(a) Sybil is a florist who operates a shop in Daly City. She is considering opening a restaurant in downtown Oakland. In 2021, she spent $51,200 on market research to determine demand for a restaurant in downtown Oakland. Based on the research, she decides to open the shop on March 1, 2021. May she deduct the $51,200? If so, how much may she deduct in 2021? (b) Sybil is also considering opening a flower shop in downtown San Francisco. She spent $52,000 on market research to determine demand for flowers in downtown San Francisco. Based on the research, she decides not to open the flower shop. May she deduct the $52,000? If so, how much may she deduct in 2021?
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- You own a construction company and have recently received a contract with the local school district to refurbish one of its elementary schools. You are given an up-front payment from the school district in the amount of $5 million. The contract terms extend from years 2018 to 2020. When would you recognize revenue for this payment? What method of accounting would you use for this construction project and why? What would be the benefits and challenges with your method selection? Give an example of your distribution selection and associated costs of the project (you may estimate based on other industry competitors). What might be some benefits and challenges associated with the other method of construction revenue recognition?Michiko and Saul are planning to attend the same university next year. The university estimates tuition, books, fees, and living costs to be 12,000 per year. Michikos father has agreed to give her the 12,000 she needs to attend the university. Saul has obtained a job at the university that will pay him 14,000 per year. After discussing their respective arrangements, Michiko figures that Saul will be better off than she will. What, if anything, is wrong with Michikos thinking?While she was a college student, Angel lived by a bookstore located near campus. She thinks a bookstore located on the other side of campus would be successful. She incurs expenses of $42,800 (legal fees, accounting fees, marketing survey, etc.) in exploring its business potential. Her parents have agreed to lend her the money required to start the business. What amount of these investigation costs can Angel deduct if she opens the bookstore on August 1, 2019.
- 2. Warren owns a marketing business. He travels to Maryland in May 2020 to discuss acquiring an accounting business. In June Warren travels to Georgia to discuss acquiring a pizza shop. Warren does not acquire the accounting business but does purchase the pizza shop on December 2, 2020. Total costs to investigate acquiring the accounting business $25,000. Total costs to investigate acquiring the pizza shop $52,000. What is the maximum amount Warren can deduct in 2020 for investigating these businesses? How will he show this on his tax return? Calculate the deduction that Warren can take on his tax return for 202o.Amy is trying to decide whether or not it would be beneficial to employ the services of a real estate broker in order to facilitate the sale of her home. She has estimated that the marketing costs and opportunity cost associated with time spent dealing with prospective buyers amounts to $5,000. If Amy were to sell the house on her own for $200,000, but a broker would have been able to negotiate a higher price of $208,556, what commission rate should Amy have been willing to accept from a real estate broker to make her indifferent between selling the house on her own and hiring a real estate broker? 2.4% ● 3.1% 5.0% 6.5%During 2020, Sandra Von Arb acquired a four-unit apartment building for $230,000. While it was her intention to operate the building as a rental property, one month after her purchase she received an unsolicited offer to purchase the building for $280,000. She accepts the offer. Should the $50,000 be treated as a capital gain or as business income? Justify your conclusion.
- Anna Osinski acquired a townhouse unit in 2019 for $120,000 (land $10,000, building $110,000). She bought the unit in order to rent it. By the end of 2021, the undepreciated capital cost of the building was $103,500. In August 2022, Anna decided to live in the unit herself. At that time, similar townhouses were selling for $136,000 (land $12,000, building $124,000). Prior to August, her 2022 net rental income before capital cost allowance was $1,000. In September 2022, Anna purchased, for rental purposes, a residential condominium unit for $145,000 (land $15,000, building $130,000). Between September and the end of the taxation year, the condo earned net rentals of $900 before capital cost allowance. Required: Determine the Change to Anna's 2022 net income for tax purposes as a result of the above activity. Change to net income $ 0the kerwins are selling their home in order to assist in providing their input for a house they have decided to purchase for $16,000,000. the sale agreement on the house being purchased requires a deposit of 20 percent plus closing costs of $800,000 to be paid on signing on August 31,2018. the balance of the purchase price (second deposit) that is not being financed by mortgage loan is due on September 30,2018, the date on which the sale is to be closed. currently, the kerwins have a mortgage balance of @2,000,000 on their old home, which has appraised at $8,000,000. a purchaser has been identified but the proceeds from the sale of this property will not be received until december 30,2018. the kerwins have been pre-approved by local building society to qualify for a 25-year mortgage of $11,000,000 on the new house. this will attract an interest of 5.50% per annum with monthly compounding. in the mean time rbnc bank ltd, a commercial bank, is offering a bridging loan at a rate of 8.50%…Dilly’s dream was to open a cookie shop, so she did her homework carefully be-fore finally opening “Dilly’s Delights” on July 1, 2019. Before that date she had incurred the following “soft costs” – $12,000 realtor’s fee for finding a storefront to rent, $16,000 attorneys’ fees for negotiating a lease and trademark services, $8,000 wage expense for employees during the pre-opening period, and $18,000 for pre-opening TV and other advertising. Calculate and state the exact amount that you, in preparing Dilly’s 2019 return, will enter as her 2019 start-up costs deduction. Note: There’s no useful reason to show your work here because there’s only one correct dollar-amount answer; no explanation of an incorrect answer will help.
- Dilly’s dream was to open a cookie shop, so she did her homework carefully be-fore finally opening “Dilly’s Delights” on July 1, 2019. Before that date she had incurred the following “soft costs” – $12,000 realtor’s fee for finding a storefront to rent, $16,000 attorneys’ fees for negotiating a lease and trademark services, $8,000 wage expense for employees during the pre-opening period, and $18,000 for pre-opening TV and other advertising. Calculate and state the exact amount that you, in preparing Dilly’s 2019 return, will enter as her 2019 start-up costs deduction.In 2020, Regina moved across the country from the east coast to the west coast. She was moving because the advertising agency she worked for wanted her to relocate to work with a big new client the company had landed on the west coast. Her company reimbursed $7,500 of moving expenses (her total cost for the move), and her total wages for the year were $110,000 While living on the west coast, she began volunteering for a children's hospital doing public relations for their office. She estimated her time volunteering at the hospital during the year was worth $7,000. She also paid $350 in professional ducs to the American Association of Advertising Agencies the beginning of the year, which was rimbursed by her employer. Determine Regina AG for 2020. a. None of the above. b. $117,500 c. $110.150 d. $110,000 e. $117,150Toni asked Adler, a real estate broker, exclusive agency to sell her farm house, and promised to pay 5% commission on the sale. Toni’s friend, Deena, approached her to buy the farm house at $100,000 on 24th Nov 2010 and Toni decided to sell the farmhouse to Deena, entering into an agreement. On 1st Dec 2010 Alder found a buyer for the farmhouse who was ready to purchase the farmhouse at $105,000. However, the sale could not take place due to the prior agreement with Deena. What commission is Alder entitled to receive for this job? A. 5% of $100,000 i.e. $5,000. B. Half of 5% of $100,000 i.e. $2,500. C. 5% of $105,000 i.e. $5,250. D. Half of 5% of $105,000 i.e. $2,725. E. $0, because Toni had found the buyer.