self-employed busines income- schedule C
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cf_assessment_6_problems_2019.docxAssessment 6 Problems: Applying the IRS Code
In a Word document, provide complete answers with explanations to the problems below.
Problem 1
In 2018, Matthew contributes equipment with an adjusted basis of $40,000 and an FMV of $36,000 to Construction Limited Partnership (CLP) in return for a 3% limited partnership interest. Matthew’s share of CLP income and losses for the year were as follows:
Interest $1,000
Dividends 600
Capital gains 1,800
Ordinary loss (8,650)
CLP had no liabilities.
What are Matthew’s initial basis, allowed losses, and ending at-risk amount?
Problem 2
How should Ben treat the loss on his federal income tax return?
Problem 3
Chrystal died owning an interest in a passive activity property. The property had an adjusted basis of $270,000, a fair market value of $284,000, and suspended losses of $25,000.
What can be deducted on her final income tax return?
Problem 4
Howard has a $76,000 loss from an investment in a partnership in which he does not participate. His basis in the interest is $70,000.
a. How much of the loss is disallowed by the at-risk rules?
b. How much of the loss is disallowed by the passive loss rules?
Problem 5
Roberta gave her daughter a passive activity last year that had an adjusted basis of $37,500. The activity had suspended losses of $17,500 and a fair market value of $60,000. In the current year, her daughter realized an income of $9,000 from the passive activity.
What is the tax effect on Roberta and her daughter last year and in the current year?
Problem 6
Charles had the following itemized deductions in 2018:
State income taxes $3,000
Charitable contributions 4,900
Mortgage interest (personal residence) 14,000
Medical expenses [$8,000-(7.5% ×$75,000)] 2,375
a. What are Charles’ itemized deductions for AMT purposes?
b. What is the amount of the AMT adjustment?
