1. Wagner Co. is a cash-basis, calendar-year taxpayer. On August 1, 2016, it paid an insurance premium of $4,800 for coverage from August 1, 2016 to July 31,2017. What is the largest deduction Wagner Co. can take in 2016?

2.Leonard and Linda Lindsay sold for $350,000 in October 2016 their residence that they had purchased in 2006 for $100,000. They made major capital improvements during their 10-year ownership totaling $30,000,

a. What is their excluded gain? How much must they recognize?

b. Suppose instead that the Lindsays sold their home for $700,000. They moved into a smaller home costing $200,000. What is their excluded gain? How much must they recognize?

c. Assume instead that the Lindsays resided in a very depressed neighborhood and the home was sold for only $80,000. How much gain or loss is recognized?