You Decide Activity

Memo
To: John & Jane Smith
From:
Date: [ 11/12/2011 ]
Re: Memo summarizing various tax issues
1. John Smith's tax issues:

Issue a) How is the $300,000 treated for purposes of federal tax income?

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Conclusion:

Issue b) How is the $25,000 treated for purposes of federal tax income?

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Issue c) What is your determination regarding reducing the taxable amount of income for both (a) and (b) above?

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Conclusion:

2. Jane Smith tax issues:

Issue a) What are the different tax consequences between paying down the mortgage (debt) and assuming a new mortgage (debt) for federal income tax purposes?

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Issue b) Can John and Jane Smith utilize a 1031 tax exchange to buy a more expensive house using additional money from John's case?

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Issue c) Does Jane have a business or hobby? Why is this distinction important?

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Issue d) Would Jane (and John) realize better tax benefits if she had a separate business for her jewelry-making activities?

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Issue e) What tax benefits would John realize if he invested $15,000 in Jane's jewelry making?

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Issue f) Can Jane depreciate her vehicle or jewelry-making equipment? How?

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3. John and Jane Smith tax issue:

Issue a) Should John and Jane file separate or joint tax returns?

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