1031 Tax Exchange Case Study

Good Essays
Register to read the introduction… 1031 (a) (1)) I don’t think John and Jane would be able to utilize a 1031 tax exchange in this scenario because I don’t think the handcrafted jewelry that Jane sells would constitute their house as a business property as that is not the main purpose of the property. Personal properties are unable to take advantage of the 1031 tax exchange.

2-C:
c. Does Jane have a business or hobby? Why is this
…show more content…
(IRC Sec. 62 (a) (1))

2-F:

f. Can Jane depreciate her vehicle or jewelry making equipment? How?

Yes, Jane can depreciate her vehicle and equipment. Since both are frequently used for business purposes she is allowed to depreciate them. She would be able to deduct the full purchase price of the vehicle and the equipment from her gross income (IRC Sec. 179). In order to qualify for the deduction the equipment/vehicle in question must be used more than 50% of the time for business purposes. The deduction is limited to the percentage of business use of the asset. (http://www.section179.org/section_179_deduction.html)

3: 3. John and Jane Smith tax issue:
a. Should John and Jane file separate tax returns or jointly?

John and Jane should definitely file a joint return. The difference in their income is so great that if they filed separately John would likely be in a higher tax bracket whereas if they filed jointly, Jane’s low income would likely bring them down to a lower tax bracket allowing them to pay a lesser tax rate on John’s income.

Related Documents

  • Decent Essays

    Unit 1: Sole Contractorship

    • 2286 Words
    • 10 Pages

    Just like the sole proprietorship, the partnership is 100% liable and creditors may go after business assets, or personal assets of either or both partners. • INCOME TAXES – Taxed like a sole proprietor where each partner pays taxes on their income from the business like it was there personal income, and expenses may be written off to offset business expenses. Since the partnership is also not considered a separate entity, the business is taxed only once. • LONGEVITY/CONTINUITY – Once a partner exits the business or dies, it is dissolved and a new business form must be created in order for the business to continue operating. • CONTROL – Partners have equal control in all decision making and operations of the business.…

    • 2286 Words
    • 10 Pages
    Decent Essays
  • Decent Essays

    Tax Liability Case Study

    • 761 Words
    • 4 Pages

    This will allow you to reimburse them without counting any money given as extra income. Accelerate deductions and defer income to put income into the next year and have more deductions in the current year. Don 't miss out on tax credits and incentives, many of which are state-specific for business. A tax professional can help. Investing in Your Company Can Help You Save on Taxes It is possible to do in this in a variety of ways.…

    • 761 Words
    • 4 Pages
    Decent Essays
  • Decent Essays

    Firstly, every company disclose the total income tax expense / benefit derived from the different between current tax and deferred tax. Then followed by the reconciliation of income tax expense to prima facie tax payable disclosed the calculation of income tax/benefit by increasing or decreasing profit after tax with permanent different accounts. All companies in our group disclose these two details in their notes to financial statement. 3.4.3 Contrast income tax Monash Ltd and Seven West Media Ltd disclosed the amount of tax recognised in other comprehensive income meanwhile Evolution Ltd and STO Ltd do not disclose any amount . In the other hand, only Cardno Ltd disclosed amount of tax recognised directly in equity.…

    • 1029 Words
    • 4 Pages
    Decent Essays
  • Decent Essays

    Calculating your income tax requires computing your business income. Gross income from sales will be most of the income you receive from you working your business. Cost of goods sold must be computed if your business uses inventory, in order to complete the business income portion of your tax return. Trying to find every deduction can be the best way to reduce your taxable income and tax bills. Almost every business must invest in major equipment, vehicles, machinery, and furniture in order to operate.…

    • 1897 Words
    • 8 Pages
    Decent Essays
  • Decent Essays

    One advantage of having a live chat agent is that someone is always available to answer product questions and the agents are sales persons as well. This is good for consumers who have merchandise questions or concerns and for the consumers who are indecisive and need to talk things over to be able to make the right choice or selection. Functional Specifications for Judy’s Internet Jewelry…

    • 734 Words
    • 3 Pages
    Decent Essays
  • Decent Essays

    In this situation, lower ratios are desirable. A high debt to equity ratio would spark concern for investors because it would reflect that the company cannot repay its liabilities if the need would present itself. For Moserk, it is just slightly higher than the industry standard. Moserk is at 1.22 and the average is 1.20. They are relatively close to a desirable ratio.…

    • 709 Words
    • 3 Pages
    Decent Essays
  • Decent Essays

    It is the same process when you purchase the unit from the developer which sold only the area plus balcony and storage, the car park space is come with the unit with no charge ka. The buyer is travelling to overseas at the moment, I will try to reach her and confirm regarding the deposit payment and other conditions and get back to you ka. Should you have any further questions, please do not hesitate to contact me ka. Proofread: Please find the Buyer’s offer below, for your review: 1. The selling price for the Unit is THB33,640,750.00, which is computed at the rate of THB 275,000.00/ per sq.…

    • 957 Words
    • 4 Pages
    Decent Essays
  • Decent Essays

    Capital Gain Tax Analysis

    • 1035 Words
    • 5 Pages

    Also, for inflation to be deducted, the interest expenses should be indexed. Interest expense would also be indexed, so only the excess of interest above inflation would be deductible. This will be benefiting since they could result to the taxpayer gaining a pure arbitrage dividends by subtracting the nominal interest at the same time recognizing real gains. Variations on a consumption tax such as the flat tax or David Bradford’s X-tax could protect low-income taxpayers from the burden of a consumption tax, but that simply means that more of the burden is placed on middle-income households, assuming revenues are to be maintained (Burman et al,…

    • 1035 Words
    • 5 Pages
    Decent Essays
  • Decent Essays

    Essay On Flat Tax

    • 1418 Words
    • 6 Pages

    Income taxes would increase for many businesses, but eliminating the second layer of taxes on capital income would partially compensate business owners for the increase. Economists’ estimates of lower compliance costs and increases in economic activity suggest these factors would be more important than the tax increase. Overall, the flat tax would generally be positive for…

    • 1418 Words
    • 6 Pages
    Decent Essays
  • Decent Essays

    The Internal Revenue Code states that there is an allowed deduction for all ordinary and necessary expenses paid or incurred during the taxable year in order to carry on a trade or business. IRC § 162(a). The Internal Revenue Code also states that a capital asset is property held by a taxpayer, whether or not connected with the taxpayer’s trade or business and lists exclusions from the general definition. IRC § 1221(a). Code section 163 states that all interest paid or accrued within the taxable year on indebtedness shall be allowed as a deduction.…

    • 854 Words
    • 4 Pages
    Decent Essays