Chapter 1, Problem 12DQ

Which of the following describes a taxpayer with a hobby? a) Sara, an independent seller for a cosmetics company, who sells products to friends and neighbors because she enjoys learning about the new products available. She maintains separate business and personal accounts and keeps meticulous business records. b) Craig, a taxpayer who builds model trains. He occasionally wins cash prizes in local train modeling contests. He deposits his winnings into his personal checking account. c) Everett, a university research associate, who had made profits on his research activities in the past and fully expects to do so in the future. d) Gail, a taxpayer who writes travel articles. She visits each location only after she has a valid contract with a publisher and keeps her business and personal accounts separate. Her travel expenses and earnings are in line with the earnings and expenses of other travel writers.

Solve through IRAC (ISSUE, Rules, Analysis, Conclusion) method. Samuel Finley has two children, a daughter Lee and a son Keaton. Samuel has a lovely beach house in Palm Beach. Sam is terminally ill and has been told by his doctors that he has less than a year to live. Lee knows that Keaton is their father’s favourite child and that he had been named in the latter’s will to inherit the beach house.   Lee knew that since their father did not have long to live and that he was 90 years old and starting to become mentally-weak, she could pressure him to transfer the Palm Beach beach house over to her even though Samuel may not totally understand what he was signing over. So, for four months, using pressure and threats, but more often with gentle but devious tactics, Lee succeeds in convincing Samuel to sign a transfer of property transferring the Palm Beach beach house over to her.   As his last act, before he dies, Samuel wants to set aside the transfer of the beach house to Lee. Advise…

Sonja is considering the purchase and renovation of an old building. She has heard about the tax credit for rehabilitation expenditures but does not know the specific rules applicable to the credit. Explain the most important and relevant provisions for her.

In 1626, Dutchman Peter Minuit purchased Manhattan Island from a local Native American tribe. Historians estimate that the price he paid for the island was about $24 worth of goods, including beads, trinkets, cloth, kettles, and axe heads. Many people find it laughable that Manhattan Island would be sold for $24, but you need to consider the future value (FV) of that price in more current times. If the $24 purchase price could have been invested at a 5.75% annual interest rate, what is its value as of 2018 (392 years later)?

39) Susan wants to travel abroad for a period of 6 months. Where can she keep her valuables and documents. Suggest a suitable option for her.

Andrew is a successful barrister working in London; he owns his own house.  His parents are both working and have significant savings.  His sister Virginia and her partner have recently had a baby.  She and her partner have a large mortgage and a lot of debt; they are struggling now that she has stopped working. Discuss the different reasons why it is important that Andrew and his sister Virginia should make a will.  Explain what would happen to Andrew and Virginia’s estate if they do not make wills.

Ned is an independent contractor working with Joe remodeling a home, and Joe pays him using cryptocurrency. Ned then took the cryptocurrency and purchased tools for work. How should he report the income and what would be the basis of the amount he received?

If Kevin works off the clock, then he will sacrifice family time and responsibilities. This is an example of what type of ethical reasoning?

In the late 1980s, Carsten Richter, from Germany, migrated to the United States, where he is now a citizen. A man of many talents and deep foresight, he has built a large fleet of oceangoing oil tankers during his stay in the United States. Now a wealthy man in his 60s, he resides in Aspen, Colorado, with his second wife, Gabriela, age 50. They have two sons, one in junior high and one a high-school freshman. For some time, Carsten has considered preparing a will to ensure that his estate will be property distributed when he dies. A survey of his estate reveals the following: Ranch in Colorado $1,000,000 Condominium in Santa Barbara 800,000 House in Aspen 1,500,000 Franchise in ice cream stores 2,000,000 Stock in Google 5,000,000 Stock in Wal-Mart 1,000,000 Stock in Silver Mines International 3,000,000 Other assets 200,000 Total Assets $14,500,000 Does Carsten really need a will? Explain why or why not? What would happen to his estate if he were to die without a will?