Instructions : Please provide 2-3 sentence brief explanation and choose the best
ID: 2564275 • Letter: I
Question
Instructions : Please provide 2-3 sentence brief explanation and choose the best multiple choice answer. All sources must be noted. SHOW ALL WORK.
PART A
____ 11. Alex sold her public accounting practice in Atlanta and accepted a job with the New York office of a national accounting firm. Her moving expenses are not deductible because she has changed employment status (i.e., went from self-employed to employee).
A) True
B) False
PART B
____ 12. A taxpayer takes ten clients to an NFL game. If all of the tickets (list price of $200 each) are purchased on the Internet for $4,000 ($400 each), $1,000 is deductible.
A) True
B) False
PART C
____ 20. In June, Bill sold stock with a cost basis of $42,000 to his sister, Jam, for $31,000, the fair market value of the stock on the date of sale. Five months later, Jam sold the same stock through her broker for $50,000. What is the tax effect of these transactions?
a.
Disallowed loss to Jam of $12,000; gain to Bill of $9,000.
b.
Disallowed loss to Bill of $11,000; gain to Jam of $8,000.
c.
Deductible loss to Bill of $1q,000; gain to Jam of $3,000.
d.
Disallowed loss to Bill of $11,000; gain to Jam of $9,000.
e.
None of the above.
a.
Disallowed loss to Jam of $12,000; gain to Bill of $9,000.
b.
Disallowed loss to Bill of $11,000; gain to Jam of $8,000.
c.
Deductible loss to Bill of $1q,000; gain to Jam of $3,000.
d.
Disallowed loss to Bill of $11,000; gain to Jam of $9,000.
e.
None of the above.
Explanation / Answer
PART A
False - moving expenses have no relation with employment status and occupation.
PART B
True - only $100 ($200 × 50% cutback adjustment) per ticket is deductible. therefore 100*10 = 1000 is deductible
PART C
option B Disallowed loss to Bill of $11,000; gain to Jam of $8,000.
Bil’s realized loss of $11,000 ($31000 – $42,000) is disallowed. jam may reduce his realized gain of $19,000 ($50000 – $31,000) by Bill’s disallowed loss of $11,000. So Jam’s recognized gain is $8000 (19000-11000)