John Little who is single is a new client of yours that has come to you with several tax issues with which he needs yourhelp. He is an engineer that has his own practice for which he files a Schedule C and has net income from that of$165,000 for 2021. In addition, he inherited some stock from his mother about 10 years ago for which she paid$4,000, but at her date of death it was worth $25,000. John sold the stock for $42,000 in 2021. Additionally, a friendgifted him a Manet painting valued at $500,000 on June 1, 2019(date of gift), but for which his friend paid nothing as itwas inherited from his great grandmother in 1990. His friend has an appraisal for the painting at the time of his greatgrandmother's death and the value of the painting at her date of death was $200,000. John is thinking of selling thepainting in 2021, but wants your advice as to whether he should sell it this year or next. (Note: John will probably havenet income from his business of about $50,000 in 2022 because he plans to backpack through Europe for about ninemonths in 2022.) During 2021 John also sold a machine for $6,000 that he used in his engineering company that hadan original cost of $32,000 and accumulated depreciation of $32,000. His final question to you relates to the househe lives in which he has maintained as his principal residence since 2005. He is thinking about renting out his house for2022 while he is in Europe and then selling it in 2023 when he returns. He paid $125,000 for the house and put in arecreation room and new kitchen for a cost of $60,000. In addition, he has had the interior and exterior recentlypainted for a cost of $12,000. He thinks he can sell the house for $400,000 in 2023.John wants to know the following:1. What impact do each of the above transactions have on his tax return for 2021? Please refer to specific codesections of the Internal Revenue Code, if appropriate.

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an engineer that has his own practice for which he files a Schedu or 2021. In addition, he inherited some stock from his mother ab at her date of death it was worth $25,000. John sold the stock f Manet painting valued at $500,000 on June 1, 2019(date of gif ed from his great grandmother in 1990. His friend has an apprais er's death and the value of the painting at her date of death was $ 2021, but wants your advice as to whether he should sell it this ye from his business of about $50,000 in 2022 because he plans to (022.) During 2021 John also sold a machine for $6,000 that he cost of $32,000 and accumulated depreciation of $32,000. His fi which he has maintained as his principal residence since 2005 He

an engineer that has his own practice for which he files a Schedu or 2021. In addition, he inherited some stock from his mother ab at her date of death it was worth $25,000. John sold the stock f Manet painting valued at $500,000 on June 1, 2019(date of gif ed from his great grandmother in 1990. His friend has an apprais er's death and the value of the painting at her date of death was $ 2021, but wants your advice as to whether he should sell it this ye from his business of about $50,000 in 2022 because he plans to (022.) During 2021 John also sold a machine for $6,000 that he cost of $32,000 and accumulated depreciation of $32,000. His fi which he has maintained as his principal residence since 2005 He

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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