Chapter 6 Solution Manual - South Western Federal Tax 2012

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CHAPTER 6 DEDUCTIONS AND LOSSES: IN GENERAL SOLUTIONS TO PROBLEM MATERIALS

Question/ Problem 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

Learning Objective LO 1 LO 1 LO 1 LO 1 LO 1 LO 1 LO 1 LO 1 LO 1 LO 1 LO 1 LO 2 LO 2 LO 2 LO 2 LO 3 LO 3 LO 3 LO 3 LO 3 LO 3 LO 3 LO 3

Topic Allowed income and deductions Deductions for and from AGI Deductions for and from AGI Deductions for and from AGI Deductions for and from AGI Deductions for and from AGI Deductions for and from AGI; deductions disallowance Ordinary and necessary requirement Reasonable compensation Business versus nonbusiness losses Reporting procedures Method of accounting: cash basis Prepayment provision for cash basis taxpayer All events and economic performance tests Reserves and economic performance test Illegal activities Domestic and foreign bribes Legal expenses Illegal activities Political contributions Political contributions and lobbying expenditures Excessive executive compensation Investigation of a business

Status: Present Edition Unchanged New New Modified Unchanged Unchanged New Unchanged New New Unchanged New Modified Unchanged New Unchanged Unchanged Unchanged Modified Unchanged Unchanged Unchanged New

Q/P in Prior Edition 1 4 5 6 8 11 13 14

16 17 18 19 20 21 22

Instructor: For difficulty, timing, and assessment information about each item, see p. 6-4.

6-1
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

6-2

2012 Comprehensive Volume/Solutions Manual Status: Present Edition New Unchanged Unchanged Unchanged Unchanged Unchanged Unchanged New Modified Modified Updated Unchanged Unchanged New Modified New Unchanged Modified New New Unchanged Unchanged New New New Updated Unchanged Modified Unchanged Unchanged Unchanged New Unchanged Modified Unchanged New Modified 44 45 Q/P in Prior Edition 25 26 27 28 29 30 32 33 34 35 36 38 40 41

Question/ Problem 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 *45 46 47 *48 *49 50 *51 *52 *53 *54 55 56 57 58 *59 60

Learning Objective LO 3 LO 3 LO 3 LO 3 LO 3 LO 3 LO 3 LO 3 LO 3 LO 1 LO 1 LO 1 LO 1 LO 1 LO 2 LO 2 LO 2 LO 3 LO 3 LO 3 LO 3, 4 LO 3 LO 3 LO 3 LO 3 LO 3 LO 3 LO 3 LO 3 LO 1, 3 LO 1, 3, 4 LO 3 LO 3, 4 LO 3 LO 3 LO 3 LO 3

Topic Hobby/business Vacation home rental: classification Vacation home rental: deduction of loss Vacation home rental: exclusion Conversion of a residence to rental property Another taxpayer’s obligation Personal expenses versus deductible legal expenses Losses between related parties Tax-exempt income/expenses Deductions for and from AGI Deductions for and from AGI Deductions for and from AGI Reasonable salaries Business and nonbusiness losses Cash method versus accrual method Cash basis and prepaid expenses Economic performance test Legal expenses and public policy limitations Illegal business Lobbying expenses and political contributions Excessive executive compensation Excessive executive compensation Investigation of a business Investigation of a business Hobby/business Hobby losses/business Vacation home rental: exclusion Vacation home rental: court’s approach and IRS’s approach Vacation home rental: primarily rental use Taxable income calculation and vacation Another taxpayer’s obligations Capital expenditure and amortization Capital expenditures and amortization Losses between related parties Deductions between related parties and constructive ownership Losses between related parties Tax-exempt income/expenses

49 50 51 52 53 54 56 57 58 60

Instructor: For difficulty, timing, and assessment information about each item, see p. 6-4.

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Deductions and Losses: In General Status: Present Edition Unchanged Modified Modified Q/P in Prior Edition 61 62 63...
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