1.Anne is a self-employed electrician who reports her business income using the
ID: 2600938 • Letter: 1
Question
1.Anne is a self-employed electrician who reports her business income using the accrual method over a calendar year. On September 1st of this year Anne paid $2,420 of interest on a loan. The interest accrues evenly over 20 months ($121 per month) from June 1st of this year through December 31st of next year. In addition, on September 1st Anne also paid $2,869 for 19 months of professional liability insurance ($151 per month). What amount of interest and insurance can Anne deduct this year?
2. Oksana started an LLC on November 2 of the current year. She incurred $49,000 of start-up costs. How much of the start-up costs can be immediately expensed for the year? How much amortization may Oksana deduct in the first year?
3. Rick recently received 570 shares of restricted stock from his employer, Crazy Corporation, when the share price was $19 per share. Rick's restricted shares vested three years later when the market price was $26. Rick held the shares for a little more than a year after vesting and sold them when the market price was $29. What is the amount of Rick's compensation income if Rick made an election under section 83(b) when the stock was granted? Assuming a marginal tax rate of 30 percent, what is the amount of Rick's ordinary income amount and tax liability at the time of the income inclusion?
4. Frederique sold furniture that she uses in her business for $15,950. Frederique bought the furniture a few years ago for $39,810 and has claimed $20,190 of depreciation expense. What is the amount and character of Frederique's gain or loss?
5. Kristi had a business building destroyed in an earthquake. The old building was purchased for $253,000 and $80,600 of depreciation deductions had been taken. Her insurance proceeds were $551,500. Although the replacement property was much larger and nicer than her old building, Kristi's new property qualified as replacement property. She acquired the new property 13 months after the earthquake for $620,600. What is the amount of Kristi's realized gain and recognized gain and the basis in her new property?
Explanation / Answer
1) interest 2420 20mnths 1/6/2017-1/12/2018 insurance 2869 1/6/2017-31/12/2018 847 19mnths 1/9/2017 2869 1/9/2017-31/12/2018 4 MNTHS 604 1451 2) 7920.548 startup cost immediately expensed 549 amortisation cost 3) ricks compensation income 5700 4) sold 15950 purchase 39810 dep 20190 19620 loss 3670 5) purchase 253000 new property depriciation 80600 13mnths 620600 172400 insurance 551500 recognised gain 379100 realized gain 69100
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