Question
Problem 1 Karl Inc. purchased only the following properties in Year 1. (1) Machine A of $1,100,000 used for business on Jan 1 (2) Machine
Problem 1
Karl Inc. purchased only the following properties in Year 1.
(1) Machine A of $1,100,000 used for business on Jan 1
(2) Machine B of $1,200,000 used for business on Oct 10 Questions: a) What is the maximum CRA for Machine A in Year 1?
b) What is the maximum CRA for Machine A in Year 2?
c) What is the maximum CRA for Machine B in Year 1?
d) What is the maximum CRA for Machine B in Year 2?
Problem 2
In Year 1, Jeff and Kim Jenson (married filing a joint return) have $200,000 of taxable income before considering the following transactions:
a. On March 2, Year 1, they sold a painting (art) for $100,000 that was purchased 15 years ago for $90,000.
b. A $12,000 loss on 11/1, Year 1 sale of bonds (acquired on 5/12, 5 years ago);
c. A $4,000 gain on 12/12, Year 1 sale of IBM stock (acquired on 2/5, Year 1);
d. A $17,000 gain on the 10/17, Year 1 sale of rental property. Of the $17,000 gain, $8,000 is reportable as gain subject to the 25% maximum rate and the remaining $9,000 is subject to the 15% maximum rate (the property was acquired on 8/2, 6 years ago. The acquiring date was after 1986);
e. A $12,000 loss on 12/20, Year 1 sale of bonds (acquired on 1/18, Year 1);
f. A $7,000 gain on 8/27, Year 1 sale of BH stock (acquired on 7/30, 10 years ago); and
g. A $11,000 loss on 6/14, Year 1 sale of QuikCo. Stock (acquired on 3/20, 5 years ago).
1) What is the amount and character of each transaction?
2) Complete the required netting procedures and calculate the Jenson's Year 1 taxable income after considering the above transactions.
3). What is Jenson's Year 1 additional tax liability as a result of the above transactions?
The taxable income is 287,860.
Tax due should be 56923. The tax calculation should separate regular income and dividends and long-term capital gains.
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