Judy has established a successful soup and bagel fast food restaurant, Soup for the Soul. At the beginning of the year, she had a balance of $13,000 in her cumulative eligible capital account. Over the years, she has deducted total EC amounts of $4,600 from her business income. Judy then sold an unlimited franchise of Soup for the Soul for $60,000 and incurred expenses of $3,000 in completing the sale. What will be the increase in Judy's taxable income as a result of the sale? O a) $4,600 Ob) $16,767 Oc) $19,833 O d) $21,367
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- During the last five months of the year, Dwana opens a new Internet telecommunications business called Dwan-Com. Dwan-Com bills 50,000 of revenues, but receives only 40,000 cash. Dwan-Com incurs 3,000 of supply expenses, and 41,000 of labor costs. Dwan-Com pays for 2,200 of the supplies and 38,000 of the labor costs in the current year. a. What is Dwan-Coms taxable income if it elects the cash method of accounting? b. What is Dwan-Coms taxable income if it elects the accrual method of accounting? c. What method of accounting do you recommend that Dwan-Com elect?Renee operates a proprietorship selling collectibles over the Web, and last year she purchased a building for $24 million for her business. This year, Rene’s proprietorship reported revenue of $95.5 million and incurred total expenses of $88.6 million. Her expenses included cost of goods sold of $48.5 million. Sales commissions paid of $16.9 million. $10.5 million of interest paid on the building mortgage, and $12.7 million of depreciation. What’s Renee’s adjusted taxable income for purposes of calculating the limitation on business interest expense? What is the maximum amount of business interest expense that Renee can deduct this year, and how is the disallowed interest expense (if any) treated? Suppose that Renee’s revenue includes $5 million of business interest income. What is the maximum amount of business interest expense that could be deducted this year under the business interest limitation?Your client's wife died this year with a gross estate valued at $5.5 million, which included two solely owned apartment buildings, each valued at $2 million. Debts and expenses payable by her estate are estimated at $250,000. During the past three years, she gave most of the rents from the apartment buildings directly to her son's university to pay for his graduate school tuition. She and your client owned a personal residence worth $1 million as joint tenants with right of survivorship. Her will, which appoints her brother executor, leaves all her solely owned property to her son with the remainder to your client. If your client's major objective is to maximize his share of his wife's estate, which one of the following is the most advisable postmortem action for him to take? A) Petition the executor to elect installment payment of estate taxes under IRC Section 6166 B) Consent to split gifts made by his wife to her son during the last tax year C) Make an election…
- Colin owns and operates Colin's Creative Coaching (3C), a sole proprietorship. 3C sponsors a 401(k)/ profit-sharing plan. Colin had net income of $200,000 and paid self-employment taxes of $20,000 (assumed) during the year. Assuming Colin is over the age of 50, what is the maximum amount that Colin and his company can contribute on his behalf to the plan for 2020? a. $25,000. b. $57,000. C. $63,500. d. $64,000.Tyson owns a condominium near Laguna Beach, California. This year, he incurs the following expenses inconnection with his condo:Insurance $ 1,000Mortgage interest 7,500Property taxes 3,200Repairs and maintenance 800Utilities 1,700Depreciation 5,700During the year, Tyson rented the condo for 100 days, receiving $25,000 of gross income. He personallyused the condo for 60 days. Assume Tyson uses the Tax Court method of allocating expenses to rental useof the property. Tyson itemizes deductions, and the sum of his itemized deduction for non-home businesstaxes and the real property taxes allocated to rental use of the home is less than $10,000. What is Tyson'snet rental income for the year (assume this is not a leap year)?Tom and Davidson go into business together as a partnership selling computer software through the Internet. On January 1 they each put $6,000 as capital and this goes into their local bank account for the company. They bought computer equipment for $10,000 in which they paid by check and set up for business in Davidson's dad's basement. The cost of computer equipment will be amortized over the next three years with a disposable value of $1000. Davidson's dad has agreed to let them operate out of his basement if they pay him a rent of 10% of their annual profit or $1,200 per year whichever is greater. At the end of the first month of business, they have made no sales and incurred no expenses other than the amortization rate of the computer equipment and the rent which is owed to Davidson's dad. At the end of January, what is the accounting equation (assets, liabilities and equity)
- Ming and Denise, mother and daughter, operate a local restaurant as an LLC. The MD LLC earned a profit of $200,000 in the current year. Denise’s equal partnership interest was acquired by gift from Ming. Assume that capital is a material income-producing factor and that Ming manages the day-to-day operations of the restaurant without any help from Denise. Reasonable compensation for Ming’s services is $50,000. How much of the LLC’s income is allocated to Ming? What is the maximum amount of the LLC’s income that can be allocated to Denise? Assuming that Denise is 15 years old, has no other income, and is a dependent of Ming, how is Denise’s income from the LLC taxed?You are to refer to Kate Minimart operation below: Kate operates a minimart store located in a private estate. She invested $20,000 of her own funds and took an additional $10,000 bank loan to pay for the renovation and store fittings totaled $22,000, balance funds to use for operation needs. Kate paid a monthly rent of $5,000 for the store. The minimart sells a variety of goods estimated a total worth of $10,000. All sales are on cash basis amounting to about $12,000 to $14,000 each month. Kate is at a loss how to prepare the accounts for her business. You will perform the following: (0) Select an accounting principle and explain how it can be applied to Kate Minimart 3(iii) (iv) element Select THREE (3) transactions that Kate Minimart performs and illustrate their effect on the accounting equation. Select ONE (1) financial statement to prepare at period end. Describe the following: -the purpose of preparing the statement the key components ONE (1) user and how he can use its information provide a brief format of the selected financial statement (with no numbers).
- Greene operates a parking lot that yielded net income of $13,000 during the current year. The only other transactions that Mr. Greene had during the year were: 1) a gain of $16,000 on the sale of some Dell Corporation stock that he bought two years ago; 2) a loss of $10,000 on the sale of one acre of the land used in his parking lot business; 3) a gain of $4,000 on the sale of half an acre of the land used in his parking lot business. All of the land used in his parking lot operations was purchased seven years ago. Mr. Greene's net capital gain from sale or exchange of capital assets for the current year is Question 14 options: 20,000 16,000 10,000 10,000Greene operates a parking lot that yielded net income of $13,000 during the current year. The only other transactions that Mr. Greene had during the year were: 1) a gain of $16,000 on the sale of some Dell Corporation stock that he bought two years ago; 2) a loss of $10,000 on the sale of one acre of the land used in his parking lot business; 3) a gain of $4,000 on the sale of half an acre of the land used in his parking lot business. All of the land used in his parking lot operations was purchased seven years ago. Mr. Grenee's net capital gain from sale or exchange of capital assets for the current year is 20,000 16,000 10,000 15,000 Please note answer is not 10,000In year 1, Abby purchased a new home for $200,000 by making a down payment of $150,000 and financing the remaining $50,000 with a loan, secured by the residence, at 6 percent. As of January 1, year 4 the outstanding balance on the loan was $40,000. On January 1, year 4, when her home was worth $300,000, Abby refinanced the home by taking out a $120,000 mortgage at 5 percent. With the loan proceeds, she paid off the $40,000 balance of the existing mortgage and used the remaining $80,000 for purposes unrelated to the home. During year 4, she made interest-only payments on the new loan of $6,000. What amount of the $6,000 interest expense on the new loan can Abby deduct in year 4 on the new mortgage as home-related interest expense?