Michael and Tyler are equal partners in the MT Partnership.  They formed the partnership three years earlier.  The partnership uses the accrual method of accounting and all of the assets were purchased by the partnership.  At the end of the year, Michael sells his partnership interest to Christian for $42,000 cash + assumption of Michael’s share of the partnership debt.  The partnership’s tax balance sheet at the time of the sale is below.               What are the tax consequences to Michael on the sale?             Assuming the MT Partnership has made a section 754 election, what is the amount of the           section 743(b) basis adjustment for Christian?  What is Christian’s basis in his partnership      interest and capital accounts?     FMV Book Tax   Book Tax Cash 15,000 15,000 15,000 NR Debt 6,000 6,000 A/R 30,000 30,000 30,000       Inventory 30,000 18,000 18,000 Michael 45,000 45,000 Stock 15,000 33,000 33,000 Tyler 45,000 45,000 Total 90,000 96,000 96,000   96,000 96,000

Bill and Anne Chambers are married and file a joint return. They have no children. Their college friend Ryan lived with them for the entire current tax year. Ryan is 40 years old and earned 2,000 at a part-time job and received 25,000 in municipal bond interest. Ryan is a citizen of the United States and is unmarried. Which of the following statements is true regarding claiming Ryan as a dependent on the Chamberses tax return? a. If Ryan earns 15,000 in self-employment income in addition to the part-time job and municipal bond interest, he will qualify as a dependent on the Chamberses tax return. b. Ryan qualifies as a dependent for the Chamberses under the qualifying child rules. c. As long as Ryan does not provide more than half of his own support, he qualifies as a dependent for the Chamberses under the qualifying relative rules because he lived with them for the entire year. d. As long as the Chamberses provide more than half of Ryans support, he qualifies as a dependent for the Chamberses under the qualifying relative rules.

Bonnie is married and has one child. She owns Bonnies Rib Joint, which produces a taxable income of approximately 120,000 per year. a. Assume that Bonnies taxable income is 40,000 without considering the income from the rib joint. How much tax will she pay on the 120,000 of income from the rib joint? b. You work for the firm that prepares Bonnies tax return. Bonnie has asked the partner for whom you work to advise her on how she might lower her taxes. The partner has assigned you this task. Draft a memorandum to the partner that contains at least two options Bonnie could use to lower her taxes. For each option, explain the calculations that support the tax savings from your recommendation.

Chelsea, who is single, purchases land for investment purposes in 2014 at a cost of 22,000. In 2019, she sells the land for 38,000. Chelseas taxable income without considering the land sale is 100,000. What is the effect of the sale of the land on her taxable income, and what is her tax liability?