can you please solve this practice exam for me Problem 1 Deductions 30% Problem 2 Loss Limitations 30% Problem 3 Accounting Methods 30% Problem 4 Related Parties 10% Total Weight 100% Please explain all your responses; include authority where provided and reasoning. Do not just answer a question yes or no. Acceptable authority is the Code, the Regulations, cases and rulings from textbook or provided by the in DocSharing. Although you may use the Lecture Slides as an aid, it is not appropriate to cite to the Lecture Slides as authority (you may, of course, use them to figure out what authority to cite). You are not expected to do any research outside of the authorities listed above. Do not just provide a numerical answer without explaining how you derived it. You may not communicate in any manner, directly or indirectly, with any human being about this examination. From the time you DOWNLOAD OR VIEW the exam, you have 3.5 hours to complete and upload. Your responses to this exam should uploaded to the Final Exam Dropbox in eCollege no later than 11:59 p.m. YOUR TIME on Tuesday, 4/30/13. There are no extensions available. Grades are due at 8:00 am on Monday, 5/6. I have 5 classes of work coming in during finals week. There is no more time. You may not communicate in any manner, directly or indirectly, with any human being (except the Instructor) about this examination. Points are assigned to each Problem. Your best bet is to give yourself a time limit and stick to it. It will not help you to do one problem perfectly and another not at all (you will leave points on the table). Attempt all problems. Good Luck. Problem 1. Worth 30% of total exam grade: 1) Individual A paid $10,000 in to B. What is the federal income tax effect to A? Hint: Clearly, this is an open ended question. You are not expected to address all possible scenarios. However, it is important to communicate your process and support any points you raise with citations to primary authority. I suggest that you put a time limit for responding (it is best to attempt to answer each question). Problem 2 Worth 30% of total exam grade: J.P., a wealthy investment banker, purchased an office building and underlying land (the property) for $2 million, borrowing the entire purchase price from the Last Texas Savings and Loan. The amount was borrowed in 2 loans a recourse loan of $200,000 and a nonrecourse loan of $1,800,000. Principal and interest on the loan are payable over 20 years. J.P. did not invest any of his own money and did not devote any of his time to managing the office building (he hired a management company to take care of the business). In the first year of operations, the results for J.P. are as follows: Rental income $270,000 Interest paid $210,000 Operating expenses $50,000 Depreciation $60,000 In addition to the interest payment, J.P. made a $20,000 principal payment on the recourse note. J.P. has $800,000 of salary income from his investment banking job and $80,000 of dividend income from the portfolio investments. J.P.s depreciation was not accelerated. List the authorities relied upon in your responses: (a) To what extent may J.P. deduct his net $50,000 loss from the office building? (b) In part (a), what would be the tax consequence in Year 1 if J.P. also owned a second rental property that produced $40,000 of income net of all expenses, including interest and depreciation? (c) Refer to (a). On the first day of the second year, J.P. sold the property. Because the value of the property exactly equaled the $1,980,000 debt on the property, the buyer simply took the property subject to the mortgage, and J.P. received no other consideration. What are the tax consequences of the sale to J.P. in Year 2? (d) Refer to (c). Assume that instead of selling the property, J.P. receives in the second year $320,000 of rental income net all expenses except for interest and depreciation. J.P. pays $22,000 of recourse loan principal, $200,000 of interest on both loans, and depreciation is again $60,000. J.P.s salary and dividend income are the same as in the first year. What are the tax consequences of J.P.s investment in the property in Year 2? Problem 3 Worth 30% of total exam grade: Space Funerals, Inc. is a calendar year accrual basis taxpayer. What is the tax status of each of the following items from the company's current year (provide citations and a brief discussion/conclusion)? a. Receivable known to be worthless in February. b. Prepaid rent of January, check received, but not deposited. c. Dividend declared to shareholders of record as of December 30, check not received. d. Payment for supplies ordered the previous year. e. Increase in unpaid accounts payable. f. Sale of securities at a loss at the end of December, settlement date January 4. g. Same as (f), but at a gain. h. Prepayment for services to be rendered this year, check cashed by payee in December. Problem 4 Worth 10% of total exam grade: There are numerous provisions in the Code that treat transactions between related parties differently than transactions between unrelated parties. Note two provisions that would alter the tax consequences of transactions based on relationships. Provide a brief description of how each provision works and what parties are affected. Identify and discuss the authorities within the body of the response itself. a) Provision 1 Response: b) Provision 2 Response