity.(a) How much loss from the activity is allowable under the at-risk rules? (b) How much loss from the activity isarrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
- Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT
Individual Income Taxes
Accounting
ISBN:9780357109731
Author:Hoffman
Publisher:CENGAGE LEARNING - CONSIGNMENT