personal income tax

a.  If losses were limited only by the at-risk rules, how much can Gerald deduct in 2015 and 2016?

Year Loss Allowed Disallowed 2015 ($40,000) $ $ 2016 ($30,000) Total $

b.  Refer to the information in part (a) above. Assuming Gerald has $50,000 income in 2017, what is his taxable income in 2017 under at-risk rules?

$

c.  If losses were limited by the at-risk and passive activity loss rules, how much would Gerald be able to deduct in 2015 and 2016?

2015: $

2016: $

d.  Assuming Gerald has $50,000 income in 2017, (and considering both at-risk and passive activity loss rules), what is the amount of Gerald’s suspended passive activity losses at the end of 2017 under the at-risk rules and under the passive activity loss rules?

Under the at-risk rules: $

Under the passive activity loss rules: $

At the end of 2017, what is the amount of Gerald’s adjusted basis in the activity?

$

 Problem 11-58 (LO. 3, 8)

Ida, who has AGI of $80,000 before considering rental activities, is active in three separate real estate rental activities and is in the 28% tax bracket. She has $12,000 of losses from Activity A, $18,000 of losses from Activity B, and income of $10,000 from Activity C. She also has $2,100 of tax credits from Activity A.

Calculate her deductions and credits allowed and the suspended losses and credits.

If an amount is zero, enter “0”.

a.  Ida’s deductions (her utilized loss) total $.

b.  Her suspended loss is $.

c.  After deducting the loss, Ida has available a deduction equivalent of $.

d.  Her utilized credit is $, and her suspended credit is $.

 

Problem 11-60 (LO. 9)

At death, Francine owns an interest in a passive activity property (adjusted basis of $160,000, suspended losses of $16,000, and fair market value of $170,000).

On Francine’s final income tax return, a deduction for suspended losses of $ is allowed.

 

 

 

Discussion Question 12-3 (LO. 2, 3, 4)

Classify the following regular tax amounts as “Preference”, “AMT adjustment”, “Neither AMT adjustment nor Preference”.

 

a.   Percentage depletion expense   b.   Employee’s exclusion for an employer’s contribution to the employee’s pension plan   c.   Incentive stock option exercised   d.   Student loan interest expense   e.   Excess of accelerated over straight-line depreciation on real property placed in service before 1987   f.   Exclusion for gains on the sale of certain small business stock   g.   Medical expenses

 

iscussion Question 12-4 (LO. 2)

Based on the statements provided and using the Exhibit 12.1 as a guide, label each as being either “True” or “False” with regard to the AMT calculation.

 

a.   Regular taxable income – This taxable income amount is prior to any standard deduction or personal and dependency exemptions taken in the calculation of the taxpayer’s taxable income.   b.   Plus or minus: Adjustments – Adjustments are timing differences; these amounts reflect the difference between how an item is treated for regular tax purposes and AMT purposes.   c.   Plus: Preferences – Preferences only increase AMTI, in contrast to adjustments, which can be positive or negative.   d.   Equals: AMTI – AMTI stands for Alternative Minimum Taxable Income.   e.   Less: AMT exemption – The exemption amount is indexed to inflation annually. The exemption amount also phases out at a rate of 25% per dollar of AMTI over a certain threshold.   f.   Equals: AMT base – If the taxpayer’s regular tax liability is more than this, no AMT is due.   g.   Multiplied by: 26% or 28% – Unlike the corporate AMT rate, the individual AMT rate is mildly progressive. The dollar amount that divides the 26% and 28% brackets is also indexed to inflation annually.   h.   Equals: Tentative minimum tax (TMT) before FTC – This is the TMT before considering the AMT foreign tax credit.   i.   Less: AMT FTC – Foreign Tax credit for AMT purposes is calculated the same as the FTC for regular tax purposes.   j.   Equals: TMT – TMT stands for Tentative Minimum Tax.   k.   Less: Regular tax liability – This is adjusted to remove any Foreign Tax credit.   l.   AMT (if TMT > regular tax liability) – Technically, the AMT is a surtax; the AMT amount is the excess of the TMT over the regular tax liability. Practically, the taxpayer will pay the larger of the two amounts.

 

Problem 12-29 (LO. 2)

Use the following data to calculate Chiara’s AMT base in 2016:

Taxable income $148,000 Positive AMT adjustments 73,000 Negative AMT adjustments 55,000 Preferences 30,000

Chiara will file as a single taxpayer and chooses to itemize her deductions. The personal/dependency exemption amount is $4,050.

Click here to access the exemption table.

 

Chiara’s taxable income $152,050 Plus or minus: Positive adjustments  Negative adjustments  Plus: Tax preferences  Equals: AMTI $ Less:   Equals: AMT base $