1) RESEARCH CASE: Blue Power and Light Corporation is an energy company. It produces electricity, sells wholesale and retail electricity, and delivers electricity to customers. Blue also provides street and highway lighting and area lighting for public and private entities. The equipment used to provide street and area is called streetlights. Blue wants to know the appropriate asset class to determine the cost recovery deductions for the streetlights.
On Thomson-Reuters Checkpoint, do a keyword search of primary source materials using the following search string: “street lights” & “asset class”. You should find a court case that provides an answer to the problem.
Submit a tax file memorandum with proper citations of all sources: I want to see citations of the court case, a revenue procedure, and a specific section of the IRC.
2) Hazel purchased a new business asset (five-year asset) on September 30, 2012, at a cost of $100,000. On October 4, 2012, Hazel placed the asset in service. This was the only asset Hazel placed in service in 2012. The only election with respect to the asset was not to take § 179. On August 20, 2013, Hazel sold the asset. Determine the cost recovery for 2013 for the asset.a. / $9,600.
b. / $11,875.
c. / $23,750.
d. / $38,000.
e. / None of the above
3) White Company acquires a new machine (seven-year property) on January 10, 2012, at a cost of $600,000. White makes the election to expense the maximum amount under § 179. No election is made to use the straight-line method. White does take additional first-year depreciation. Determine the total deductions in calculating taxable income related to the machine for 2012 assuming White has taxable income of $800,000.
a. / $71,593.b. / $128,610.
c. / $204,877.
d. / $385,296.
e. / None of the above.
4)
Jose, single, had the following items for 2012:
Salary $44,000
§ 1244 loss on stock acquired 3 years ago / (70,000)
§ 1244 gain on stock acquired 10 months ago / 26,000
Worthless security purchased in Jun of last year / (4,000)
Nonbusiness bad debt / (7,000)
Interest income / 8,000
Compute Jose’s adjusted gross income for 2012.
5) On March 3, 2012, Sally purchased and placed in service a building costing $12,000,000. The building has 10 floors. The bottom three floors are rented out to businesses. The top seven floors are residential apartments. The gross rents from the businesses are $60,000 and the gross rents from the apartments are $310,000. Determine Sally’s cost recovery for the building in 2012.
6) Sid bought a new $410,000 seven-year class asset on August 2, 2012. On December 2, 2012, he purchased $160,000 of used five-year class assets. Sid does take additional first-year depreciation if available. If Sid elects § 179, what is the maximum write-off for these purchases for 2012?
7) Joe purchased a new five-year class asset on June 1, 2012. The asset is listed property (not an automobile). It was used 55% for business and 45% for the production of income. The asset cost $1,000,000. Joe made the §179 election. Joe’s taxable income would not create a limitation for purposes of the § 179 deduction. Joe does not take additional first-year depreciation. Determine Joe’s total cost recovery (including the § 179 deduction) for the year.
8) Locate and read a recent judicial or administrative ruling regarding the deductibility of hobby losses for horse breeding operations. Which criteria (for example, the list on p. 6-17 of the nine factors) did the ruling emphasize in upholding or reversing the taxpayer’s deductions for such losses? List all criteria mentioned in the ruling and provide a complete citation for your source so I can check the accuracy of your answer.