Computational Exercises c11-12

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Computational Exercises

Chapter 11
27. LO.2 In the current year, Ed invests $30,000 in an oil partnership. He has taxable income for the current year of $2,000 from the oil partnership and withdraws $10,000. What is Ed’s at-risk amount at the end of the year?
28. LO.3 Lucy sells her partnership interest, a passive activity, with an adjusted basis of $305,000 for $330,000. In addition, she has current and suspended losses of $28,000 associated with the partnership and has no other passive activities. Calculate
Lucy’s total gain and her current deductible loss. Describe the type of income that the deductible loss may offset.
29. LO.4, 5 Forrester owns a nonrental business with two separate departments.
Department A generates net income of $70,000, and Department B generates a net loss of $58,000. Forrester participates 800 hours in the operations of
Department A and 300 hours in the operations of Department B. If Forrester is allowed to treat the departments as components of a single activity, calculate the amount of the Department B loss that can be offset against the income from Department
A in the current year.
30. LO.7 Rhonda has an adjusted basis and an at-risk amount of $7,500 in a passive activity at the beginning of the year. She also has a suspended passive activity loss of $1,500 carried over from the prior year. During the current year, she has a loss of $12,000 from the passive activity. Rhonda has no passive activity income from other sources this year. Determine the following items relating to Rhonda’s passive activity as of the end of the year.
a. Adjusted basis and at-risk amount in the passive activity.
b. Loss suspended under the at-risk rules.
c. Suspended passive activity loss.
31. LO.8 Noah, who has $62,000 of AGI before considering rental activities, has $70,000 of losses from a real estate rental activity in which he actively participates.
He also actively participates in another real estate rental activity from which he has $33,000 of income. He has other passive activity income of $20,000. What amount of rental loss can Noah use to offset active or portfolio income in the current year?
32. LO.9 Rose dies with passive activity property having an adjusted basis of $65,000, suspended losses of $13,000, and a fair market value at the date of her death of $90,000. Of the $13,000 suspended loss existing at the time of Rose’s death, how much is deductible on her final return or by the beneficiary?
33. LO.10 Troy’s financial records for the year reflect the following:
Interest income from bank savings account $ 900
Taxable annuity receipts 1,800
Safe deposit box rental (to hold annuity documents) 125
Investment interest expense 3,200
Calculate Troy’s net investment income and his current investment interest deduction. Assume that Troy does not itemize his personal deductions. How is any potential excess investment interest deduction treated?

Chapter 12
11. LO.2 Carlson’s general business credit (before limitations) for the current year is $84,000. His net income tax is $190,000, tentative minimum tax is $175,000, and net regular tax liability is $185,000. He reports no other Federal income tax credits for the year. Compute the amount of the general business credit that Carlson can claim for this year.
12. LO.3 Emily spent $135,000 to rehabilitate a building (adjusted basis of $90,000) that originally had been placed in service in 1935.
a. Compute Emily’s credit for rehabilitation expenditures.
b. How would your answer change if the building were a historic structure?
13. LO.3 During 2016, Lincoln Company hires seven individuals who are certified to be members of a qualifying targeted group. Each employee works in excess of 600 hours and is paid wages of $7,500 during the year. Determine the amount of
Lincoln’s work opportunity credit.
14. LO.3 Dorcas incurs the following research expenditures.
In-house wages $60,000
In-house supplies 5,000
Paid to ABC, Inc., for research services 80,000
a. Determine the amount of Dorcas’s qualified research expenditures for the tax year.
b. If the taxpayer’s base amount is $50,000, what is Dorcas’s incremental research activities credit?
15. LO.4 In late 2015, Randy and Rachel Erwin paid $7,000 in legal fees, adoption fees, and other expenses directly related to the adoption of an infant son, Jameson.
The adoption becomes final in 2016, and the Erwins then pay an additional $8,000 in adoption fees. Their 2016 AGI amounts to $135,000.
a. Determine the amount of the couple’s 2016 adoption tax credit.
b. How does your answer change if the Erwins’ 2016 AGI is $210,000?
16. LO.4 Santiago and Amy are married and file a joint tax return, claiming as dependents their three children, ages 12, 14, and 18. Their AGI is $140,000. Determine the amount of the couple’s child tax credit.
17. LO.4 Ivanna, who has three children under age 13, worked full-time while her husband, Sergio, was attending college for nine months during the year.
Ivanna earned $28,000 and incurred $9,100 of child care expenses. Determine the amount of Ivanna and Sergio’s child and dependent care credit.
18. LO.4 Paolo and Isadora Shaw are married, file a joint tax return, and have one dependent child, Dante. The Shaws report modified AGI of $148,000. The couple paid $12,000 of tuition and $10,000 for room and board for Dante, a fulltime first-year student at Serene College. Determine the amount of the Shaws’
American Opportunity credit for the year.
19. LO.4 Rafael and Lucy Gonzalez, married taxpayers, each contribute $2,900 to their respective § 401(k) plans in 2016. The AGI reported on their joint return is $38,000. Determine the amount of the couple’s “Saver’s Credit.”
20. LO.5 In 2016, Bianca earned a salary of $164,000 from her employer, CallMart.
How much in FICA and Medicare taxes will CallMart withhold from Bianca’s salary?
21. LO.7 Determine the appropriate amount of 2016 additional Medicare tax for Mario, a single individual. His wages total $440,000.