Detailed Income Tax Calculation Assignment: University Coursework

This document presents a solved income tax assignment, detailing the calculations for various scenarios. It includes the computation of Wayne's basis, determining taxable income with adjustments for charitable contributions, dividends, and capital gains (Part C and D), and calculating Mathew's basis, considering ordinary losses and at-risk amounts. The solutions demonstrate the application of income tax provisions, referencing relevant publications and resources. The assignment covers key aspects of income tax, providing a comprehensive guide for students to understand and solve complex tax-related problems. It includes step-by-step calculations and explanations, making it a valuable resource for learning and exam preparation.

Running head: INCOME TAX
Income Tax
Name of the Student:
Name of the University:
Authors Note:

1
INCOME TAX
Contents
Answer 1:.........................................................................................................................................2
Answer 2:.........................................................................................................................................3
Answer 3:.........................................................................................................................................6
References:......................................................................................................................................8

2
INCOME TAX
Answer 1:
Calculation of Wayne's basis:
Particulars Amount
($)
Amount
($)
Wayne's basis at the beginning 46,000.0
0
Add: Items of income and gains
Ordinary income 86,000
.00
Long term capital gain 31,000
.00
117,000.0
0
163,000.0
0
Less: Expenses and losses
§1231 gain (Tax on capital gain) 8,600
.00

3
INCOME TAX
Charitable contributions 4,000
.00
§179 expense 36,000
.00
Distribution of cash 12,000
.00
60,600.0
0
Wayne's basis at the end 102,400.0
0
Wayne’s basis at the end is $102,400 ("What is Section 1231?", 2019).
Answer 2:
Part C:
Particulars Amount
($)
Amount
($)
Book income 152,000.
00
Add:

4
INCOME TAX
Less:
Interest on municipal bond 4,000.
00
Charitable contributions 10,000.
00
Dividend received from domestic corporation 4,200.
00
Charitable contributions carry over 4,380.
00
22,580.
00
Taxable income 129,420.
00
Taxable income before deduction of charitable contributions 143,800.00
Maximum deduction for charitable contributions @10% 14,380.00
Thus, taxable income is $129,420 after making necessary adjustments as per the income tax
provisions ("Publication 541 - Partnerships - Basis of Partner's Interest", 2019).
Part d:

5
INCOME TAX
Particulars Amount
($)
Amount
($)
Book income 258,000.
00
Add:
Capital gain 5,000.
00
5,000.
00
263,000.
00
Less:
Interest on municipal bond 4,000.
00
Dividend received from domestic corporation 11,200.
00
Capital loss carry over 12,000.
00
27,200.
00

6
INCOME TAX
Taxable income 235,800.
00
Thus, taxable income is $235,800 after making necessary adjustments as per the income tax
provisions.
Answer 3:
Calculation of Mathew's basis:
Particulars Amount
($)
Amount
($)
Adjusted basis of equipment 40,000
.00
Add: Items of income and gain
Share of interest 1,000.
00
Share of dividend 600
.00
Capital gain share 1,800.
00
3,400

7
INCOME TAX
.00
43,400
.00
Less: Ordinary losses 8,650
.00
Ending at risk amount 34,750
.00
Ending at risk amount of Mathew after necessary adjustments is $34,750.

8
INCOME TAX
References:
Publication 541 - Partnerships - Basis of Partner's Interest. (2019). Retrieved from
https://taxmap.irs.gov/taxmap/pubs/p541-006.htm
What is Section 1231?. (2019). Retrieved from https://loopholelewy.com/loopholelewy/15-
selling-your-business/selling-your-business-12-sec1231.htm

9
INCOME TAX