Fed Income Tax: Individual

Accession to wealth,
Clearly realized,
Over which TP has complete dominion

Yes. S102(a) wages general rule: Gross income does not include the value of property acquired by gift, bequest, devise, or inheritance.
Otherwise, it's income.

No. Gross income does not include gifts S102

Yes. You are richer and you control it. S61 satisfied. Glenshaw Glass is satisfied.
Treasure trove to the extent of its value in the US currency constitutes gross income for the taxable year in which it is reduced to undisputed possession.

No. Not clearly realized. Where is the concrete gain? You never sold it for gain. In Palmer v Commis the court held that buying something at a discount is not gross income.

Yes it is. It meets all three factors of GG.

Yes. It satisfies all 3 GG factors. Interest income is gross income under S61. There is accession to wealth, clearly realized, TP has complete dominion over it.

No. Accession to wealth is not satisfied because you have to pay it back. You have another asset but you also have another liability.

No. Sam does not realize any Gross income. Palmer says that buying at a discount is not gross income.
Yes. All three Glenshaw Glass factors met.
1k. His basis is what he paid for it. IRC S61(a)(3) gains derived from dealings in property. If you're hit with 9k tax for GI you can reduce gross income by basis. 10 - 1 = 9. Under S1001 this is clearly realized.

Yes she has gross income. Cesarini says found property results in immediate gross income. Distinguished from bargain purchase property. Sam finding the ring satisfies all 3 factors of GG.
None. Sam was taxed for it in 2018. Her basis in the ring is 5k. Tax cost = basis rule. S1.61(2)(d)(2)
Yes. GI of 2500. Basis protects you up to how much you paid taxes for.

TP has no GI as no gain has been realized. 1001 requires a sale or other disposition.
Yes. GI of 200. All three GG satisfied.

0. There is no realized gain. No taxable income.

25k of gross income. 1001 is satisfied as there has been a sale or other dispensation. All three of GG satisfied. Accession to wealth, clearly realized, TP has complete dominion

Basis will increase. Under S1016 - proper adjustment in respect of the property shall in all cases be made for expenditures n shit.

16k. 10+6. Quick maffs.
Cost of improvements. If adding a pool increases value 100k but costs 6k, use 6k. COST of improvements is what to use.

S1.61-6. When part of larger prop is sold, the cost or other basis of entire property shall be equitably apportioned among the several parts and the gain realized or loss sustained on the part of the entire property sold is the difference between the selling price and the cost or other basis allocated to such part.
The cost should be calculated from when you bought it. Can't base basis on the adjusted value.

When outside of the 9th circuit apply Inaja.
When the basis of the property sold is impossible / difficult to determine.
Inaja says that sales proceeds will only be included in gross income to the extent that they exceed TP's basis in the property. Only add to GI if basis is reduced to 0 and there is still profit. There is no negative basis.

Apply when in the 9th circuit. Use when TP can't calculate which part of basis was sold. If you can't use equitable apportionment and show which part you sold, then all sale proceeds will be GI and basis will not be adjusted.

60k. S1016.
0. There has been no realized gain. There must be a sale or other disposition S1001(a)
Joe bought it for 25, improved for 35k, and sold for 150. 150 (1001b) - 60k (1016(a)(1) = 90k
Adjusted basis = 25(1012) + 35 + 50(1016(a)(1)) = 110k(1011)
There is a loss. Total basis is greater than the amount realized. If it's personal property then TP can't write it off, if it's business or other property TP may be able to realize a loss and get a tax write off.

50k. Clearly realized, accession to wealth, has complete dominion.

100k. Cannot deduct for your own labor. You have no basis in your own labor.
1001(b) amt realized
1011 adj basis for gain
1001(a) GI
Joe's basis is zero because he didn't pay anything to produce the painting.

7250. Basis in all the land is 1k. Sold one quarter of the land. Basis in land sold is 250. Reduce 7500 (gain) by the basis sold (250). In this Q we have no reason to believe that land is valued differently so we apply equitable apportionment.

I have gross income of 10k.

No. Under Inaja basis is reduced to 800. There is no gross income.

Under Inaja: TP's basis is reduced to 900, and they have no gross income.
Under 1st NW: TP has 100 of income. TP's basis remains the same. They sold created rights.

Gross income under S61 results any time a third party pays TP's obligation. Income may be excluded as a gift in some circumstances. Wages are always includible in gross income.

Held that this was gross income. A TP who discharges their own debt obligation for less than original face value will have gross income to the extent of the reduction.

GI does not include any amount which would be (but for this exclusion) includible in GI by reason of the discharge (in whole or in part) of indebtedness of the TP if the discharge occurs when TP is insolvent. Insolvency in this section = extent that liabilities exceed your assets immediately before the discharge.

KL has no gross income. When KL buys their own bonds back, they're retired. When someone else buys them they are not retired. KL still has the liability.

No. There was no accession to wealth. One debt was simply traded for another.

There is gross income. JD has 15k of indebtedness income. When JD received 20k of forgiveness and that was not enough to get past 50k of liabilities remaining.
There is an exclusion under S108 because JD is insolvent.
No because S108 will apply and exclude the debt discharge. In order for 108 to apply, JD has to be insolent at least to the extent of the discharge (15k). JD is 50k insolvent so it will apply

No it is not. JD made gains on the sale of the stock. Debt is not being forgiven, it is being paid off.
Yes, S1001c requires gain to be recognized. There was a sale or other disposition and a realization of gain.
Could've sold it. If he had he would've had income of 12. These two interactions are functionally the same and therefore will be treated the same in the tax code.

Both are included in TP's basis. The presumption is that you're going to repay it that's why you have no GI when you get loan money.

Yes because it's recourse they don't really have a choice.

Whenever loan is recourse and lender does not pursue borrower for the difference.

$500 under S1012

$500. S1012 - doesn't matter where the money comes from, the presumption is that they are going to repay the debt.
Basis remains $500.
Basis remains $500. Under 1012 there is the presumption that you will repay the loan.
Basis remains the same. A has taken a loan and then paid it back.
Her basis remains 500. She has not put money into the property. Basis adjustment rule 1016(A)(1) only applies to improvements for the property.

Basis increases to 3500. Money was used to make improvements on property 1016A(1)

Amount realized is 5000. A is not being relieved of debt so no additional. A is not assuming any more debt so no reduction in realization.

5000. A gets debt relief of 500 and cash of 4500. Liability relief is an example of "property received" in S1001(b).
5k because 4500 AR and 500 income in the form of debt forgiveness.
Nope. IRS operates under the assumption that you'll pay it back.

Basis = 500 S1012
A's basis includes the full amount of the mortgage Tufts/Crane
Because mortgage is recourse first test of Rev Rul 90-16 is met.

500 S1012
- 475 S1016a2
= 25 S1011(a)

We have met both conditions for 90-16 to apply.
1. Recourse debt
2. the bank releases A from recourse debt without buttfocking them (financially) (lender forgives remaining loan balance). Because 90-16 applies we now have two transactions. Property transaction and discharge of indebtedness.
TP has 75 gain on prop transaction: AR 100 (fmv) - AB 25 = Gain 75
Discharge of indebtedness:
Liab 500 - FMV100 --> S61/108 analysis.
If nonrecourse then Tufts and one transaction. AR 500 - AB (25) = Gain of 475.

When the loan is recourse and the bank agrees not to sue the borrower for the balance.

TP has Old Colony income. This occurs when a third party pays off. your debt. Kirby Lumber ruling applies when you manage to pay off your own debt at less than face value.

Hawaii is in the 9th circuit. If basis was impossible to determine NW would apply, but basis is not impossible to determine since nothing tells us not to use equitable apportionment. Basis reduced by % of purchase price represented by 5 acres.

1st NW applies because she is in the 9th circuit and farmer has sold intangible rights. The amount realized will be categorized as gross income.
We would use Inaja because they are no longer in 9th circuit but the rights sold are still intangible.

d is the correct answer. Mary's basis in the land is 500k. Her outstanding mortgage is 400k. The principal outstanding is still 400 in year 3 bc no interest. Here she paid 100k, took out 400k debt. She turned property over paying debt back with the property, which she paid 500k for, and didn't get her 100k back. Only cancellation of debt by repayment of what she went into debt for by giving the property back. Nonrecourse means tufts, one transaction. No debt discharge.

The mere absence of a legal or moral obligation to make such a payment does not establish that it is a gift. Payments made in a business setting (here, a cadillac) are taxable income

A detached and disinterested generosity out of affection, respect, admiration, charity, or like impulses. The most critical consideration is the transferor's intention. In general, almost never a gift from employer to employee unless your boss is your mom/dad or something.

Yes. Glenshaw Glass is satisfied.
The basis would be 30k which is the FMV. Tax cost = basis.
She has a loss of 5k. The loss is realized, but it is NOT recognized.

40k will be treated as a gift. Given generously from father to son under no obligation. Unless this shit was in a K, which, unlikely. The 120k will be treated as gross income. Father paid because he was legally required to.
If everything paid voluntarily then likely was a tax free gift.

This will likely be treated as a gift. The $50 was given out of "affection, respect, admiration, charity, or like impulses" This is a graduation gift and should be excluded under S102

IRS may argue that son earned income. Glenshaw Glass satisfied. Father may have felt obligated to make son stop smoking. If given out of moral duty then not gift. More likely, Father gave it to son for benefit of son, not out of duty. Likely a gift. No taxable income.

Additional information needed to know would have to be about the special events that are causing people to give money. Were these payments random or scheduled or expected or what. Payments were gathered in a routinized highly scheduled event. Special giving events were higher than his salary. They knew that the church couldn't keep this guy if they didn't pay so it wasn't really voluntary. Likely more like a tip than a gift. This will be gross income considering that it is for his service.

This is not a detached or disinterested gift. Oprah's intent was more for publicity than to just be generous. IRS won. This is gross income.

Excluded. S102. Bequest, devise, inheritance not counting as gross income.

Included in gross income S61. This is just being paid to do a job. The amount paid was not detached and disinterested generosity. It was consideration for services rendered.

S61 included. It's really a bonus for services rendered. Very rarely will payment from an employer be a gift. It must not be tied to performance.

A can exclude 20k from gross income. This was a transfer for valuable consideration so it will not be excluded.

Partner excludes 100k from gross income at A's death because we are in rule 3 of 101(a). Law firm partner does not have an insurable interest in A.

80 (FMV) will be his basis because of the carryover basis rule when sold for a loss and when transferred with a built in loss.
If at time of gift there is a built in loss but using FMV basis results in a gain then we use carryover basis = 100.

Special loss basis rule applies here. At the time of the gift, basis is in excess of value. Aviya's basis would be 80 (I think?)

Stuart's gain is 20. While the property is transferred with a built in loss, Stuart sells for a gain, carryover basis can be used.

Basis will be 150 (carryover). It carries over because even though she transferred for a loss, Fred sold for a gain. Gain of 25k.
Basis will be 120 (FMV). It was transferred with a built in loss and Fred sold for a loss. Using FMV will produce a loss so use it. Loss of 45.
Basis will be 150 (carryover). Transferred with a built in loss. Using 120 (FMV) will not result in a loss so we don't use it. You can never use FMV to generate a gain. If we use 150k basis we have a 25k loss. Some of that loss is attributable to loss that was accrued on donor's watch. IRS made a special rule for this. IRS declines to allow TP to recognize the loss. Whenever donee sells property for an amount realized between FMV at date of gift and carryover basis, no loss allowed. Treas Reg 1.1015-1(a)(2).

262 is correct. Rent is a personal, family, or living expense.

162. I am paying rent and the rent is deductible because it is not personal, it is not a capital expenditure. Rent is an ordinary and necessary business expense. Rent is not eligible for a depreciation deduction.

It is not deductible under 162. This is a capital expenditure. Capital expenditures prevent you from taking deductions except for the allowance permitting depreciation.

162 or 212.
1.162-4
TP may deduct amounts paid for repairs and maintenance to tangible property if the amount paid are not otherwise required to be capitalized.

May be deductible as depreciation or amortization deduction under 167 or 168

TP cannot deduct 750k. 263. This building will have a useful life of more than one year which means it'll be a capital expenditure.

Installation costs had to be capitalized
1.263 de minimus safe harbor: if TP makes an election and
TP has an applicable financial statement
Written accounting procedures in place
and amount apaid does not exceed 5k per invoice (or per item)
TP without an applicable financial statement is limited to 500 per invoice (or item)
Big companies are usually only the type to have applicable financial statements.

Printers are a capital expenditure but safe harbor. Yes. A may deduct these amounts under§1.162-1 in the taxable year paid provided the amounts are ordinary and necessary expenses incurred in carrying on a trade or business. Despite not having applicable financial statements, each item is below the 500 cap.

No. B may not apply the de minimis safe harbor election because the amount paid for the property exceeds $500 per item included in the invoice. B will have to depreciate these assets. If B had applicable financial statements then safe harbor would apply.

(i) $15,000 (2% of the building's unadjusted basis);or(ii) $10,000
Taxpayer may elect to not apply the capitalization rules and provided the amounts constitute deductible ordinary and necessary expenses incurred in carrying on a trade or business, A may deduct these amounts under §1.162-1 in Year 1.

Capitalized / Amortized.
Copyright has a useful life beyond the taxable year so no deduction. This is also an intangible asset which will have a different amortization schedule than a tangible asset.

Capitalized/Amortized. The useful life will be longer than one year. Copy machine will be used up in more than one year.

Deducted under 162. The paper will likely be used up in under one year this is not a capital expense.

Authority for deductions is found in 167. If tangible = 168. If intangible = 167 or 197. Intangible can NEVER be deducted with 168.

intangible
property used in the trade or business OR
property held for the production of income

Depreciation deductions are subtracted from GI and reduce the property's basis

D. Only the furniture rental expense is deductible under 162.
1. A deduction used to reduce taxable income.§167/168 952. A reduction in basis in the property.§1016(a)(2)

Father's G/L = 0. Bought it for 25k, sold for 25k.
When a transfer is part gift part sale (sold at a discount), the gain is the extent that the AR is more than the amount paid. Transferee's basis in the property is the greater of:
Amount paid or carryover basis
AB for transferor is at time of transfer.
Son's basis is 25k.

Kelly's purchase of marital rights: AR 1.5. AB 500k. GI 1m. Transfer of stock s1001 / Davis gain
Presumption if you can value one side of the transaction the presumption is the other side is of equal value. Here presume 1.5. B's value is 1.5 mil. AR 1.5. AB 1.5. GI 0. B recognizes no gain, but takes a stepped up or FMV basis.
AR 2 mil, AB 1.5 mil. Gain 500k.

Property's FMV remains $1000. Basis remains $1 1014(e) If the person dies after a year of having the property then basis is adjusted to FMV. Must die after 1981.

Basis is now $1000. The donee survived for more than a year. Congress says if you're willing to take that chance then good on ya, mate.

Impact on taxable year: 100k can be completely deducted under 167/168. Taxable income = 150k.
ABC co's basis = 100k. Depreciation of 100k under 1016 / 168k. 168 only uses 100%?
$0 - this guy used it all up. There's nothing left to depreciate year 2. You used 100% of what you paid for it. That's 168k.
$0. No reduction left.

No. Recovery period must 20 years or less for it to qualify for 100% deduction under 168(k). Must be after 2017 and before 2023.
Depreciation will be calculated under 168(a)

GI (250k) - Depreciation (34,850) = Taxable income 215,150.
1 mil year 1 - 34,850 (1016(a)(2)) = AB 965,150
Taxable income 250k (GI) - Depreciation (36,360) [1 mil x .03636]
TI = 213,640.
Percentages come from IRS tables. AB = 965,150 - 36,360 = 928,790.

She can deduct all in one year under 168k assuming that she has sufficient income.
after 2017 is good.
less than 20 year life is good.
Income needs to be as high as the deduction she wants to take (400k here)
Property is tangible.

b) 167 applies and amortization period is 10 years.
197 only applies in connection with buying a business and the business buying a patent. If 197 applies period must be 15 years. If 167 applies period will be the remaining useful life.

a) 197 and 15 years.
If you're in 197 then it must be 15 years. If you bought a business and the business buys a patent then it must be 197.

C) is correct - Purchased goodwill when acquiring a trade or business.

a) is wrong because you cannot depreciate personal property. You get a depreciation deduction for trade or business property or property held to generate income.
b) wrong because no depreciation because we have no idea how long useful life is. No reasonably ascertainable period. goes for any stock.
d) land is not a wasting asset you cannot depreciate land.

b) TP purchases patent for use in trade or business, not purchased after purchasing business. 197 does NOT apply. Must be 167. Useful life is 5 years so must spread it out. 15 / 5 = 3k per year.

b is correct. events have occurred that fix the right to receive the income and amount can be determined with reasonable accuracy
a) no part of accrual method is what you paid.
c) if not satisfied all events test, no deduction for you. But she has
d) this would be the right answer if we didn't have economic performance as a requirement. She's only allowed to take amount of the lease all in one year.

Year 2. Actually got money Year 2. That's when money is accounted for.

Recognized in year 1 when sent the bill. Amount can be determined with reasonable certainty and the legal right to the income exists. All the events have occurred that fix the right to receive income.

No. Rent is included in gross income. 109 applies to all improvements that are "other than rent"

a) is correct: Landlord has 15k gain upon sale.

basis remains unadjusted. S109 applies. When she sells for 100k, she has 15k GROSS INCOME.

Depends on her income and if married or single.
Single must be below 214900.
Married must be below 429800 if filing jointly.

Nope. never eligible for 199A if you're an employee.

1) GI. GG is satisfied s61. s102 excludes inheritances from GI. Basis is FMV (2 mil) s1014. There is no 1014 problem because we don't have niece giving it to her and then AN giving it back.
2) Receipt of stock is included in GI under s61, but s102 excludes it from GI. Basis in stock is $5,000. Inherited prop basis is FMV. For gifts it can be carryover basis.
3) Receipt of insurance proceeds is GG income under 61, however 101 excludes it from GI because it's amount received under a LIK paid by reason of death of insured. Proceeds excluded from GI

1) This is not GI to Fred. Rev rul 67 says he is deemed to have basis of FMV of whatever was exchanged for his marital rights. Sold marital rights worth the stock, got the stock. Int'l Freighting / Philadelphia park / Rev rul 67. Never any taxable income.
2) 1041 does not apply. This is not a transfer between spouses or incident to a divorce, this is before the marriage. For stock Leanna has AR 75.k (1001b), AB 5k (1011/1014) for a gain of 2.5k (having gotten fred's marital rights worth 7.5k (1001a & int'l freighting / davis) so taxable gain of 2.5k.
3) Nope. Personal, non-deductible. 262/Gilmore.
4) 199a deductions cannot apply to anyone who is an employee.
5) Not deductible under 262. They are personal, family, or living expenses.
6) No. Under 262 they are personal family or living. Origin of the claim is personal.
7) Yes dude definitely.

1) no. personal family or living expense. 262.
2) Gilmore requires origin of the claim analysis. Who paid for legal fees? If Leanna and expenses will not be deductible. 263/Welch will apply, Leanna likely loses. If Fred paid, he will be denied deduction under 262. Leanna could try arguing under Kopp's or Jenkins but prob won't. Prof says these two are our friend if trying for deduction.

1) Old Colony applies when a 3rd party pays off debt. Old Colony also recharacterizes the transfer. Under Old Colony this transfer is seen as Employer --> Leanna --> Fred. 250 is included in L's GI s 61. She has no exclusion available. Employer/employee transfer you cannot have a gift. L's basis is 250 bc tax cost = basis. Treas Reg 1.61.
2) Employer recognizes 100k gain (FMV-AB). Int'l freighting. Difference in basis and value. 100k GI.
3) Employer has a wage deduction of 250k available provided it is reasonable under 162. Exacto.
4) L --> F is transfer incident to a divorce so 1041 applies. No gain by Fred, and Fred's basis is carried over (250k). He gets stepped up basis of 250. When Fred sells it for 250k, he has no taxable gain. He got the benefit of her tax bill.
5) L prob won't be able to deduct any legal fees relating to the divorce. Treas Reg 1.262

1) Because this is between mother and daughter rather than employer/employee this is a gift. No income tax consequences to mother. L excludes the gift under 102 and takes carryover basis under 1015. It's still in the Old Colony recharacterization though because 3rd party paying off a debt. S --> L --> F. No gi for S or L or F. But F has a basis of 75. When employer transfers it, he gets 250. From employer was taxable event, from mother to L was a gift, so lower basis applies.
2) No. This is a personal, family, or living expense.
3) Sally recognizes no gain when she makes the transfer. A gift is not a taxable event even though it is a dispositon. 102. Taft v Bowers.
4) 1041. L is the ex wife, fred is the ex husband. This is a transfer to a spouse or incident to a divorce and treated as a gift.
5) 75k carryover. No gain or loss. Gain of 250-75=175. Gain last time was 0.

Yes. Kopps. TP will never argue no deduction so you won't choose b or d. Stuck with a or c. TP lost in Gilliam so Kopps is your best option.

Son's basis is $20. Special basis rule for losses. This was transferred with a built-in loss. For purposes of determining the loss, use the FMV. 2 tests:
At time of the gift is there a built in loss? Yes. Basis greater than value.
If you sell for 15 is there a loss? Yes there is a loss.

a) requires there be recourse debt AND lender release TP from liability
b) nah.
c) If it's recourse and the debt is not forgiven then it's Tufts/Crane
d) requires insolvency

Old colony income. A 3rd party is paying off your debt. You have a gain under discharge of indebtedness.

d) is correct.
Suing for unpaid rent: expense incurred for the production of income. Ordinary and necessary expense.
Title opinion: this goes to the essence of the property that you are buying. This is not an ordinary expenditure. This is a capital expense. This is additional basis.

1) TP must include 50k into income. 1st NW applies bc 9th.
2) TP must only include 20k in gi. Inaja applies. Reduce basis to 0 and then excess is GI.

d) Mary excludes 15k under 101(a)(2)

Mary's basis is the FMV + any cost that she paid to maintain the policy. GI - basis = taxable gain

Mary can exclude 10k + 5k.

This is an exception to the no taxable gain on LIK because this was a transfer for valuable gain and it was not to the right person. She only excludes her basis.

a) Mary excludes 150k under 101(a)(2).

This is the right kind of transaction. This is a transfer of LIK for valuable gain, but this is a part gift part sale since it was sold for under FMV.

d) is correct. If the mortgage is recourse AND the lender forgives. debt, Rev Rule 90-16 will apply making this two transactions.

If nonrecourse then Tufts which is liability - basis. 1000-800=200. If Tufts then only one transaction. 200 of GI if nonrecourse.

If mortgage is recourse, we have d. If mortgage is nonrecourse, then 200 GI.

c is correct
199a is never available to employees. For doctors and lawyers there is an income limit of about 430k if married and less if single.

No. Improvements that are not a substitute for rent are excluded from GI. That's what 109 is for.

No basis adjustment. Under 1019 there is no basis adjustment. If 109 excludes it, 1019 says no basis adjustment.

Improvements included into GI. 109 does not apply because that says "for improvements other than rent"

There is a basis increase. 1019 does not apply because there was no amount excluded under 109. There's a basis adjustment under 1016 because improvements are a capital expenditure under 263

In year 3 she has 95 of income.

In year 2 she has 100 of income.

Yes because the assignment is ineffective.

To junior but at the 37% tax rate. We do not need to know if he's a student. If he's a student 1g can apply up to 24 years old.

To junior at junior's tax rate. 1g does not apply because junior is 18 or older and not a student.

No. This is income that she earned.

W has no gain 1041 transfers between spouses or those subject to a divorce are treated as gifts.
25k. Basis of the transferee in the property is carryover. 1041.
Realizes a gain of 75k and recognizes gain of 75k.
Wife would have 75k gain, husband would have tax free 100k.

1041 applies. This is a transfer incident to a divorce. No tax consequence to wife, this is treated as a gift from W to H. H takes carryover basis and has no income. When he sells prop he'll receive 50k of cash (gain) and 50k debt relief.

Yes. This a property transfer incident to a divorce. Wife has no tax consequences and husband takes wife's carryover basis.
If investment then deductible. If personal asset then not deductible. Looks like it could be either here? It depends on how H treats it before he sells.

c) lawyer has $5 loss in year 3. She recorded gain of 100 in year 1, and then sold something for 95 that she had a basis of 100 on. Basis = 100 bc tax cost = basis

d) no income.
Cash method = income when actually or constructively received
No. There is not bad debt deduction because business bad debt can be deducted to the extent of TP's basis. Nonbusiness bad debt must be totally worthless.
There is no bad debt deduction here bc lawyer was never taxed on any income, lawyer has no basis in the bad debt. 166b only applies to the extent of TP's basis in debt.

Year 2. Accrual lawyer sends bill in year 2. With accrual, income is recognized when all events fix the right to receive and amount can be determined with reasonable accuracy, here represented by her sending the bill. Having recognized this an income, she now can be taxed on it, and thus has basis in it of 100. Cash method would not have basis because they would not have recognized the income yet.

Yes. Here, lawyer has basis because she recognized the income and could be taxed on it. Business bad debt can be deducted up to TP's basis in the debt. Business bad debt is treated as ordinary deduction as opposed to nonbusiness bad debt which is treated as short term capital loss.

Net LTCG > Net STCL

Basis is 100. Carryover basis bc gift. Under 1223: in determining LT or ST, use the term that the grantor held the property IF the previous owner's basis is used in whole or in part in determining the new basis. AKA since S got carryover basis, we add to time that A held the property = S has LT gain rather than ST despite selling after 2 weeks.

Here, decedent held the property for over a year. K inherits it. K get FMV basis. K's basis in NOT determined by using basis of previous owner, meaning that K cannot classify this as LTCG since she sold two weeks after inheriting.

LT = +4 = gain.
ST = -3 = loss.
Net capital gain of 1k because LT - ST = 1k.
LTCG > STCL which means we qualify for net capital gains and the preferential tax rate.

LT = 9 - 7 = +2
ST = 6 - 5 = +1
LTCG 2 > STCL 0 (use 0 instead of 1 because there were no losses only gain. 0 STCG)
Net capital gain of 2.

LT = -2
ST = +5
LTCG = 0 < STCG 5
There is no net capital gain because there were no LT capital gains. Not taxable at the preferential rate.

The amount of capital losses that TP could not deduct in the current year.

12k. 20 - 5 - 3 (max deduction under 1211 I think)

If net STCL > net LTCG then carryover is STCL

If net LTCL > net STCG then carryover is LTCL

LTCG = 2k. STCL = -4k.

There is no capital loss. There are losses in excess of gains totaling 2k. Net STCL 4 Net LTCG 2. 1211(b) amount will be the lesser of 3k, or the net loss. Here the lesser is 2k. There is nothing carried over into year 2, because the entire loss is deducted here. Net capital loss is what is carried over in year 2.

LT = -5k. ST = -4k.
Net capital loss of 6k. Net loss of 9k, remove 1211(b) deduction of 3k, and you will have 6k carry over. Everything that carries over is net capital loss.

1212 creates a "deemed" 3k STCG to use in the required re-netting. This is an additional transaction.
Net LTCL 5k
STCG 3k (deemed) + Net STCL 4k = 1k STCL

Net STCL (1k) > net LTCG (0)
Net LTCL (5k) > net STCG (0)
1k carried over as ST. 5k carried over as LT.

ST -2, LT -2. Here there is total loss 4. Deduct 1211b 3k, and you have STCG 1, LTCL -2. Net capital loss of 1. Carry over loss 1k LT because LTCL > STCG.
STCL = 0 after re-netting

c) TP has 4k ncg subject to preferential rates. STCG are taxed at ordinary income rates. Net capital only includes LTCG - STCL. STCG are not part of the equation.

TP has 7k net capital loss. 15 - 10 - 3k(1211b amount)

Yes. Everything is a capital asset unless one of the exclusions applies. 1221. Basically anything except inventory or shit that you invented.

No. Specifically excluded by 1221. Pretty much just inventory is excluded or shit that you invented.

No. This is property held primarily to sell to other people. Excluded by 1221.

Yes it is a capital asset. Not intended for sale to other people. 1221

No. This is property held primarily to sell to other people. 1221. This is not a capital asset.

Ordinary gain. Inventory is not a capital good.

Capital gain. This is not inventory. This is not otherwise excluded.

Ordinary. She is an artist selling art. This is inventory.
Capital gain. This was not inventory or otherwise purchased with the intent of making a profit.

You can sell your entire catalogue and get capital gains treatment a la Bob Dylan

Ordinary gain. Shit that you invent is excluded under 1221. Rice / Winthrop factors let us know what's a capital asset.

TP bought corn futures. Court held that futures transactions were an integral part of its business and therefore not open for capital asset preferential rate.
Corn products fall under the inventory exclusions of 1221(a)(1), meaning not a capital asset
Hedging transactions that are an integral part of a business' inventory-purchase system fall

Motive or "business purpose" behind purchase is irrelevant. Stock is a capital asset for everyone who is not a dealer.
Corn products fall under the inventory exclusions of 1221(a)(1), meaning not a capital asset
Hedging transactions that are an integral part of a business' inventory-purchase system fall

i. If TP only sells the right to receive rental income for a period of years, TP has not transferred "property" for purposes of 1221
1. TP has still retained the right to receive rents from other tenants and the underlying asset (building) - ordinary income
No sale or disposition of capital asset. Rental income is ordinary income.

a ) If 1231 gains exceed the 1231 losses then all the gains and all the losses are capital. The travel together. They're either all capital or all ordinary. Never a split.

1. 1231 property is sold or exchanged.
2. Involuntary conversion other than casualty of 1231 property or certain 1221 capital assets
1. Casualty of 1231 property or certain 1221 capital assets. Only if gains exceed the losses will they be included in 1231 netting process.

A) gains exceed losses.
Transaction 1 is NOT 1231 property because it was not held for more than a year. For property related to trade or business to qualify for 1231 it must be held for more than a year.
Real property held for 5 years and sold for a gain does qualify for 1231.
Gain of 4k, loss of 0k.
Tricky tricky.

1) This might be a 1231 transaction. This is a type 3 transaction so we need to net all gains and losses to assess whether 1231 gains exceed 1231 losses. If gains exceed losses then capital applies. a4c netting process.
2) This is not a 1231 transaction. This is an involuntary conversion BUT this is a personal asset not subject to 1231. Not a capital asset held in connection with trade or business.
3) Yes. This is a 1231 capital loss of 15k. Prop for T or B, held more than a year, involuntarily conversion.
4) gain of 25k in (1) and loss of 15k in (3). 1231 gains exceed 1231 losses. This is all LTCG / LTCL.
10 LTCG > 0 STCL meaning it's all subject to preferential rate.

Yes. 3rd type. Potential. Requires netting. AR = 15k, AB = 10k. Loss of 10, gain of 15. Gain of 5k. We'd have to see if a4c gains exceed losses in all 1231 shit for the year.
Yes. This property was held for T or B. Held for more than 1 year. AR 60 - AB 50 = gain of 10k. No preliminary netting type 1 transactions necessary.
Yes. 1231. Type 1 transaction. Cattle. Not poultry that wouldn't count. 1231 loss of 2k. No additional netting necessary for type 1.
No, not poultry. This will be ordinary income.
Painting is the only a4c transaction. Preliminary netting only uses 5k gain. Preliminary netting = +5k so 5k is included in the rest of the netting process. 5k gain, 10k gain, 2k loss. 13k gain. Factor in other 8k LTCL from prompt. 1231 gains exceed 1231 losses. This is all LTCG. Preferential rate.

1231. Property held for trade or business, for over a year, sold for a profit.
This is her only transaction this is a4c transaction, gains exceed losses.Net capital gain eligible for the preferential rate.

This is neither 1221 or 1231. 1231 excludes dealer property. This is excluded from 1221 because this is considered inventory under that code. This is ordinary income.

gain that is solely due to depreciation deductions is ordinary income and not 1231 gain.

Depreciation generated the gain, not market conditions that caused the asset to appreciate.

1) Yes it is. This is also 1231 property (T or B prop held > year)
2) Calc total realized gain = 10k gain. 75 - 25 (50 basis) --> gain of 10k. Select lower of AR (60k) or recomputed basis (75k) --> 60k. Subtract AB (50k) from lower amount (60k) --> 10k gain --> amount to be recaptured under 1245. Gain was 10, 10 was recaptured. 10 - 10 = 0 so there is none left to be characterized at 1231. All will be taxed under ordinary income rates under 1245. Because gain was solely attributable to depreciation deductions it's all ordinary income.

This is 1245 property because it's personal property used in a trade or business. This is 1231 property because it is depreciable property used in a trade or business and held for more than a year. Not 1221 property because 1221 specifically excludes property used in a trade or business.

Only 10k is 1231 gain, the rest is recaptured. This is 1245 property and 1231 property. Therefore some or all of what would otherwise be 1231 gain will be recharacterized by 1245 as ordinary income and not included in 1231 netting process.
Calculate total gain from sale. AR (110) - AB (40(100-60)) = 70. Without 1245 all would be 1231 gain. BUT recalculate basis. 40+60. Select the lower of recomputed basis (100) or AR (110). Subtract adjusted basis (40) from lower number (100) --> recapture of 60. 60 of 70 taxed as ordinary. 10k left for 1231 netting process. 1231 netting process: 10k gain, no losses. Gains exceed losses. This is all categorized as LTCG 10k. So 1221. If 10k LTCG > STCL then everything get capital preferential rate. Jesus we done

Combined allowance now 4144. "Marriage penalty" prevents combined EIC 6,946.

reduces tax liability

Yes. You do not need children for earned income tax credit.

87,600. 100k GI - 12,400.

She'll take std. If 50k is her only expense then she has no itemized deduction. This educational expense qualifies her for a new business or profession and is exempt from educational deduction.

TP has an above the line deduction. This is a personal nonbusiness bad debt. Loans are deductible when totally worthless and treated as a short term capital loss. Not itemized bc in s62. Losses from the sales of property? whut?

If she has nothing else then at least able to deduct 3k. Then 17k NTCL carryover.

b) 15k itemized deductions.

TP is employee. Unreimbursed bidness expenses are nondeductible by 2017 tax act. Pick the greater. 15 is greater than standard deduction 12,550

b) TP has 15k of itemized deductions.

TP still has itemized deductions that total 15k. But she has an above the line deduction of 10k. As an owner she has trade or business expenses under 162a not as an employee, which makes them above the line deductions under 62a1. They are not additional below the line itemized deductions.

This is 1245 property because it is personal property used in T or B.
This is also 1231 property bc it is depreciable property used in T or B held for more than one year.
Start w 70k (1012), 8k capital expenditure (263), -12k 1016(a)(2) depreciation deduction. AB = 66k. Repairs have no basis impact. Sell for 9k gain. Recomputed basis: 66k + 12k (depreciation) = 78k. Take lower of AR (75) or recomp basis (78). 75 - 66. 9k 1245 gain. All is ordinary income.

b) is correct.
Theft of car is in no way 1231. Personal asset doesn't count unless federally declared disaster relief. 1231 gain from other transactions are included.
Art is an a4c loss. A4c losses only included in netting if the a4c gains exceed the losses. Here the losses exceed the gains so yeet the art loss into oblivion. 1231 gains of 20k. 20k LTCG with potential for preferential rate depending on other shit TP has

a) TP has net cap gain of 15k.
STCG 5k, LTCL 10k, vacation home is not allowed 165c, LTCG 25k. LTCG of 15k.

i. Winthrop Factors (determining capital or ordinary)
1. TP's purpose in acquiring the property
2. Purpose for which property is held
3. TP's everyday business and relationship of the income of the property to total income
4. Frequency, continuity, and substantiality of the sales
5. Extent of developing and improving the property to increase sales
6. Use of ads, promotion or other activities to increase sales
7. Use of a business office for sale of property
8. The degree of supervision TP exercises over any representative selling the property
9. The time and effort TP has devoted to sales

Equitable apportionment (most likely the other shit doesn't make any sense it's stupid and I hate it.

C is correct. TP has 1k net capital loss.
4k STCL bc held for less than a year. 75k income tells us that she can offset her other income by 3k. 1211b amount. 1211b amount is 3k. This leaves 1k that cannot be taken in the current taxable year. That is a 1k net capital loss.

C is correct.
If we're talking about real property then 1245 does not apply and if anything is purchased after 1986 then there is nothing to recapture. D is wrong because recapture property is defined as trade or business property.

B is correct. TP has capital gain that may be eligible for the preferred rate.
Art for her house is a capital asset. If it was purchased and not self-created. She sold the art for a gain which makes it a capital gain. We don't know what other capital gains and losses TP has. We don't know if the art was held long term. May be eligible for preferential rate depending on what her other transactions are.

B is correct. 6k STCL offset by the deemed 3k STCG, and 6k LTCL. 12 losses in excess of gains, 3k allowed under 1211b. 9k Net capital loss will be carried forward into year 2.

C is the correct answer.

We have limits on TP's ability to take a loss on capital assets. To the extent of her gain and then 3k in losses may be used to offset her ordinary income.

C is correct. 20k is 1245 recapture. TP takes deductions that result in the basis being 0. AB is 0. This is 1245 property. Upon sale it is 1231 property because by then she's held it for more than 1 year. 20k realized gain. Recomputed basis is 0 AB - 25k depreciation = 25k
Lower of recomputed basis 25 or Amt realized of 20 = 20. Offset AB from lower amount so 0 + 20 = 20k to be recaptured under 1245.

B is correct. Net capital loss of 9k.
Lost 10k on ABC stock held for 3 years = LTCL 10k.
Loaned 2k to bro two years ago and that debt just became worthless = STCL of 2k. 166 nonbusiness bad debt.
TP has 12k capital losses in excess of gains. Net capital loss of 9k that TP can take into account in year 2.
STCL 0 = LTCG 0 so 0 of STCL
LTCL 10 > STCG 1 so 9k carryover is LTCL. 9k LTCL carryover in year 2.

A is correct. She has income but also above the line deduction because she got reimbursed. 62a2a provides above the line deduction for reimbursed expenses. reimbursement is included in GI and TP get deduction for that amount. Net $0.

A is correct. TP earns too much. EITC is least generous for TPs with no kids. But even with 29 kids wouldn't qualify. EITC is low.

a) TP can deduct interest on 750k only under 163h. TP could deduct on both if combined amount is not greater than 750k.

No deduction. This is an unreimbursed employee business expense.

Taxes are racist pick whatever answer says this and you win

Type A deductions as defined by section 62

Type B deductions or standard deductions or itemized deductions. Anything not in 62. Unreimbursed employee business expenses are one of the largest categories here.

100 is deductible. She's at a restaurant and not an employee because she is a partner.

None is deductible. This is an unreimbursed employee business expense. No tax break for Kobie. Nondeductible bc 2017 Act changes.

Deductible because it's limited to and for the benefit of employees.

Not deductible. Entertainment expenses are no longer deductible under 274.

1 year or less, actually away for a year or less, and reasonably expected to be away for one year or less

162a. We're not away from home so not 162a2.

No. This is a commuting expense which courts see as your own choice. They're only deductible under 162a2 if you're away from home.

No. 262. Eating lunch by yourself is a personal nondeductible expense. If you're away from home under 162a2 then not deductible.

Yes. Because this isn't home to office this is traveling exclusively for business reasons. 162a
162a2 does not apply because she was not away from home overnight.
No. 262. Lunch by yourself when you're sleeping in your own bed that night is not deductible. Nondeductible personal, family, or living expense.

162a because you were not away from home overnight. You must sleep away from home overnight for 162a2 to be applicable.
Yes. 162a. This is
No. 262. Personal family or living expense

Yes. 162a2. She is gone from home overnight on a business trip. She sleeps in SD and reasonably expects to be gone for less than a year. Flight would qualify for 162a regardless of duration since it's for business.
If at a restaurant 100% deductible under 162a2. If not in a restaurant only 50% under 274n

Depends on whether the trip is viewed primarily as business or personal. Treas Reg 1.162-2b provides that travel expenses are deductible if trip is primarily business. 3 days business 2 days personal prob mostly business. Also direct expenses of business days deductible under 162a2 but primarily personal days expenses won't be deductible under 262.

162a. 162a2 cannot apply because you are not away from home for under a year.
No. The expectation is 2 years so no deduction is permitted.
Nope. IRS would still say it's an indefinite departure.

All 70 deductible. It is at a restaurant. 100% is deductible if at a restaurant. If not at rest then 50% deduct under 274n

d) is correct. As an employee, no deduction for unreimbursed business expenses. No longer allowable deductions after 2017 tax act.

Max allowable is 500k. 168k.
That's FMV. Unlimited deduction phase of 2017 tax act

Include 1200 into GI bc 132f is not met.
If employee had taken parking then it could've been fringe benefit.

TP can exclude 1200 from GI each year bc 132f is met.
Now it satisfies because they took free parking. They can only use this benefit for the car that's parked for work.

In 9th so NW applies. Include all into GI since you can't use equitable apportionment.

Net capital gain of 5k.
1) LTCG 9k
2) STCL 4k
3) Recaptured ordinary income of 60k (not includable)
4) ain't shit bc primary residence

b) 325,730.

a) never applies to nonrecourse.
c) is bad math
d) is bad math

Tufts says taxable transaction is difference btw liability you're being relieved of and AB

b) is right again. For 90-16 to apply, bank must release TP from liability.

d) TP recognizes 50k as 1245 recaptured ordinary income and 75k as net cap gain

c) TP has 17k net capital loss
3k deemed stcg allowed which should be taken from 20k ncl

c) unreimbursed employee expenses is not a deduction

No other expenses are expenses eligible for itemized deduction.

46,300. 58,500 (agi) - 12,200 = taxable income

b) art not included in netting process but 1231 gain will be

art not included bc a4c transaction. Only include these in netting process if gains exceed losses.
1231 gain will be included

c is right. rev rul applies bc recourse and bank did NOT pursue borrower.

something something else

TP not eligible bc lawyer

There are income caps on this deduction for doctors and lawyers.

262 baybeee. Code leans towards not giving you a deduction.
262 - personal or living expenses
162 - trade or business expenses

Not deductible. Still too frequently. Not out of the ordinary in any way.
Not deductible. Not occasional enough. Doesn't matter if from restaurant still too frequent.

GI. 132d working condition fringe tests for this. GG income. This would be forced consumption except that it's every single day. 119 analysis? On the business premises? Requirement of employment?

Clothes are not deductible unless they could not have been worn outside of the business.
After 2017 act, they are deductible only by self-employed or owners. Not employees.

b. No deduction. The tux could be worn somewhere else.

1. Where they maintain or improve your skills
2. Where they meet the express requirement for employer (monthly publix training)

1. Where satisfy minimum educational requirements for T or B
(plumber)
2. Where they qualify you for a new T or B
(law skoo)

Deductible. Continuing education is deductible where TP is maintaining or improving skills. TP was not meeting minimum educational reqs for becoming qualified for new T or B

No. This qualifies her for a new T or B.

No. This is a personal choice. 262. Too personal to override potential business benefits.

No. 262. 274 disallows a deduction for expenses for travel as a form of education.

Yes. Getting LL M does not qualify you for a new T or B. These are not minimum qualification expenses. This maintains or improves her skills.
2) Yes. 162a2. She is away from home for less than a year. She must have reasonably believed that she would be away for less than a year.
3) nope. Unreimbursed employee business expense

TP will itemize deductions bc TP gets choice. Here 14k is greater than 12,550. TP will choose the larger. Can't take both. TP is NEVER ineligible to take std deduction.

C.
A is wrong bc 274n2 says that 100% is deductible if at a rest. B doesn't apply. Moss only applies when not with a client.
D is wrong bc with client.

A is correct.
B is wrong bc wrong. Never under 162a
C is wrong bc never 162a
D is wrong bc they are deductible when away from home

163 owns this.
Student loan interest up to 2.5k is deductible if modified AGI isn't too high. 85k if single, 170k if married.
Mortgage interest is allowed up to 750k. Acquisition indebtedness up to 750k.
Residence must be qualified
a) principal residence of TP, and 1 other residence of TP used by TP as a residence.

A is correct. 163. Indebtedness allowed up to 750k on qualified residence. TP's home.

A is correct. Interest is deductible on both mortgages. Mort adds up to 750. If greater than that = bad. TP is allowed to deduct interest on morts on up to two homes here bc morts combined are not greater than 750k.

Only mort loan is deductible. 163 allows loan interest on loans up to 750k on two residences but home equity loans can only be used to make improvements on the home to be deductible. HE loans cannot be used to buy another home, pay off debt, etc

Business debts can be deducted if partially or wholly worthless as an ordinary loss

Nonbusiness debts can be deducted only when wholly worthless and must be treated as STCL

Debt stuff. Business debt deductible when partially or wholly worthless. Nonbusiness can only take when wholly worthless. Must have basis in both to deduct.

If both could apply, apply 166

A is correct. Bc business debt, can take ded when partially worthless.

A is correct. 15k in ded. basis was adjusted to reflect 5k ded from year 1.

No deduction. With a nonbusiness debt, you can only take. deduction when it is wholly worthless.

20k STCL in year 2. Bad business in nonbusiness loans must be categorized as STCL.

D is correct. G has no basis in the debt. Bc G is a cash method TP, he never recorded any income. If he was accrual method TP then he would've had basis and could've taken ded.

S has 100 bad debt ded under 166a. She had basis in it bc she recorded income. She can take deduction because it is wholly worthless and business debt. Even if nonbusiness could take it bc wholly worthless. She has not sold receivable for a loss for 165c1 does not apply.

c) he has no taxable gain if married. If married you can deduct up to 500k gain on sale of principal residence. This was a gain of 300k so it would be wholly covered.