Attachment is the questions relates to income tax. The textbook is concept in federal tax.

1. Tim is exploring his options to minimize his tax liability for this year. Earlier in the year Tim sold a substantial number of his securities and recognized a $15,000 gain. He would like to mitigate the tax effects of that gain. The remainder of Tim's portfolio consists of 1,000 shares of Edgewood Corporation stock. Tim has not sold it because it has a history of paying large dividends. Tim paid $20,000 for the stock, but it is currently trading for $5 per share. Tim is considering selling all of his Edgewood stock, realizing the loss, netting it against his capital gains, and then repurchasing 1,000 shares a few days later. He knows he will lose some money due to transaction and brokerage costs, but he feels it may be worth it. Discuss Tim's plan. What is the amount of the gain or loss he would generate if he implements his plan? As Tim's tax advisor, what advice and recommendations would you give him? Relate your analysis to the basic tax concepts that help drive your position. 2. Gerry is a 50% shareholder of Angelmeyer Corporation, an S corporation. At the beginning of the year, Gerry's basis in his Whitman stock is 50,000. During the year, Angelmeyer Corporation has operating income of $50,000; dividends from domestic corporations of $15,000; tax-exempt interest of $5,000; nontaxable life insurance proceeds of $10,000 on the death of a key employee; and a capital loss of $15,000. Angelmeyer pays no dividends. What is Gerry's year-end basis in Angelmeyer stock (after the distribution)? 3. Jane and Ted decide to start up a hotel business in 2005. On December 31, 2005, they purchase a vacant 12 story building for $650,000 from the city by paying $150,000 in cash from their savings and obtaining a bank loan for the remaining amount at 7% annual interest. The building was a historic hotel that went out of business 10 years earlier and has been vacant ever since. To close the sale, they incur legal costs of $5,000 related to the title work and pay property transfer taxes of $6,500. Per the real estate tax bill, the assessed value for the building is $40,000 and the assessed value for the land is $10,000. To get the building ready for use as a hotel, on January 2, 2006 Jane and Ted obtained a construction loan from the bank for $2,300,000 at 10% annual interest. Over the next 2 years, they spent the money upgrading the outdated rooms to modern hotel standards, including knocking down walls to double the size of the former tiny rooms to modern sizes, etc. They incurred the following building renovation costs during that 2 year period: Architect Fees: $100,000Permit Fees paid to City to get permission to modify the building: $20,000 Electrical Contractor - new wiring: $150,000 Plumbing Contractor - upgrade plumbing: $100,000New HVAC (heating, ventilation, air conditioning) system, including installation and testing $250,000General Contractor (flooring, cabinets, walls, etc): $750,000New bathrooms: sinks, toilets, bathtubs, showers: $200,000Inspections: $10,000New Roof: $150,000Masonry Repointing to upper floors of building (removing old mortar between bricks and replacing with new mortar): $300,000 New Elevator: $75,000 Build an addition for an indoor swimming pool: $200,000 In addition, they incurred the following costs to enable their guests to get to the building: Pave parking lot: $20,000 Install sidewalks: $5,000 Landscaping: $5,000 The building renovations and land improvements were completed on December 19th, 2007. All inspections were completed the following week and the certificate of occupancy for the building was obtained on December 30, 2007. The construction loan was converted to a regular loan at a lower interest rate on January 2, 2008. From January 10th-15th, 2008, the hotel furniture was delivered and installed by Raymour & Flanigan. The hotel furniture, which included beds, couches, desks, desk chairs, lamps, coffee tables and end tables, cost $300,000. Delivery and Installation Costs were $10,000. The following week, the TVs, mini-refrigerators, microwaves, and coffee pots for the rooms were delivered and installed, The equipment cost $30,000. The delivery and Installation costs were $2,000. A large ice-maker was purchased from American Hotel Register company for $6,000 plus delivery cost of $500. The contractors charged $1,000 to run the wiring and the plumbing for the ice-maker and test it. The hotel computer system, phone system, internet and satellite systems were installed and tested from January 16th - January 31st. The computer system, including installation and testing, was $20,000 (included multiple computers and the hotel operating software). The phone system, including installation and testing, cost $30,000. The Satellite TV receivers and installation cost $30,000. The Internet installation included wireless access points throughout the floors, a Sonic Wall firewall and other computer components to separate the guest network from the front office network, optimize traffic flow, etc. The internet system, including installation and testing, cost $40,000. The hotel spent the next week training the staff on how to operate as a hotel, without taking any real guests. On February 10, 2008 the hotel opened for business, telling interested guests that they were still in the opening stages so there were issues still to work out. They had their first guest on February 14th, 2008. It took the staff a few months to work out the kinks in the systems and operations. The hotel held its Grand Opening celebration a few months later on May 1, 2008 when its operations had smoothed out. You are hired as the accountant for the new hotel. One of your first jobs, after creating the chart of accounts in Quickbooks (QB), is set up the fixed assets in QB. To do this you must do several things, the first of which is to determine the Initial Basis of the assets of this new hotel business. Your second task is to determine the date the assets were placed in service. Complete the excel template in the answer sheet using the above information: A.Calculate the Initial basis of each asset class (ie, Land, Building, Building Improvement, Land Improvement, Furniture, Equipment (eg, TVs, satellites, microwaves, etc), Computer Equipment, Communications Equipment (eg, phone, internet), ). See Revenue Procedure 87-56 for the IRS Table of Asset Classes (End of Chp 10 has a partial table, which should be sufficient for this test). B.After you have calculated the initial basis and determined its placed in service date, determine the MACRS life per Rev. Proc 87-56. C.DeterminetheMACRSconventiontouseforeachassetclass D.CalculatetheDepreciationontheassetsforthefirstyearofuse(2008),assumingyou chose to use MACRS depreciation for tax purposes. Assume you do NOT make a section 179 election because you are a new business and will likely incur tax losses for the first two years. The economy is not good and you don't need extra expenses the first year. E. CalculatetheannualMACRSdepreciationforeachassetclassfrom2009-2013. F. Calculate the adjusted basis for each asset on 12/31/13. G.On January 2, 2014, Jane and Ted engage in the following property transactions:1. Sell the furniture because it is outdated. They sell it to a furniture re-seller for $25,000. What is the AMOUNT of the gain or loss on the furniture sale? What is the type of property that is sold? 1231, 1245, 1250? What is the CHARACTER of the gain or loss on the furniture sale (Sec. 1245, Sec, 1250 or ordinary: short-term or long-term)? 2. Upgrade the Satellite receiver system to High Definition because guests are complaining about the Standard definition TVs. They get a trade in value of $1,000 on the old satellite equipment and the cost of the new, replacement equipment is $25,000 before the trade-in. What is the AMOUNT of the gain or loss on the equipment sale? What is the type of property that is sold? 1231, 1245, 1250? What is the CHARACTER of the gain or loss on the sale (Sec. 1245, Sec, 1250 or ordinary: short-term or longterm)? OR is the gain/loss not recognized in 2014 because it is a like-kind exchange? If so, what is the basis of the replacement property? 3. Upgrade the computer system because it is obsolete. They have to throw the equipment away because no one will buy it. What is the AMOUNT of the gain or loss on the equipment sale? What is the type of property that is sold? 1231, 1245, 1250? What is the CHARACTER of the gain or loss on the sale (Sec. 1245, Sec, 1250 or ordinary: short-term or long-term)? What if the computer equipment will be replaced with like kind equipment that cost $15,000? How does that change your answer above? Is there any impact to the basis of the new equipment