Allison and Paul are married and have no children. Paul is a lawyer who earns a salary of $80,000. In November 2018, Allison quit her job as a copy editor and began exploring the possibility of breeding and showing horses. She would run the business on their property. Allison expects to travel to nine or ten horse shows during the year. While researching the activity, she came across an article entitled: “IRS Cracking Down on Horse Breeding—Is It Really a Business or Is It a Hobby?” She is unsure of the tax ramifications discussed in the article and has come to you for advice on whether her activity will be considered a business or a hobby. Allison provides you with the following projections of the 2019 income and expense items for the horse breeding and showing activity:
Revenue:
Expenses:
Paul and Allison expect to receive $6,000 in interest and dividend income, they will have an $8,000 net long-term
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CONCEPTS IN FED.TAX.,2020-W/ACCESS
- Jake is an IRS tax law - certified volunteer preparer at a VITA/TCE site. When preparing a return for Jill, Jake learns that Jill does not have a bank account to receive a direct deposit of her refund. Jill is distraught when Jake tells her the paper refund check will take three to four weeks longer than the refund being direct deposited. Jill asks Jake if he can deposit her refund in his bank account and then turn the money over to her when he gets it. What should Jake do?arrow_forwardYour supervisor has asked you to research the following situation concerning Scott and Heather Moore. Scott and Heather are married and file a joint return. Scott works full-time as a wildlife biologist, and Heather is a full-time student enrolled at Online University. Scott’s earned income for the year is $36,000. Heather does not have a job and concentrates solely on her schoolwork. The university she is enrolled in offers courses only through the Internet. Scott and Heather have one child, Elizabeth (age 8), and pay $3,000 for child care expenses during the year. Go to the IRS website (www.irs.gov). Locate and review Publication 503. Write a memorandum stating the amount of child and dependent care credit that Scott and Heather Moore can claim. (An example of a file memorandum is available at the website for this textbook located at www.cengagebrain.com.arrow_forwardUnfortunately, Betty’s business was not profitable. She decided to sell the business andseek work in a different industry. She sold her business in May 2020 after spending$22,000 on advertising the sale with an estate agent. Unfortunately, the sales proceedswere not sufficient to discharge her existing bank loan and she was required to makeregular monthly interest payments on the outstanding balance.Please discuss whether the advertising expenses would be deductiblearrow_forward
- John owns a convenience shop called City Conv. The following events occurred for John during 20192020 financial year. John incurred legal expenses as he was sued for false advertising. John purchased new fridge to the shop - $800. In addition, his builder added more space to the shop front. This cost him $22,000. John ordered 1000 new T-shirts with printed City Conv’s logos for marketing purposes. These costs him $1,500. John received a City of Sydney fine for putting his sales item for display outside his shop without a permit. He required to apply for a permit to use the footpath. Required: With reference to relevant legislation and case law advise John on the assessability and/or deductibility of above events. (maximum 300 words)arrow_forwardTimmy, a CPA, caught “long COVID” early in 2020 and had to retire from his accounting firm job. One result was that he no longer could pay the mortgage on the 40-acre ranch he owned in Hunt County. (Timmy had never actually lived there, he’s always lived in Dallas – he was a “gentleman-rancher” only…) Of course once Timmy stopped making his mortgage payments, Friendly Nation-al Bank, the mortgage holder on the ranch, became very much less friendly. It foreclosed and took ownership of the ranch on November 1, 2020. Here are some additional facts: Timmy had purchased the ranch for $1,600,000 in 2016. The principal balance on the mortgage on Nov. 1, 2020, was $1,200,000. Timmy’s 2020 property tax bill for the ranch showed an appraised value of $900,000. In January 2021 the bank sent Timmy a Form 1099-C. In Box 2 (Amount of debt discharged) the bank entered $1,200,000. The bank left Box 7 (Fair market value of property) blank. Timmy was never actually insolvent (in the balance-sheet…arrow_forwardJohn owns a convenience shop called City Conv. The following events occurred for John during 2019- 2020 financial year. John incurred legal expenses as he was sued for false advertising. John purchased new fridge to the shop - $800. In addition, his builder added more space to the shop front. This cost him $22,000. John ordered 1000 new T-shirts with printed City Conv’s logos for marketing purposes. These costs him $1,500. John received a City of Sydney fine for putting his sales item for display outside his shop without a permit. He required to apply for a permit to use the footpath. Required:With reference to relevant legislation and case law advise John on the assessability and/or deductibility of above events. (Australian Taxation Law question )arrow_forward
- Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT