07 May HOW SHOULD HERBERT ALLOCATE THE 975,000 PURCHASE PRISE TO THE ASSETS?
Herbert purchases frams jewelry store for 975,000.00 the identifiable assets of the business are as follows
Inventory
Basis 125,00
FMV 150,00
Accounts receivable
Basis 55,000
FMV 50,000
Building
Basis 200,000
FMV 275,000
Land
Basis 280,000
FMV 300,000
Herbert and fran agreed to sign $ 125,000 to a 5 year covenenat not to compete. How should Herbert allocate the 975,000 purchase prise to the assets?
2
Discuss the criteris used to determine whether a building is residential or non residential realty, also explain the tax consequences resulting from this determination if the property is placed in service in 2009?
3
Rachell owns renatla propertys. When rahcelle rents to a new tenant she usually requires the tenant to pay a amount in addition to the first months rent. The additional amount serves as security for damages to the property and the tenenats failure to pay future rents. How should the payments be characterized
(on lease documents) to minimuize rachele current tax liability?
4. Indivisuals who receive substancial Social security benefits are usually not eligiable for the tax credit for the elderly or disabled because these benefits efffectivly eliminate the base upon which the credit is computed explain?
5. Carolina and clint are married have 0 sdependants and file joint in 2005. Use the following selected data to calculate the federal income tax liablilty.
AMTI 325,000
Regular Income tax liability 61,001
AMT tax preferences 107,000
6. During 2009 Colin had th efollwoing transactions
Salary 70,000
Interst income on city of Denver bonds 500
Damage for personnal injury (car accident) 100,000
Puntiive damages (car accident same) 50,000
Casd dividend from General Motors COprt stock 4000
Based on info above determine colins AGI show the work
7. Explain the ethical implecations where a tax preparer knowling prepares a return with false information.
8.Steve has a tneative general business credit of 85,000 for the current year. His net regular tax liability befor the genral business credit is 95,000 and his tentative tax is 90,000. Compute Steves allowable genral business credit for the year.
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