ACCT – Brown, a calendar year taxpayer



In June 2013 Brown, a calendar year taxpayer, receives cash of $750,000 from the county upon condemnation of his warehouse building (adjusted basis of $500,000 and a FMV of $750,000.
(a) What must Brown do to qualify for a 1033 postponement of gain treatment?
(b) If he were to acquire another property for a cost of $1,000,000, what would the basis in the property be if he qualifies for an 1033 postponement?
(c) What would be the basis of the property if his purchase doesn’t qualify for a 1033 replacement?

David, a sole proprietor and owner of a small store, pays $7,500 for health insurance for him and his family. Joan is an employee of a small company that does NOT provide for health insurance so she had to pay $8,000 just for herself. How does the tax treatment differ for David and Joan?

Ray lost his job and falls behind in his mortgage payments on his personal residence. His friend volunteers to make the mortgage payments for Ray to avoid having Ray lose his house due to a foreclosure.
(a) Can this be structure so that Ray can still deduct the interest?
(b) if the friend pays the interest directly are both parties denied the interest deduction?
(c) Can this be structured in such a way that the friend can get the interest deduction?

Alvin is a medical doctor who conducts his practice as a sole proprietor. During 2013 he received cash for $280,000 for his services. Of the amount collected, $40,000 was for services performed in 2012. At the end of 2013, Alvin had receivables owed to him for services already rendered of $60,000. Additionally, Alvin received $12,000 as an advance payment on a procedure he was scheduled to perform in January 2014. Compute Alvin’s gross taxable income for 2013 using:
(a) the cash method of accounting
(b) the accrual method accounting, and
(c) advice to Alvin which method was better for him.


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