Principles Of Taxation For Business And Investment Planning 2020 Edition
23rd Edition
ISBN: 9781259969546
Author: Sally Jones, Shelley C. Rhoades-Catanach, Sandra R Callaghan
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 12, Problem 5QPD
Mr. Eros operates an antique store located on the first floor of a four-story office building owned by Mr. Eros. The top three stories are leased to business tenants. Mr. Eros is considering giving a one-third interest in both the antique store and the building to each of his two grandchildren and operating the businesses in one passthrough entity. Mr. Eros wants to receive 100 percent of the rent from his tenants for several years but is willing to distribute one-third of the net profit from the antique store to his grandchildren each year. On the basis of this objective, which form of organization should he choose?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Sam and Sung are equal joint owners in a property which they rent out.
Because Sam is unemployed, he spends more time at the property to help do maintenance and gardening.
Because Sung earns $200,000 per year from his job as an accountant, they come to a private agreement to divide the annual rent of received from their tenants, as follows:
Sam will receive a salary payment of $20,000, after which the remainder will be split 60% in favour of Sam and 40% in favour of SungDuring the 2020 tax year, they incurred the following expenses on the property which they hope to claim as deductions: Council rates: $3,000Land Tax: $12,000Bank interest on the loan taken out to finance the purchase of the property: $80,000Required: If the total rent received for the 2020 tax year was $177979 calculate Sam's Assessable Income (assuming he has no other income sources).
Keith, 65, owns several rental tracts with a total fair market value of $100,000. He wants his son, Chris, to own the tracts as Chris's share of his estate. Keith is considering an annuity agreement whereby the tracts would be sold to Chris in return for Chris's promise to pay Keith an income for his life based upon Keith's original life expectancy. Upon Keith's death, Chris would own the rental tracts outright.
What is one estate tax implication of this proposed private annuity for Keith's estate?
Â
Â
A)
There is no estate tax liability because the annuity payments expire upon Keith's death.
Â
Â
B)
The value of Keith's gross estate increases because the gross-up rule applies.
Â
Â
C)
The value of Keith's gross estate increases because the present value of past annuity payments is included.
Â
Â
D)
There is no estate tax liability because taxes are paid on the annuity during Keith's lifetime.
Brian owns a duplex used as rental property. The duplex has a basis of
$84,000 and $380,000 FMV. He transfers the duplex to Carrie​,his​ sister, in exchange for a triplex that she owns. The triplex has a basis of $280,000 and a $380,000 FMV. Two months after the​ exchange, Carrie sells the duplex to a business associate for $395,000.
Requirements
​Determine:
a.
Brian's
realized and recognized gain on the exchange.
b.
Carrie's
realized and recognized gain on the exchange.
Â
Requirement a. Determine
Brian's realized and recognized gain on the exchange.
Â
Begin with the realized gain. First identify the​ formula, then enter the applicable amounts and calculate the realized gain.
Â
Â
Amount realized (Brian)
-
Adjusted basis (duplex)
=
Realized gain
Â
$380,000
-
$84,000
=
$296,000
Determine
Brian's recognized gain on the exchange.
Â
The recognized gain is $
Â
.
Chapter 12 Solutions
Principles Of Taxation For Business And Investment Planning 2020 Edition
Ch. 12 - Mr. and Mrs. Velotta are self-employed...Ch. 12 - Prob. 2QPDCh. 12 - Ms. Johnson is eager to create a family...Ch. 12 - Discuss the tax and nontax reasons why the stock...Ch. 12 - Mr. Eros operates an antique store located on the...Ch. 12 - Prob. 6QPDCh. 12 - Prob. 7QPDCh. 12 - Prob. 8QPDCh. 12 - Prob. 9QPDCh. 12 - Prob. 10QPD
Ch. 12 - Prob. 11QPDCh. 12 - Ms. Knox recently loaned 20,000 to her closely...Ch. 12 - Explain the logic of the tax rate for both the...Ch. 12 - Prob. 14QPDCh. 12 - Prob. 15QPDCh. 12 - Prob. 16QPDCh. 12 - Mr. Tuck and Ms. Under organized a new business as...Ch. 12 - Grant and Marvin organized a new business as a...Ch. 12 - Prob. 3APCh. 12 - Ms. Kona owns a 10 percent interest in Carlton...Ch. 12 - Mrs. Franklin, who is in the 37 percent tax...Ch. 12 - Prob. 6APCh. 12 - Prob. 7APCh. 12 - Prob. 8APCh. 12 - Prob. 9APCh. 12 - Prob. 10APCh. 12 - Prob. 11APCh. 12 - Prob. 12APCh. 12 - Prob. 13APCh. 12 - Ms. Xie, who is in the 37 percent tax bracket, is...Ch. 12 - Prob. 15APCh. 12 - In 1994, Mr. and Mrs. Adams formed ADC by...Ch. 12 - Prob. 17APCh. 12 - Prob. 18APCh. 12 - Prob. 19APCh. 12 - Prob. 20APCh. 12 - Prob. 21APCh. 12 - Prob. 1IRPCh. 12 - Prob. 2IRPCh. 12 - Prob. 3IRPCh. 12 - REW Inc. is closely held by six members of the REW...Ch. 12 - Prob. 5IRPCh. 12 - Prob. 6IRPCh. 12 - Prob. 7IRPCh. 12 - Prob. 8IRPCh. 12 - Prob. 9IRPCh. 12 - Prob. 10IRPCh. 12 - Prob. 2TPCCh. 12 - Prob. 3TPC
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Hassad owns a rental house on Lake Tahoe. He uses a real estate firm to screen prospective renters, but he makes the final decision on all rentals. He also is responsible for setting the weekly rental price of the house. During the current year, the house rents for 1,500 per week. Hassad pays a commission of 150 and a cleaning fee of 75 for each week the property is rented. During the current year, he incurs the following additional expenses related to the property: a. What is the proper tax treatment if Hassad rents the house for only 1 week (7 days) and uses it 50 days for personal purposes? b. What is the proper tax treatment if Hassad rents the house for 8 weeks (56 days) and uses it 44 days for personal purposes? c. What is the proper tax treatment if Hassad rents the house for 25 weeks (175 days) and uses it 15 days for personal purposes?arrow_forwardEd owns Oak Knoll Apartments. During the​ year, Fred​, a​ tenant, moved to another state. Fred paid Ed $1,000 to cancel the​ two-year lease he had signed. Ed subsequently rented the unit to Wayne. Wayne paid the first and last​ months' rents of $800 each and a security deposit of $500. Ed also owns a building that is used as a health club. The club has signed a​ fifteen-year lease at an annual rental of $17,000. The owner of the club requested that Ed install a swimming pool on the property. Ed declined to do so. The owner of the club finally constructed the pool himself at a cost of $15,000.  Requirement Which of these amounts must Ed include in gross​ income?  In addition to the regular rental income from the apartment and health club Ed must include the following in gross income. ​(If an input field is not​ used, leave the input​ field(s) empty; do not select a label or enter a​ zero.)  Source of income Income…arrow_forwardJacob has a parcel of vacant land that he had purchased as an investment. The land has an adjusted cost base of $156,000 to Jacob. The fair market value of the land on January 1 of the current taxation year is $167,500. On this date, Jacob gifts the property to his 14-year-old daughter, Tabitha. Tabitha subsequently sells the land on December 1 of the current year for its fair market value of $200,000. How much gain will each recognize on this series of transactions? .....arrow_forward
- Dan is the sole owner of his closely held business and he is considering retiring within the next few years. Dan's basis in the property is $500,000 and the current FMV of the business is $1,500,000. Dan would like to see his business continue within his family and be operated by his only child, Amy. If Dan eventually gifts his entire business interest to her, which one of the following statements is correct? A)Amy will have capital gain in the property of $500,000.  B)Amy will have a carryover basis in the property of $500,000.  C)Amy will have a stepped-up basis in the property of $1,500,000.  D)Amy will have an adjusted basis in the property of $1,000,000.arrow_forwardThe Lyns live in their own home at 40 Cavin Ave, on which they have a mortgage balance of $2,000,000. This property  has been appraised at $8,500,000 and is now up for sale at its current market value.  A purchaser has been identified but the proceeds from the sale is not due to be paid to the Lyns until November 30, 2020. In the meantime the Lyns have contracted to purchase a new home at Wex Haven for      $17,000, 000, although this property is valued at only $16,000,000. The sale agreement on this property requires a deposit of 20% on signing which will take place on June 1, 2020, with the balance which will not be covered by a mortgage, payable in 30 days after signing.  Based on their high salaries, North Caribbean Building Society have pre-approved the Lyns for a 25-year mortgage of 75% of purchase price or value, whichever is less,up to a maximum of $20,000,000.  This will attract an interest rate of 5.50% per annum with monthly compounding and will be disbursed on September…arrow_forwardSteven owns an apartment building that he purchased ten years ago for $339,000. His current adjusted basis is $218,000 and his outstanding mortgage is $253,000. Steven sells the building for cash of $310,000 plus assumption of his mortgage. He pays commissions on the sale of $30,000, title transfer fees of $520, and an attorney at closing $900. What is Steven's recognized gain? Recognized gain $arrow_forward
- The Lyns live in their own home at 40 Cavin Ave, on which they have a mortgage balance of $2,000,000. This property  has been appraised at $8,500,000 and is now up for sale at its current market value.  A purchaser has been identified but the proceeds from the sale is not due to be paid to the Lyns until November 30, 2020. In the meantime the Lyns have contracted to purchase a new home at Wex Haven for      $17,000, 000, although this property is valued at only $16,000,000. The sale agreement on this property requires a deposit of 20% on signing which will take place on June 1, 2020, with the balance which will not be covered by a mortgage, payable in 30 days after signing.  Based on their high salaries, North Caribbean Building Society have pre-approved the Lyns for a 25-year mortgage of 75% of purchase price or value, whichever is less,up to a maximum of $20,000,000.  This will attract an interest rate of 5.50% per annum with monthly compounding and will be disbursed on September…arrow_forwardThe Lyns live in their own home at 40 Cavin Ave, on which they have a mortgage balance of $2,000,000. This property  has been appraised at $8,500,000 and is now up for sale at its current market value.  A purchaser has been identified but the proceeds from the sale is not due to be paid to the Lyns until November 30, 2020. In the meantime the Lyns have contracted to purchase a new home at Wex Haven for      $17,000, 000, although this property is valued at only $16,000,000. The sale agreement on this property requires a deposit of 20% on signing which will take place on June 1, 2020, with the balance which will not be covered by a mortgage, payable in 30 days after signing.  Based on their high salaries, North Caribbean Building Society have pre-approved the Lyns for a 25-year mortgage of 75% of purchase price or value, whichever is less,up to a maximum of $20,000,000.  This will attract an interest rate of 5.50% per annum with monthly compounding and will be disbursed on September…arrow_forwardThe Lyns live in their own home at 40 Cavin Ave, on which they have a mortgage balance of $2,000,000. This property  has been appraised at $8,500,000 and is now up for sale at its current market value.  A purchaser has been identified but the proceeds from the sale is not due to be paid to the Lyns until November 30, 2020. In the meantime the Lyns have contracted to purchase a new home at Wex Haven for      $17,000, 000, although this property is valued at only $16,000,000. The sale agreement on this property requires a deposit of 20% on signing which will take place on June 1, 2020, with the balance which will not be covered by a mortgage, payable in 30 days after signing.  Based on their high salaries, North Caribbean Building Society have pre-approved the Lyns for a 25-year mortgage of 75% of purchase price or value, whichever is less, up to a maximum of $20,000,000.  This will attract an interest rate of 5.50% per annum with monthly compounding and will be disbursed on…arrow_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
What is Fund Accounting?; Author: Aplos;https://www.youtube.com/watch?v=W5D5Dr0j9j4;License: Standard Youtube License