Second Exam Fall 2011
The exam is open text book. That is the only source of material that you can bring. You cannot bring your class outlines or assignment solutions. Calculators are allowed, but the use of text in calculators is prohibited. Bring blue books or paper, as the exam will be done in this manner. Brief notes in the margin of your text are ok. However, writing solutions to entire problems in your text will be considered a violation.
Put all answers in your blue books or blank paper. Do not put your answers on the exam. Show your work whenever possible.
Q1=5; Q2=13; Q3=6; Q4=7; Q5=10; Q6=13; Q7=10; Q8=11; Q9=25
1.Harry’s business is raising and harvesting peaches. On March 10, 2011, Harry purchased 10,000 new peach trees at a cost of $60,000. Harry does not elect to expense assets under Section 179. Determine the depreciation deduction for 2011.
2.Audra acquires the following new five-year class property in 2011: AssetAcquisition DateCost
A January 10$106,000
B July 5 70,000
C November 15 450,000
Audra elects Section 179 for Asset B and Asset C (not for asset A). Audra’s taxable income from her business would not create a limitation for purposes of the Section 179 deduction. Audra elects not to take additional first-year depreciation. Determine her depreciation deduction for the year.
3.Hazel purchased a new business asset (five-year asset) on October 4, 2011, at a cost of $100,000. This was the only asset Hazel placed in service in 2011. Hazel does not take Section 179 or additional first year depreciation. On August 20, 2012, Hazel sold the asset. Determine depreciation in 2012 for the asset.
4.During 2011, Jen (age 66) furnished more than 50% of the support of the following persons: •Jen’s current who has no income and is not claimed by someone else as a dependent. •Jen’s stepson (age 18) who lives with her and earns $6,000 as a dance instructor. He dropped out of school a year ago. •Jen’s ex-husband who does not live with her. The divorce occurred two years ago. •Jen’s former brother-in-law who does not live with her.
How many personal and dependency exemptions is Jen allowed? Explain fully.
5.Abner gives his daughter, Melissa, stock (basis of $52,000; fair market value of $42,000). No gift tax is paid. Assume this is the only short or long term capital transaction during the year: a.If Melissa subsequently sells the stock for $54,000, what is her recognized gain or loss? b.If Melissa subsequently sells the stock for $34,000, what is her recognized gain or loss?
6.In 2011, Marty had the following casualty losses:
•Loss on theft of bonds$4,500
•Loss on fire at business property (after insurance)$12,000 •Loss on losing engagement ring down the drain$3,000
•Loss on theft of big screen TV and stereo system$35,000 The theft of the bonds and the big screen were different incidents.
a.For each item, determine if there is a deduction or loss, and the amount and place (report on what tax form and what line) of such loss. For example, you could report one of these items as other miscellaneous deduction on line 28 of Schedule A (this may or may not be an answer). b.If Marty is in the 33% tax bracket, with AGI of $250,000. How much in taxes does he save from all of these transactions? Report the amount separately for each item.
7.Noelle received dining room furniture as a gift from her friend, Jane. Jane’s adjusted basis was $9,200 and the fair market value on the date of the gift was $7,000. Noelle decided she did not need the furniture and sold it to a neighbor six months later for $6,500. What is her realized and recognized gain or loss?
8.Jacqueline is employed as an architect. For calendar year 2011, she had AGI of $200,000 and paid the following medical expenses:
Medical insurance premiums7,400
Doctor bills for Craig...