Category: Writing

Kara and Brandon Arnold are married and file a joint return.
Their Social Security numbers are 000-00-1111 and 000-00 -2222, respectively.
Kara and Brandon have one son, Henry, age 3. His Social Security number is
000-00 -3333. They live at 356 Welcome Lane, Woodbury, WA 84653. They report
their income on the cash method. During 2018, they report the following items:
The address of the Condo is 1127 Skyline Drive, Lutsen, WA
84666. During the year the following events also occur:
a. In 2016, Brandon had loaned a friend $3,000 to help pay
medical bills. During 2018, he discovers that his “friend” has
skipped town.
b. On June 20, 2018, Brandon sells Kim Corporation stock for
$16,000. He purchased the stock on December 12, 2012 for $22,000.
c. On September 19, 2018, Kara discovers that the penny
stock of Roberts, Inc. she purchased on January 2 of the prior year is
completely worthless. She paid $5,000 for the stock.
d. Instead of accepting $60 the utility store offers for
their old dishwasher, they donate it to Goodwill on November 21, 2018. They
purchased the dishwasher for $750 on March 30, 2008. The new dishwasher cost
$900.
e. Kara and Brandon purchased a new residence for $250,000.
As part of the closing costs, they pay two points, or $3,800, on the mortgage,
which is interest rather than loan processing fees. This payment enables them
to obtain a more favorable interest rate for the term of the loan. They also
paid $8,400 in interest on their mortgage on their personal residence.
f. They pay $4,100 in property taxes on their residence and
$7,500 in state income taxes.
g. On July 20, 2018, Kara and Brandon donate 1,000 shares of
Anton, Inc. stock to the local community college. The value of the stock on
that date is $10,200. Anton, Inc. is a listed stock. They had purchased the
stock on November 10, 2010 for $1,000. h. $7,000 in federal income tax was
withheld during the year.
Complete Kara and Brandon’s Form 1040, Schedules A, B, D,
and E, Form 8283 and Form 8949. For purposes of this problem, disregard the
alternative minimum tax and any credits.

Heather and Nikolay Laubert are married and file a joint
income tax return. Their address is 3847 Jackdaw Path, Madison, WI 58493.
Nikolay’s Social Security number is 000-00- 1111, and Heather’s is 000
-00-2222. Nikolay is a mechanical engineer, and Heather is a highly renowned
speech therapist. Nikolay’s employer provides health care coverage for Heather
and Nikolay. Heather is self-employed. They report all their income and
expenses on the cash method. For 2018, they report the following items of
income and expense:
Heather and Nikolay sold the following assets:
Heather owned the KLN stock and sold it to her brother,
Jacob. Heather and Nikolay used the motorcycle for personal recreation. In
addition to the items above, they donate Miner Corporation stock to their commu
– nity church. The FMV of the stock on the date it is donated (8/18/18) is
$6,200. Ir cost $2,700 when purchased on 3/12/98. Heather and Nikolay’s shed
was damaged in a fire that was a federally-declared disaster. The fire damaged
a snowblower (FMV $3,500; cost $5,000), the shed (FMV $12,000; cost $10,000),
and a lawn mower (FMV $1,500; cost $1,300). The insurance company pays $1,500
for the snowblower, $4,000 for the shed, and $500 for the lawn mower. Complete
Heather and Nikolay’s Form 1040, Schedules A, C, D, and SE, Form 4684, and Form
8283. For purposes of this problem, disregard the alternative minimum tax, any
credits, and the qualified business income deduction.

On November 15, Alex and Deanna Kent come ro you for tax
advice. The Kents, a married couple that files a joint tax return, own a rental
home in Southern California. From January to November 1 of the current year,
they rented our the home for 210 days. Since they live in Minnesota, they are
considering staying in their rental home from December 10 ro 31. If they do nor
stay in the home during chat period, it will sit vacant. They ask you if this
decision would have any tax consequences. They also provide you with the
following information for the year:
What do you recommend ro the Kents?

During the current year, Kenneth, who is married, reports
the following income/loss from his business activities:
What is the amount of Kenneth’s excess business loss? How is
the excess business loss treated?

Net Operating Loss. During 2019, Karen, a single taxpayer,
reports the following income and expense items relating to her interior design
business:
Karen also worked part-time during the year, earning $13,500
. She reports a long-term capital gain of $4,200, and a short -term capita l
loss of $3,800. Her itemized deductions total $5,200 .
a. What is Karen’s taxable income or loss for the year?
b. What is Karen’s NOL for the year?

Net Operating Loss Deduction . Michelle and Mark are married
and file a joint return. Miche lle owns an unincorporated dental practice .
Mark works part-time as a high school math teacher, and spends the remainder of
his time caring for their daughter. During 2019, they report the following
items:
a. What is Miche lle and Mark’s taxable income or loss for
the year?
b. What is Miche lle and Mark’s NOL for the year?

What difference does it make for income tax purposes whether
an intangib le asset is (1) acquired in connection with a business acqu
isition, (2) acquired by the purchase of an individua l asset (e.g., a parent),
or (3) created internally? Explain.

Bad Debt Deduction . Assume the same facts as in Problem
1:9-53, except that Becky and Ken are not related and that under the terms of
the loan Ken agrees to repay Becky the $5,000 plus interest (at a reasonable
seated rate) over a five-year period. What is Becky’s bad debt deduction for
2019? For 2020?