Book that I use is AC 450A Income Tax I , 4th edition 2013 Homework - Written Questions Show your calculations for full or partial credit 1. Harmony was self-employed for the first half of 2012, earning $18,000 of Schedule C (business) net income. During the second half of the year, she began working as an employee and earned $38,000 in salary. What amount of self-employment taxes is Harmony required to pay? 2. Apollo is single and his AMT base is $100,250. This amount includes $500 of qualified dividends (the dividends were taxed at 15% in determining the regular tax liability). What is Apollo's tentative minimum tax for 2012? 3. Joe operates a plumbing business that uses the accrual method and reports on a calendar year. This year Joe signed a $50,000 binding contract with Brian. Under the contract Brian will provide Joe with up to 2,000 hours of vehicle repairs at $25 per hour. This year Brian provided 200 hours of repair services and billed Joe for $5,000. At year end Joe had not paid Brian for the services. What amount, if any, can Joe deduct for the repair services for 2012? 4. Yasmin purchased two assets during 2012. Yasmin placed in service computer equipment (5-year property) on May 26th with a basis of $10,000 and machinery (7-year property) on December 9th with a basis of $10,000. Calculate the maximum depreciation expense (ignoring 179 and bonus depreciation): 5. Kristine sold two assets on March 20th of 2012. The first was machinery with an original basis of $51,000, currently in the fourth year of depreciation, and under the half-year convention. The second was furniture with an original basis of $16,000 placed in service during the fourth quarter, currently in the third year of depreciation, and under the mid-quarter convention. What is Kristine's depreciation expense for the current year, rounded to the nearest whole number. 6. In 2012, Northern LLC placed in service on September 6th machinery and equipment (7-year property) with a basis of $580,000. Assume that Northern has sufficient income to avoid any limitations. Calculate the maximum depreciation expense including 179 expensing (ignore any potential bonus depreciation), rounded to the nearest whole number. 7. Assume that Reid has 2012 taxable income of $125,000 before any 179 expense and acquired the following assets: he placed in service computer equipment (5-year property) on August 6th with a basis of $100,000 and machinery (7-year property) on November 9th with a basis of $100,000. Calculate the maximum depreciation expense including 179 expensing (but not bonus depreciation). 8. Oksana started an LLC on November 2 of 2012. She incurred $30,000 of start-up costs. How much of the start-up costs can be immediately expensed for the year? How much amortization may Oksana deduct in the first year

AC 450A Income Tax I , 4th edition 2013 Homework - Written Questions Show your calculations for full or partial credit 1. Harmony was self-employed for the first half of 2012, earning $18,000 of Schedule C (business) net income. During the second half of the year, she began working as an employee and earned $38,000 in salary. What amount of self-employment taxes is Harmony required to pay? 2. Apollo is single and his AMT base is $100,250. This amount includes $500 of qualified dividends (the dividends were taxed at 15% in determining the regular tax liability). What is Apollo's tentative minimum tax for 2012? 3. Joe operates a plumbing business that uses the accrual method and reports on a calendar year. This year Joe signed a $50,000 binding contract with Brian. Under the contract Brian will provide Joe with up to 2,000 hours of vehicle repairs at $25 per hour. This year Brian provided 200 hours of repair services and billed Joe for $5,000. At year end Joe had not paid Brian for the services. What amount, if any, can Joe deduct for the repair services for 2012? 4. Yasmin purchased two assets during 2012. Yasmin placed in service computer equipment (5year property) on May 26th with a basis of $10,000 and machinery (7-year property) on December 9th with a basis of $10,000. Calculate the maximum depreciation expense (ignoring 179 and bonus depreciation): 5. Kristine sold two assets on March 20th of 2012. The first was machinery with an original basis of $51,000, currently in the fourth year of depreciation, and under the half-year convention. The second was furniture with an original basis of $16,000 placed in service during the fourth quarter, currently in the third year of depreciation, and under the mid-quarter convention. What is Kristine's depreciation expense for the current year, rounded to the nearest whole number. 6. In 2012, Northern LLC placed in service on September 6th machinery and equipment (7-year property) with a basis of $580,000. Assume that Northern has sufficient income to avoid any limitations. Calculate the maximum depreciation expense including 179 expensing (ignore any potential bonus depreciation), rounded to the nearest whole number. 7. Assume that Reid has 2012 taxable income of $125,000 before any 179 expense and acquired the following assets: he placed in service computer equipment (5-year property) on August 6 th with a basis of $100,000 and machinery (7-year property) on November 9th with a basis of $100,000. Calculate the maximum depreciation expense including 179 expensing (but not bonus depreciation). 8. Oksana started an LLC on November 2 of 2012. She incurred $30,000 of start-up costs. How much of the start-up costs can be immediately expensed for the year? How much amortization may Oksana deduct in the first year AC 450A Income Tax I , 4th edition 2013 Homework Written Questions Show your calculations for full or partial credit 1. Harmony was selfemployed for the first half of 2012, earning $18,000 of Schedule C (business) net income. During the second half of the year, she began working as an employee and earned $38,000 in salary. What amount of selfemployment taxes is Harmony required to pay? Answer: $2,211 2. Apollo is single and his AMT base is $100,250. This amount includes $500 of qualified dividends (the dividends were taxed at 15% in determining the regular tax liability). What is Apollo's tentative minimum tax for 2012? Answer: Tentative minimum tax = $26,010. 3. Joe operates a plumbing business that uses the accrual method and reports on a calendar year. This year Joe signed a $50,000 binding contract with Brian. Under the contract Brian will provide Joe with up to 2,000 hours of vehicle repairs at $25 per hour. This year Brian provided 200 hours of repair services and billed Joe for $5,000. At year end Joe had not paid Brian for the services. What amount, if any, can Joe deduct for the repair services for 2012? Answer: The all events test is satisfied for $50,000 but Joe can only deduct $5,000 this year because that was the amount of services provided to Joe this year. 4. Yasmin purchased two assets during 2012. Yasmin placed in service computer equipment (5 year property) on May 26th with a basis of $10,000 and machinery (7year property) on December 9th with a basis of $10,000. Calculate the maximum depreciation expense (ignoring 179 and bonus depreciation): Answer: The midquarter convention applies since more than 40 percent of the property was placed in service during the fourth quarter. The calculations are $10,000 x .25 = $2,500 and $10,000 x . 0357 = $357. The total is $2,857 ($2,500 + $357). 5. Kristine sold two assets on March 20th of 2012. The first was machinery with an original basis of $51,000, currently in the fourth year of depreciation, and under the halfyear convention. The second was furniture with an original basis of $16,000 placed in service during the fourth quarter, currently in the third year of depreciation, and under the midquarter convention. What is Kristine's depreciation expense for the current year, rounded to the nearest whole number. Answer: The depreciation on those assets are $51,000 x .1249 x 1/2 year = $3,185 and $16,000 x .1968 x 1.5/12 = $394, the total is $3,579 ($3,185 + $394) 6. In 2012, Northern LLC placed in service on September 6th machinery and equipment (7year property) with a basis of $580,000. Assume that Northern has sufficient income to avoid any limitations. Calculate the maximum depreciation expense including 179 expensing (ignore any potential bonus depreciation), rounded to the nearest whole number. Answer: The $500,000 section 179 expense is increased to $920,000 because of the property placed in service limitation ($500,000 ($580,000 $2,000,000)). The halfyear convention applies. The expense is $1,191,510 which is depreciation of $1,900,000 x .1429 = $271,510 plus $920,000 of section 179 expense. 7. Assume that Reid has 2012 taxable income of $125,000 before any 179 expense and acquired the following assets: he placed in service computer equipment (5year property) on August 6 th with a basis of $100,000 and machinery (7year property) on November 9 th with a basis of $100,000. Calculate the maximum depreciation expense including 179 expensing (but not bonus depreciation). Answer: The $500,000 section 179 expenses are reduced to $125,000 because the expensing is limited to net income before the section 179 expense. The midquarter convention does not apply because the determination of the convention occurs after the basis reduction from the section 179 expensing. Reid chooses to use the section 179 election on the 7year machinery first, then the remaining $25,000 amount on the computer. This leaves $25,000 basis in the computer that was acquired on August 6. Therefore the halfyear convention applies. Reid's expense is $130,000 which is depreciation of $25,000 x .2 = $5,000 plus $125,000 of section 179 expense. 8. Oksana started an LLC on November 2 of 2012. She incurred $30,000 of startup costs. How much of the startup costs can be immediately expensed for the year? How much amortization may Oksana deduct in the first year Answer: $5,000 of startup expenses can be immediately expensed and $278 ($25,000/180) x 2 months) of amortization may be deducted. 2) ($35,000/180) x 4 months = $778 of the startup costs may be amortized and ($60,000/180) x 4 months = $1,333 of the organizational expenditures may be amortized