1. Sale of principal residence. Zelig files his tax returns as head-of-household. For many years, he had lived in an apartment that he rented. He purchased a house on August 1 of last year and lived in it as his principal residence. However, because of a sudden and significant increase in gang violence in the neighborhood, Zelig had to sell the house on August 1 of this year and move back into an apartment. He bought the house for $430,000 and sold it for $670,000. How much capital gain does Zelig have to report on this sale?

2. Capital gains. This year, Brutus earned a salary of $56,000. He received $5,000 of qualified dividends. He realized a $18,000 gain from the sale of a capital asset he had held for three years and a $4,000 gain from the sale of a capital asset he had held for four months. He also had a long-term capital loss carryover of $8,000 from the prior year. What is the total amount of income that qualifies for preferential capital-gains tax rates (i.e., adjusted net capital gain or ANCG)?

3. Adjusted basis. Ludwig owned some land and a workshop building on the land. He acquired the land and building in 2014 for $600,000, of which $400,000 was allocable to the land and $200,000 allocable to the building. In 2018, there was a storm that damaged (but did not destroy) the roof of the workshop building. Ludwig spent $800 repairing the roof. Ludwig also spent $500 each year from 2015 to 2019 to paint the workshop. In 2019, Ludwig added a room to the building at a cost of $70,000. Through the end of 2019, Ludwig took depreciation deductions totaling $28,000. What is the adjusted basis of the workshop building at the beginning of 2020?

4. Vacation home. Frankie owns a vacation home which she uses for vacation for 150 days and rents to strangers at fair rental value for 150 days. The rest of the year it is not used. She uses the IRS method to allocate expenses. She had $34,000 of rental income. She paid $40,000 of mortgage interest on the home, all of which would be deductible if she solely made personal use of the home. She paid no real estate taxes. Operating expenses (including maintenance, insurance, utilities, etc.) were $18,000. Depreciation would be $22,000 if the home were solely used as a rental. (To be clear, the expenses noted above are all totals BEFORE allocation.) How much income or loss should she report for the home?

A. No income or loss

B. Income of $34,000

C. Loss of $6,000 [$34,000 rental income - $20,000 mortgage interest - $9,000 operating expense - $11,000 depreciation]

D. Income of $14,000 [$34,000 rental income - $20,000 mortgage interest]

5. Capital gains. This year, Kyra earned a salary of $70,000. She also realized a $14,000 loss on the sale of a capital asset she had held for several years. She had no other income or transactions. How much is Kyras adjusted gross income (AGI)?