Income Tax Fundamentals 2020
38th Edition
ISBN: 9780357391129
Author: WHITTENBURG
Publisher: Cengage
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Question
Chapter 4, Problem 15MCQ
To determine
Concept Introduction:
Gross income is the starting point for calculating a taxpayer’s liability. It includes all the income from any sources unless there is an exception in the law. In gross income, non-cash items are included at the fair market value. These incomes are excluded from
To explain: The true statement about rental of real estate
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Students have asked these similar questions
Which of the following statements is incorrect?
Assume that the rental activity is classified as ‘production-of-income.’ If the taxpayer sells the rental property later at a loss, the loss will be treated as a capital loss (i.e., $3,000/$1,500 deduction limit in the current year).
An amount that would have been paid in an arm’s-length transaction is considered a reasonable amount as deduction.
Payment (except for medical or educational expense) of another person’s obligation does not result in a tax deduction for the payer.
Regarding the start-up costs, if the new business is in the same line of business as the existing one and if the new business is not launched, then none of the start-up costs are deductible.
Payments for a speeding ticket are nondeductible.
HELP
A loss on the sale of a taxpayer's personal residence is deductible if the taxpayer owned and lived in the home for two of five years.
True
False
[The following information applies to the questions displayed below.]
Tamar owns a condominium near Cocoa Beach in Florida. In 2023, she incurs the following expenses in connection with
her condo:
Insurance
Advertising expense
Mortgage interest
Property taxes
Repairs & maintenance
Utilities
Depreciation
$ 1,000
500
3,500
900
650
950
8,500
During the year, Tamar rented out the condo for 75 days, receiving $10,000 of gross income. She personally used the
condo for 35 days during her vacation. Tamar's itemized deduction for nonrental taxes is less than $10,000 by more than
the property taxes allocated to the rental use of the property.
Assume Tamar uses the IRS method of allocating expenses to rental use of the property.
Chapter 4 Solutions
Income Tax Fundamentals 2020
Ch. 4 - All of the following assets are capital assets,...Ch. 4 - Which of the following is a capital asset? Account...Ch. 4 - Yasmeen purchases stock on January 30,2018 . If...Ch. 4 - Vijay sells land and receives $5,000 cash, a...Ch. 4 - Prob. 5MCQCh. 4 - In 2019, what is the top tax rate for individual...Ch. 4 - In November 2019, Ben and Betty (married, filing...Ch. 4 - Prob. 8MCQCh. 4 - In 2019, Tim, a single taxpayer, has ordinary...Ch. 4 - Prob. 10MCQ
Ch. 4 - Prob. 11MCQCh. 4 - Prob. 12MCQCh. 4 - Kevin purchased a house 20 years ago for $100,000...Ch. 4 - Gene, a single taxpayer, purchased a house 18...Ch. 4 - Prob. 15MCQCh. 4 - John owns a second home in Palm Springs, CA....Ch. 4 - Helen, a single taxpayer, has modified adjusted...Ch. 4 - Prob. 18MCQCh. 4 - Prob. 19MCQCh. 4 - Prob. 20MCQCh. 4 - Prob. 21MCQCh. 4 - Prob. 22MCQCh. 4 - Prob. 23MCQCh. 4 - Prob. 24MCQCh. 4 - Jim has a net operating loss in 2019. If he does...Ch. 4 - Prob. 26MCQCh. 4 - Prob. 27MCQCh. 4 - In 2019, Tracy generates a $10,000 loss from an...Ch. 4 - Prob. 1PCh. 4 - Prob. 2PCh. 4 - Prob. 4PCh. 4 - Prob. 5PCh. 4 - In 2019, Michael has net short-term capital losses...Ch. 4 - Prob. 7PCh. 4 - Prob. 8PCh. 4 - Prob. 9PCh. 4 - Prob. 10PCh. 4 - Walter, a single taxpayer, purchased a limited...Ch. 4 - Tyler, a single taxpayer, generates a net...Ch. 4 - Julie, a single taxpayer, has completed her 2019...Ch. 4 - Prob. 15P
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Similar questions
- Which of the following statements is false? When calculating depreciation expense in the year that half-year convention property is sold, the taxpayer is allowed a half year of depreciation expense for the year in which the property is sold When calculating depreciation expense in the year that half-year convention property is sold, the taxpayer is allowed a half quarter of depreciation expense for the quarter in which the property is sold When calculating depreciation expense in the year that realty is sold, the taxpayer is allowed a half month of depreciation expense for the month in which the property is sold When calculating depreciation expense in the year that mid-quarter convention property is sold, the taxpayer is allowed a half quarter of depreciation expense for the quarter in which the property is soldarrow_forwardRequired information Problem 6-38 (LO 6-2) (Static) [The following information applies to the questions displayed below.] Natalie owns a condominium near Cocoa Beach in Florida. This year, she incurs the following expenses in connection with her condo: Insurance Advertising expense Mortgage interest Property taxes Repairs & maintenance. Utilities Depreciation $1,000 500 3,500 900 650 950 8,500 During the year, Natalie rented out the condo for 75 days, receiving $10,000 of gross income. She personally used the condo for 35 days during her vacation. Natalie's itemized deduction for nonrental taxes is less than $10,000 by more than the property taxes allocated to the rental use of the property. Problem 6-38 Parts a, b, c, d & e (Static) Assume Natalie uses the IRS method of allocating expenses to rental use of the property. a. What is the total amount of for AGI (rental) deductions Natalie may deduct in the current year related to the condo? b. What is the total amount of itemized…arrow_forwardRequired information [The following information applies to the questions displayed below.] Tamar owns a condominium near Cocoa Beach in Florida. In 2022, she incurs the following expenses in connection with her condo: Insurance Advertising expense Mortgage interest Property taxes Repairs & maintenance Utilities Depreciation $ 1,480 740 5,180 1,116 890 1,190 13,300 During the year, Tamar rented out the condo for 75 days, receiving $10,000 of gross income. She personally used the condo for 35 days during her vacation. Tamar's itemized deduction for nonrental taxes is less than $10,000 by more than the property taxes allocated to the rental use of the property.arrow_forward
- Which of the following statements with respect to the depreciation of property under MACRS is incorrect? Under the half-year convention, one-half year of depreciation is allowed in the year the property is placed in service. If a taxpayer elects to use the straight-line method of depreciation for property in the 5 -year class, all other 5 -year class property acquired during the year must also be depreciated using the straight-line method. In some cases, when a taxpayer places a significant amount of property in service during the last quarter of the year, real property must be depreciated using a mid-quarter convention. Real property acquired after 1986 must be depreciated using the straight-line method. The cost of property to which the MACRS rate is applied is not reduced for estimated salvage value.arrow_forwardWhich of the following statements regarding deductions for real property taxes is incorrect? Multiple Choice O O A taxpayer is allowed to immediately deduct property taxes as the taxpayer makes monthly mortgage payments to an escrow account held by her mortgage company. Taxpayers are not allowed to deduct payments made for setting up water and sewer services. An individual deducts real property taxes on her principal residence as a from AGI deduction. Taxpayers are not allowed to deduct payments made for repairs to neighborhood sidewalks.arrow_forward! Required information [The following information applies to the questions displayed below.] Alexa owns a condominium near Cocoa Beach in Florida. This year, she incurs the following expenses in connection with her condo: Insurance Mortgage interest Property taxes Repairs & maintenance Utilities Depreciation $ 2,050 7,450 4,200 650 4,650 23,700 During the year, Alexa rented out the condo for 137 days. Alexa's AGI from all sources other than the rental property is $200,000. Unless otherwise specified, Alexa has no sources of passive income. Assume that in addition to renting the condo for 137 days, Alexa uses the condo for 8 days of personal use. Also assume that Alexa receives $47,750 of gross rental receipts and her itemized deductions exceed the standard deduction before considering expenses associated with the condo and that her itemized deduction for non-home business taxes is less than $10,000 by more than the real property taxes allocated to rental use of the home. Answer the…arrow_forward
- On an involuntary conversion in which the taxpayer does not buy replacement property within the replacement period, the gain on the involuntary conversion and any tax due must be reported: Multiple Choice In the year the replacement period expires. Never, because the tax year of the conversion would be closed. As soon as the taxpayer knows replacement property will not be purchased. In the year the involuntary conversion occurred.arrow_forwardD1. A taxpayer (65 years old) sold a holiday home in the previous year of assessment. The taxpayer does not buy and sell houses regularly. The base cost of the house is R350 000. In terms of the sale agreement the taxpayer received R600 000 on the date of the sale in the previous year of assessment. The sales agreement stipulates that the taxpayer will receive 10% of the net profit generated from the rental of the house in the current year of assessment as the balance of the selling price. On 1 July of the current year of assessment the taxpayer received R50 000 representing the 10% of the net profit. Calculate the taxpayer's taxable capital gain or assessed capital loss for the current year of assessment.arrow_forwardAn individual resident citizen taxpayer who owns a ten (10)-door apartment with a monthly rental of P15,000.00 for each residential unit, sold this property to another individual taxpayer. The sale shall be subject to * a presumed capital gains tax. a percentage tax. the schedular tax on taxable income. an excise tax.arrow_forward
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