1. (TCOs 1 and 2) In terms of revenue neutrality, comment on the following: I. A tax cut enacted by Congress that also contains revenue offsets II. A tax cut enacted by Congress that is phased in over a period of years III. A tax cut enacted by Congress that contains a sunset provision IV. A tax cut enacted by Congress that includes a stealth tax feature (Points : 20) Question 2.2. (TCOs 1, 2, 3, and 5.) Several years ago, Gordon purchased extra grazing land for his ranch at a cost of $80,000. In 2010, the land was condemned by the state for development as a highway maintenance depot. Under the condemnation award, Gordon received $200,000 for the land. Within the same year, he replaced the property with other grazing land. What is Gordon's tax situation if the replacement land cost: I. $70,000? II. $120,000? III. $210,000? IV. Why? (Points : 20) Question 3.3. (TCOs 4 and 5) Kitty runs a brothel (illegal under state law) and has the following items of income and expense. What is the amount that she must include in taxable income from her operation? Income: $200,000 Expenses: Rent $8,000 Utilities $2,000 Bribes to Police $10,000 Medical Expense $5,000 Legal Fees $20,000 Depreciation $14,000 Illegal Kickbacks $15,000 (Points : 20) Question 4.4. (TCOs 4 and 5) In 2011, Jean earns a salary of $150,000 and invests $20,000 for a 20% interest in a partnership not subject to the passive loss rules. Through the use of $400,000 of nonrecourse financing, the partnership acquires assets worth $500,000. The activity produces a loss of $75,000, of which Jean's share is $15,000. In 2012, Jean's share of the loss from the partnership is $7,500. How much of the loss from the partnership can Jean deduct? (Points : 20) Question 5.5. (TCO 7) Norm purchases a new sports utility vehicle (SUV) on October 12, 2011, for $50,000. The SUV has a gross vehicle weight of 6,200 lbs. It is used 100% of the time for business and it is the only business asset acquired by Norm during 2011. Compute the maximum deduction with respect to the SUV for 2011. If Congress reenacts additional first-year depreciation for 2011, Norm elects not to take additional first-year depreciation. (Points : 20) Question 6.6. (TCOs 6 and 7) Albert is considering two options for selling land for which he has an adjusted basis of $70,000 and on which there is a mortgage of $100,000. Under the first option, Albert will sell the land for $150,000 with a stipulation in the sales contract that he liquidate the mortgage before the sale is complete. Under the second option, Albert will sell the land for $50,000 and the buyer will assume the mortgage. Calculate Albert's recognized gain under both options. (Points : 20) Question 7.7. (TCOs 3, 4, and 6) Gene is single and for 2011 has AGI of $40,000. He is age 65 and has no dependents. For 2011, he has itemized deductions from AGI of $7,000. Determine Gene's taxable income for 2011. (Points : 20) Question 8.8. (TCOs 3, 4, and 6) Rachel lives and works in Chicago. She is the regional sales manager for a national fast food chain. Due to unusual developments, she is compelled to work six straight weeks in the St. Louis area. Instead of spending the weekend there, she flies home every Friday night and returns early Monday morning. The cost of coming home for the weekend approximates $500. Had she stayed in St. Louis, deductible meals and lodging would have been $600. How much, if any, may Rachel deduct as to each weekend? (Points : 20)