Sidney is a car salesman. As a result of being the best salesman for the year, his employer permits him to buy a new BMW with a cost of Fair Market Value to the dealer of $40,000 for only $25,000. This is to be Sidney's personal vehicle and not used in business. As a result of this purchase, Sydney must report. Zero Income or Loss $40,000 income $15,000 income $20,000 income

Sidney is a car salesman. As a result of being the best salesman for the year, his employer permits him to buy a new BMW with a cost of Fair Market Value to the dealer of $40,000 for only $25,000. This is to be Sidney's personal vehicle and not used in business. As a result of this purchase, Sydney must report. Zero Income or Loss $40,000 income $15,000 income $20,000 income

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter13: Property Transactions: Determination Of Gain Or Loss, Basis Considerations, And Nonta Xable Exchanges

Section: Chapter Questions

Problem 56P

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Andrea entered into a 529 qualified tuition program for the benefit of her daughter, Joanna. Andrea contributed 15,000 to the fund. The fund balance had accumulated to 25,000 by the time Joanna was ready to enter college. However, Joanna received a scholarship that paid for her tuition, fees, books, supplies, and room and board. So Andrea withdrew the funds from the 529 plan and bought Joanna a new car. a. What are the tax consequences to Andrea of withdrawing the funds? b. Assume instead that Joannas scholarship did not cover her room and board, which cost 7,500 per academic year. During the current year, 7,500 of the fund balance was used to pay for Joannas room and board. The remaining amount was left in the 529 plan to cover her room and board for future academic years. What are the tax consequences to Andrea and to Joanna of using the 7,500 to pay for the room and board?
Determine whether the taxpayer has income that is subject to taxation in each of the following situations: a. Capital Motor Company is going out of business. As a result, June is able to purchase a car for 12,000; its original sticker price was 25,000. b. Chuck is the sole owner of Ransom, Inc., a corporation. He purchases a machine from Ransom for 10,000. Ransom had paid 50,000 for the machine, which was worth 30,000 at the time of the sale to Chuck. c. Gerry is an elementary school teacher. She receives the Teacher of the Month Award for February. As part of the award, she gets to drive a new car supplied by a local dealer for a month. The rental value of the car is 400 per month. d. Payne has worked for Stewart Company for the last 25 years. On the 25th anniversary of his employment with Stewart, he receives a set of golf clubs worth 1,200 as a reward for his years of loyal service to the company. e. Anna enters a sweepstakes contest that was advertised on the back of a cereal box, and wins 30,000. The prize will be paid out in 30 annual installments of 1,000. She receives her first check this year. f. Terry buys an antique vase at an estate auction for 780. Upon returning home, she accidentally drops the vase and finds that a 100 bill had been taped inside it.
Nicky receives a car from Sam as a gift. Sam paid 48,000 for the car. He had used it for business purposes and had deducted 10,000 for depreciation up to the time he gave the car to Nicky. The fair market value of the car is 33,000. a. Assuming that Nicky uses the car for business purposes, what is her basis for depreciation? b. Assume that Nicky deducts depreciation of 6,500 and then sells the car for 32,500. What is her recognized gain or loss? c. Assume that Nicky deducts depreciation of 6,500 and then sells the car for 20,000. What is her recognized gain or loss?
On July 24 of the current year, Sam Smith was involved in an accident with his business use automobile. Sam had purchased the car for 30,000. The automobile had a fair market value of 20,000 before the accident and 8,000 immediately after the accident. Sam has taken 20,000 of depreciation on the car. The car is insured for the fair market value of any loss. Because of Sams history, he is afraid that if he submits a claim, his policy will be canceled. Therefore, he is considering not filing a claim. Sam believes that the tax loss deduction will help mitigate the loss of the insurance reimbursement. Sams current marginal tax rate is 35%. Write a letter to Sam that contains your advice with respect to the tax and cash flow consequences of filing versus not filing a claim for the insurance reimbursement for the damage to his car. Also prepare a memo for the tax files. Sams address is 450 Colonels Way, Warrensburg, MO 64093.