There was $155,000. The property was distributed to Judy on January 1, 2006. The Vance’s have held the property as rental property and have managed it themselves. From January 1, 2006, until June 30, 2010, they rented the house to the same tenant. The tenant was transferred to a branch office in California and moved out at the end of June. Since they did not want to bother finding a new tenant, Paul and Judy sold the house on June 30, 2010.
They received $140,000 for the house and land ($15,000 for the land and $125,000 for the house), less a 6 percent commission charged by the broker. They had
C-2 Appendix C
depreciated the house using the MACRS rules and conventions applicable to residential real estate. To compute depreciation on the house, the Vance’s had allocated $15,000 of the property’s basis to the land on which the house is located. The Vance’s collected rent of $1,000 a month during the six months the house was occupied during the year. They incurred the following related expenses during this period:
Property insurance $500
Property taxes 800
Depreciation (to be computed)?
6. The Vance’s sold 200 shares of Capp Corporation stock on September 3, 2010, for $42 a share (minus a $50 commission). The Vance’s received the stock from Paul’s father on June 25, 1979, as a wedding present. Paul’s father originally purchased the stock for $10 per share in 1966. The stock was valued at $14.50 per share on the date of the gift. No gift tax was paid on the gift.
7. Judy is required by Xavier University to visit several high schools in the
Cincinnati area to evaluate Xavier University students who are doing their practice teaching. However, she is not reimbursed for the expenses she incurs in doing this. During the spring semester (January through April 2010), she drove her personal automobile 6,800 miles in fulfilling this obligation. Judy drove an additional 6,700 personal miles during 2010. She has been using the car since June 30, 2009. Judy uses the standard mileage method to calculate her car expenses.
8. Paul and Judy have given you a file containing the following receipts for expenditures during the year:
Prescription medicine and drugs (net of insurance reimbursement) $376
Doctor and hospital bills (net of insurance reimbursement) 2,468
Penalty for underpayment of last year’s state income tax 15
Real estate taxes on personal residence 4,762
Interest on home mortgage (paid to Home State Savings & Loan) 8,250
Interest on credit cards (consumer purchases) 595
Cash contribution to St. Matthew’s church 3,080
Payroll deductions for Judy’s contributions to the United Way 150
Professional dues (Judy) 325
Professional subscriptions (Judy) 245
Fee for preparation of 2009 tax return paid April 14, 2010 500
9. The Vance’s filed their 2009 federal, state, and local returns on April 14, 2010. They paid the following additional 2009 taxes with their returns:
federal income taxes of $630, state income taxes of $250, and city income taxes of $75.
10. The Vance’s made timely estimated federal income tax payments of $1,500 each quarter during 2010. They also made estimated state income tax payments of $300 each quarter and estimated city income tax payments of $160 each quarter.
The Vance’s made all fourth-quarter payments on December 31, 2010. They would like to receive a refund for any overpayments.