Hello I need assistance in answering the attached question (Problem 98). All answers should be completed in word (preferably in one document) without anything being copy and pasted from another source such as excel. All work must be shown including all formulas used. I have attached the question and the template to be used when answering the questions, it is labeled CH 11 Problem. The template is basically fill in the blank. I have also attached the other referenced question and answers.

CH 11. 89. In problem 89 in Chapter 9 and problem 74 in Chapter 10, the initial basis and the adjusted basis of Emelio and Charita's assets were determined as of December 31, 2013. During 2014, they have the following transactions related to the assets: a. In June, an electrical connection shorts out and starts a fire in Emelio's building. The cost of repairing the damage caused by the fire is $11,500. Emelio's insurance policy reimburses him $5,500 for the fire damage. b. The real estate market begins to deteriorate in 2014. Emelio and Charita decide to sell their rental house before it loses any more value. They sell the house for $76,000 on October 16, 2014. They pay $325 to advertise the property for sale. In addition, they pay $5,200 in brokerage commissions and $1,045 in legal fees on the sale. Because their renters had a one-year rental agreement, Emelio and Charita have to pay the renters $900 to vacate the lease. c. Emelio's office building is next to a new industrial park development project. The developer needs to run utility lines through Emelio's property. The developer agrees to pay Emelio $2,000 for an easement to run the utility lines along one side of Emelio's property. d. While assessing the damage caused by the fire, the contractor Emelio hired to repair the damage finds an antique chair that had been sealed behind one wall. Emelio sells the chair to a local dealer for $1,200. e. Emelio raises the additional cash he needs to complete the building repairs by selling 100 shares of Software Corporation stock for $24 per share. (He pays brokerage commissions of $140.) He also sells 100 shares of Flex Corporation stock for $40 per share. (Brokerage commissions are $200.) f. Charita decides to upgrade her home office by purchasing new furniture costing $1,300. She gives the old office furniture to her gardener, who agrees to exchange 8 weeks of gardening services for the furniture. The gardener normally charges $50 per week. g. In addition to these transactions, Charita tells you that a company in which she and Emelio had invested went bankrupt in 2012. They had purchased the stock from Charita's father for $24,000 in 2007. The company was dissolved in 2012, and the shareholders received nothing from the bankruptcy proceeding. Emelio and Charita had no other capital asset transactions in 2012 and 2013. For each of these transactions, determine the realized and recognized gain or loss and the character of the gain or loss. Do the appropriate year-end netting procedures and determine the effect of the transactions on Emelio and Charita's 2014 adjusted gross income and their income tax liability. Assume that Emelio and Charita's adjusted gross income before considering these transactions is $120,000. a. Emelio has a business casualty loss of $? Insurance proceeds Cost of repairs as a result of the fire: $ ? (?) Business casualty loss $ (?) b. Amount realized ($? - $? - $? - $?) Adjusted basis ($? - $? - $?) Gain on sale $? (?) $? Unrecaptured Section 1250 gain ($? + $?) Long-term capital gain (?) $? 2013 Depreciation on building: [$? x ?% x (? 12)] = $? The $? payment to the renters is a current period rental expense. c. There is no income effect from the receipt of the $?. A realization has not occurred. The basis of the land is reduced by the $? (capital recovery). d. Emelio has a $? ?-term capital gain on the sale of the antique chair. The antique chair is not property used in his trade or business and therefore, is a capital asset. e. Both stocks have been held for ? than 12 months. The sale of the Software stock results in a ? -term capital gain of $?. The sale of the Flex stock results in a $? ? -term capital gain: Software Corporation stock: Amount realized (? x $? = $2,400 - $?) $? Adjusted basis (100 x $?) (?) Long-term gain on sale $ 1,260 Flex Corporation stock: Amount realized (? x $? = $? - $?) $ ? Adjusted basis (100 x $?) (?) Long-term gain on sale $ 300 f. Amount realized ($? x ?) $? Adjusted basis ($? - $? - $36) Gain on sale (?) $? Section 1245 recapture Section 1231 gain (?) $ -0- The 2013 depreciation is $? ($? x ?% x 50%). The office furniture is Section 1245 property and the $? gain on the sale is recaptured as ? ?. g. Worthless security - Long-term capital loss in 2012 $ (?) 2011 loss deduction ? 2012 loss deduction ? Long-term capital loss carryforward to 2014 $ (?) Section 1231 Netting First netting: Business casualty loss from fire is an ordinary loss $ (?) Second netting: There are no other Section 1231 gains or losses $ ? Capital Gain and Loss Netting Long-term gain and loss netting: Unrecaptured Section 1250 gain Gain on sale of rental house Gain on sale of Software stock $ 14,319 ? ? Gain on sale of Flex stock ? Capital loss carryforward (?) Net long-term capital gain $ 17,309 Short-term capital gain on antique chair $ ? Income Effect Summary Business casualty loss $ (?) Section 1245 recapture - ordinary income ? Long-term capital gain ? Short-term capital gain ? Net effect on adjusted gross income $? The transactions increase Emelio and Charita's adjusted gross income to $?. Their taxable income is $?. Original adjusted gross income $120,000 Additional income effect on adjusted gross income Revised adjusted gross income ? $? Less: Standard deduction Personal exemptions (? x $?) Taxable income (?) (?) $ 87,366 In calculating their income tax liability, the net long-term capital gain is taxed at 15%: the $? capital loss carryforward is used to offset the unrecaptured Section 1250 gain ($? > $14,025), leaving an adjusted net capital gain of $?. The remaining income $? ($? - $17,309) of income is taxed at the married, filing jointly tax rates. Their total income tax liability is $?: Tax on $88,657 ordinary income $?+ [25% x ($? - $?)] Tax on adjusted net capital gain - $? x 15% Income tax liability $? ? $16,618 89. Emelio and Charita are married taxpayers with 2 dependent children. Emelio starts a computer consulting business in 2012. Charita works as a real estate broker. During 2012, they have the following property transactions: a. Emelio purchases an office building on March 15, 2012, to use in his computer consulting business. The price of the property is $120,000. He pays $15,000 in cash and signs a 30-year, 10% mortgage for the remainder. For property tax purposes, the land is assessed at $10,000 and the building at $30,000. Emelio pays $3,000 for a new roof for the building. b. Emelio was employed by Computer Corporation as a consultant starting his own business. Computer Corporation lets Emelio purchase the computer equipment in his office for use in his business. He makes the purchase on April 3, 2012. The fair market value of the equipment is $20,000, but Emelio pays $16,000 to Computer Corporation. Computer Corporation's original basis in the equipment was $36,000 and its adjusted basis at the time of the transfer to Emelio is $8,000. c. Emelio takes the color printer that the children have been using at home to use in the office in his consulting business. The original price of the printer was $8,000, but it was worth $4,000 when converted to business use on April 1, 2012. d. On March 30, 2012, Emelio buys office furniture to use in his business for $2,200. e. In January, Charita purchases a new car to use in her real estate business. She pays $19,500 for the car and $1,500 to have a sunroof installed in it. During the year, she drives the car 6,800 miles for business and 3,200 for personal use. f. Charita uses a room in their home exclusively and regularly as an office, The room is 12 feet by 12 feet. The total area in the home is 2,400 square feet. Charita purchased office furniture for $800 when she started using the office in the home in June 2007. She and Emelio paid $140,000 for the property in 2002, of which $20,000 is allocated to the land. g. Emelio and Charita own a rental house. Charita acquired the house from her former husband in 2003 as part of their divorce settlement. Charita and her former husband had paid $50,000 for the house (which is her basis in the property) in 1996. Charita estimates that the house had increased in value to $90,000 when it was converted to rental property in October 2004. h. Charita inherits 200 shares of stock in Desmond, Inc., from her uncle, who paid $700 for it in 1980. At the date of the uncle's death, the stock is worth $14,000. The executor of the estate elects to use the alternate valuation date, at which time the stock is worth $13,300. Charita receives the stock 2 months later when it is worth $14,500. i. Emelio and Charita own stock in Software Corporation. They purchased 1,000 shares for $20 per share in July 2005. They paid $400 in brokerage commissions. On July 21, 2012, Software Corporation distributed a 2-for-1 stock split. The fair market value at the time of the split was $100 per share. j. On July 21, 2007, Emelio's father gives him 100 shares of stock in Flex Corporation. His father paid $35 per share in June 1998. The fair market value at the date of the gift was $45 per share. Based on the information provided, determine the initial basis of each of Emelio and Charita's assets. If more than one basis is possible, list the alternatives and explain when each basis would apply. Ch 9 89 Emelio's Business Assets: Land and Building - Purchase Price = $120,000 Land = ($10,000 $40,000) x $120,000 = $30,000 Building = ($30,000 $40,000) x $120,000 = $90,000 + $3,000 = $93,000 Computer Equipment - Emelio acquired the computer equipment in a bargain purchase. Therefore, he must recognize as income the difference between the fair market value of the computer ($20,000) and the $16,000 he paid for the computer. Emelio's basis in the computer is $20,000. The $4,000 he recognizes as income from the bargain purchase is added to the $16,000, he paid for the computer. Basis in Computer= 16,000 cost + $4,000 bargain purchase = $20,000 Printer - Personal property converted to business use. The basis is the lesser of the adjusted basis ($8,000) or the fair market value ($4,000) at the date of conversion (this is also the depreciable basis). Split-basis rule: Gain basis = $8,000 Loss and depreciation basis = $4,000 Office Furniture Purchased - The basis in the furniture is $2,200 - its cost. Charita's Business Assets: Charita's Automobile - $19,500 purchase price + $1,500 sunroof = $21,00 The automobile is a mixed-use asset. The basis must be allocated between business and personal use: Business Use = (6,800 10,000 miles) x $21,000 = $14,280 Personal Use = (3,200 10,000 miles) x $21,000 = $ 6,720 Home Office - Charita can deduct the costs associated with the home office. A portion of the basis of the home must be allocated to the home office space. At the date the home office use began, the basis of the house is $120,000 ($20,000 is allocated to the land). Based on square footage, the basis of the home office would be $7,200: [(12 x 12 = 144) 2,400] x $120,000 = $7,200 Investment Assets: Rental House - The basis of property received in a divorce is equal to the adjusted basis of the property. Therefore, Charita's basis as a personal residence is the $50,000 adjusted basis. At the date of conversion to business use, the basis is the lesser of the adjusted basis or the fair market value of the property. The rental house basis is Charita's $50,000 adjusted basis. The basis of the land and the building must be determined separately: Land Building = ($10,000 $80,000) x $50,000 = $ 6,250 = ($70,000 $80,000) x $50,000 = $43,750 Inherited Stock = Inherited property is valued at fair market value. Because the executor elected the alternate valuation date, the property is valued at six months after the date of death. This gives the stock a basis of $13,300. Stock in Software Corporation - The basis is equal to the purchase price plus the other costs of acquiring the stock. The basis is $20,400. Purchase Price (1,000 x $20) $20,000 Brokerage Commission Total Basis 400 $20,400 The stock split increases the number of shares to 2,000 and reduces the cost per share from $20.40 per share ($20,400 1,000) to $10.20 ($20,400 2,000) per share. Note that the total investment in the stock is unchanged. Stock from father - The fair market value of the gifted property is greater than the donor's basis. Thus, Emelio's basis is his father's basis or $35 per share x 100 shares = $3,500. CH 10. INTEGRATIVE PROBLEMS 74. Emelio and Charita's Assets Emelio's Business Assets: Asset: Building/Land Date Acquired: March 15, 2013 Initial Basis: Land = $30,000; Building = $93,000 Depreciation Life: 39 years MACRS Depreciation Deducted to December 31, 2013: $1,891 Basis on December 31, 2012: Building - $91,109 Land - $30,000 Depreciation Schedule - (Table A10-9): Depreciable Depreciation Year Basis 2013 Percentage $93,000 2.033% Depreciation $1,891 Asset: Computer Equipment Date Acquired: April 3, 2013 Initial Basis: $20,000 Depreciation Life: 5 Year MACRS Depreciation Deducted to December 31, 2013: $4,000 Basis on December 31, 2013 $16,000 Depreciation Schedule - (Table A10-2) Depreciable Depreciation Year Basis $20,000 2013 Percentage 20% Depreciation $4,000 Asset: Printer Date Acquired: April 1, 2013 Initial Basis: Gain - $8,000, Loss and Depreciation -$4,000 Depreciation Life: 5 Year MACRS Depreciation Deducted to December 31, 2013: $800 Basis on December 31, 2013: $3,200 Depreciation Schedule - (Table A10-2) Depreciable Depreciation Year Basis Percentage Depreciation 2013 $4,000 20% $800 Asset: Office Furniture Date Acquired: March 30, 2008 Initial Basis: $2,200 Depreciation Life: 7 Year MACRS Depreciation Deducted to December 31, 2013? $314 Basis on December 31, 2013: $1,886 Depreciation Schedule - (Table A10-2) Depreciable Depreciation Year 2013 Basis Percentage $2,200 14.29% Depreciation $314 Charita's Business Assets: Asset: Automobile Date Acquired: January 2013 Initial Basis: $21,000 x (6,800 10,000) = $14,280 Depreciation Life: MACRS 5-year Depreciation Deducted to December 31, 2013: Basis on December 31, 2012: $12,267 Depreciation Schedule: - (Table A10-2) Depreciable Depreciation $2,013 Year 2013 Basis Percentage $14,280 Depreciation 20% $2,856 (limited to $2,013)* The maximum amount of depreciation cannot exceed the percentage of business use times the maximum depreciation amount $2,081 ($3,060 x 68%). Asset: Home Office Date Acquired: June 2008 Initial Basis: $7,200 Depreciation Life: 39 Year MACRS Depreciation Deducted to December 31, 2013: $1,025 Basis on December 31, 2013: $6,175 Depreciation Schedule - (Table A10-9) Depreciable Depreciation Year Basis Percentage Depreciation 2008 $7,200 1.391% $100 2009 $7,200 2.564% $185 2010 $7,200 2.564% $185 2011 $7,200 2.564% $185 2012 $7,200 2013 $7,200 Investment Assets: 2.564% 2.564% $185 $185 Asset: Rental House Date Acquired: October, 2005 Initial Basis: Land = $6,250; Building = $43,750 Depreciation Life: 27.5 Years MACRS Depreciation Deducted to December 31, 2013: $13,060 Basis on December 31, 2013: Land = $6,250; Building = $30,690 Depreciation Schedule (Table A10-7): Depreciable Depreciation Depreciation Year Basis Percentage Deduction 2005 $43,750 0.758% $ 332 2006 $43,750 3.636% $1,591 2007 $43,750 3.636% $1,591 2008 $43,750 3.636% $1,591 2009 $43,750 3.636% $1,591 2010 $43,750 3.636% $1,591 2011 $43,750 3.636% $1,591 2012 $43,750 3.636% $1,591 2013 $43,750 3.636% $1,591 Asset: Desmond, Inc. (Inherited Stock) Date Acquired: 1980 (Tacked-on holding period) Initial Basis: $13,300 Asset: Software Corporation Stock Date Acquired: July Initial Basis: $20.40 per share ($20,400 Total Basis) Basis on December 31, 2013: $10.20 per share ($20,400 stock split Asset: Flex Corporation Stock Date Acquired: June 1998 (tacked on holding period) Initial Basis: $35 per share ($3,500 Total Basis) Personal Use Assets: Principal Residence: Initial Basis $120,000 Less: Home Office Basis (7,200) Basis on December 31, 2013 $112,800 Charita's Automobile: Cost $ 21,000 Less: Business Portion (14,280) Basis) 2-for-1 $ 6,720 Initial Basis Integrative Problem CH 11. 89. a. Emelio has a business casualty loss of $? Insurance proceeds Cost of repairs as a result of the fire: $ ? (?) Business casualty loss $ (?) b. Amount realized ($? - $? - $? - $?) Adjusted basis ($? - $? - $?) Gain on sale $? (?) $? Unrecaptured Section 1250 gain ($? + $?) Long-term capital gain (?) $? 2013 Depreciation on building: [$? x ?% x (? 12)] = The $? payment to the renters is a current period rental expense. $? c. There is no income effect from the receipt of the $?. A realization has not occurred. The basis of the land is reduced by the $? (capital recovery). d. Emelio has a $? ?-term capital gain on the sale of the antique chair. The antique chair is not property used in his trade or business and therefore, is a capital asset. e. Both stocks have been held for ? than 12 months. The sale of the Software stock results in a ? -term capital gain of $?. The sale of the Flex stock results in a $? ? -term capital gain: Software Corporation stock: Amount realized (? x $? = $2,400 - $?) Adjusted basis (100 x $?) $? (?) Long-term gain on sale $ 1,260 Flex Corporation stock: Amount realized (? x $? = $? - $?) Adjusted basis (100 x $?) Long-term gain on sale $ ? (?) $ f. Amount realized ($? x ?) Adjusted basis ($? - $? - $36) $? (?) 300 Gain on sale $? Section 1245 recapture (?) Section 1231 gain $ -0- The 2013 depreciation is $? ($? x ?% x 50%). The office furniture is Section 1245 property and the $? gain on the sale is recaptured as ? ?. g. Worthless security - Long-term capital loss in 2012 2011 loss deduction ? 2012 loss deduction Long-term capital loss carryforward to 2014 $ (?) ? $ (?) Section 1231 Netting First netting: Business casualty loss from fire is an ordinary loss $ (?) Second netting: There are no other Section 1231 gains or losses $ ? Capital Gain and Loss Netting Long-term gain and loss netting: Unrecaptured Section 1250 gain Gain on sale of rental house Gain on sale of Software stock Gain on sale of Flex stock $ 14,319 ? ? ? Capital loss carryforward (?) Net long-term capital gain $ 17,309 Short-term capital gain on antique chair $ ? Income Effect Summary Business casualty loss $ (?) Section 1245 recapture - ordinary income ? Long-term capital gain ? Short-term capital gain ? Net effect on adjusted gross income $? The transactions increase Emelio and Charita's adjusted gross income to $?. Their taxable income is $?. Original adjusted gross income $120,000 Additional income effect on adjusted gross income Revised adjusted gross income ? $? Less: Standard deduction Personal exemptions (? x $?) Taxable income (?) (?) $ 87,366 In calculating their income tax liability, the net long-term capital gain is taxed at 15%: the $? capital loss carryforward is used to offset the unrecaptured Section 1250 gain ($? > $14,025), leaving an adjusted net capital gain of $?. The remaining income $? ($? $17,309) of income is taxed at the married, filing jointly tax rates. Their total income tax liability is $?: Tax on $88,657 ordinary income $?+ [25% x ($? - $?)] Tax on adjusted net capital gain - $? x 15% Income tax liability $? ? $16,618