369 6/714 Schedule e Case Study Mona J. Barber Log in to the BlockWorks PRACTICE

Question

369 6/714 Schedule e Case Study Mona J. Barber Log in to the BlockWorks PRACTICE mode and open Shell return SSN 747-63-1902 for Mono J. Barber. Blockworks will create a unique SSN, which should be used to prepare a 2016 Schedule E(Form 1040 for Mona. Any of Mona's information that is not associated with the Schedule (Form 1040) has already been pre-entered for you. Mona wants to compare Schedule E(Form 10401 results when the special/bo- nus depreciation allowance is elected versus when it is not. Therefore, prepare returns for both scenar- 10s. She does want to take advantage of the de minimis safe harbor election, if any of the new property qualifies. Rental Information Mona has rented in single family home at 1947 Pinnacle Street, Your City, YS XXXXX, to various tenants since September 3, 2001, when the converted the house from personal to rental property. At that time, the adjusted basis of the house was $154,000, including land value of $11,600, and the fair market value (FMV) of the house was $14,000, including land value of $11,600. Mona does not meet the statutory requirements to be considered a real estate professional, and she materially participated in the rental activity. She received $1,020 per month in rent for all 12 months during the current tax year. The back yard fence fell into disrepair in June 2016, and she replaced it for an advertised special of $8,399 on June 27, 2016. She also replaced the kitchen stove for $492 on September 19, 2016. Both of the original assets had been fully depreciated. Regarding the new assets, electing to use the special depreciation allowance may benefit her this year, but she wants to consider the long-term benefit of how this would impact the profit or loss from the rent- al property in subsequent years. Mona also incurred the following expenses associated with the rental property: Yard maintenance: $480 Insurance: $2,520 Tax preparation fees: 8500 Mortgage interest: $3,572 Repairs: $650 Real estate taxes: $1938 Exterminator: $88 Rental license: $55 After return preparation has been completed, return to the test and answer the associated questions. If Mona elects to opt out of special depreciation for the new fence, what is her net profit or loss on the rental house? O ($3,152) O ($3,343) O ($3,362) O ($3.653) Mark for follow up « Back Save / Return Later Summary Next »

Explanation / Answer

1. Must exceed 2% of AGI (USD 171,500), or USD 3,430, to be deductible.

369 6/714 Schedule e Case Study Mona J Barber Schedule E (Form 1040) for the year Assumptions Calendar year 2016 Resident alien husband and wife with two children; one spouse earns all the income, none of which is foreign-source income. A joint return is filed. AMT liability is less than regular tax liability. Calculations based on preliminary 2016 tax tables. Tax computation Gross income (1020 x 12) 12240 USD Salary 150000 150,000 Interest 18500 18,500 Long-term capital gain (on assets held for more than one year) 3000 3,000 Total gross income 171500 171,500 Adjustments 0 0 Adjusted gross income (AGI) 171500 171,500 Less - Itemised deductions State and local taxes 12,000 Charitable contributions 2,000 Unreimbursed business expenses (exclusive of 50% of meals and entertainment costs) - 1,500 (1) 0 157500 157,500 Less - Personal exemptions: 4 x 4,050 16200 16,200 Taxable income 141300 141,300 Tax thereon On taxable income of 138,300 (141,300 less capital gain of 3,000) at joint-return rates 26052.50 26,052.50 On 3,000 capital gain at 15% 450 450 Total tax 26502.50 26,502.50 Note

1. Must exceed 2% of AGI (USD 171,500), or USD 3,430, to be deductible.

II Mona's net income Gross Income from rental (1020 x 12) 12240 Capital Gain 3000 Total 15240 Expenses: Fence 8399 Kitchen Stove 492 Yard maintenance 480 Insurance 2520 Tax preparation fees Mortgage Interest 3572 Repairs 650 Real estate taxes 1938 Exterminator 88 Rental licence 55 Total expenses 18194 Net income (loss) -2954

Related Questions

Navigate

• Browse (All)
• Browse 3
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.