A local ophthalmologist's advertising campaign included a ce
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1. A local ophthalmologist's advertising campaign included a certificate for a free radical keratotomy for the lucky winner of a drawing. Ahmad held the winning ticket, which was drawn in December 2007. Ahmad had no vision problems and was uncertain what he should do with the prize. In February 2008, Ahmad's daughter, who lives with his former wife, was diagnosed with a vision problem that could be treated with either prescription glasses or a radial keratotomy. The divorce degree requires that Ahmad pay for all medical expenses incurred for his daughter. Identify the relevant tax issues for Ahmad.
2. Julia owns a principal residence in California, a condo in New York City, and a houseboat in Florida. All of the properties have mortgages on which Julia pays interest. What are the limitations on Julia's mortgage interest deduction? What strategy should Julia consider to maximize her mortgage interest deduction?
3. Jerry purchased a personal residence from Kim. In order to sell the residence, Kim agreed to pay $3,000 in points related to Jerry's mortgage. Discuss the deductibility of the points.
4. Even though Sylvia is a full-time employee at a major software developer, she has never given up her love for pottery. For many years, she has spent evenings and weekends working to develop a profitable pottery business by making original pieces to sell to the general public. How should Sylvia treat the income or loss generated by her pottery venture? What are the tax issues?
5. Laura owns an apartment building and videocassette and DVD rental business. She participates for more than 500 hours in the operations of each activity. Are the businesses active or passive? Explain.
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Solution Summary
A local ophthalmologist's advertising campaign included a certificate for a free radical keratotomy for the lucky winner of a drawing. Ahmad held the winning ticket, which was drawn in December 2007. Ahmad had no vision problems and was uncertain what he should do with the prize. In February 2008, Ahmad's daughter, who lives with his former wife, was diagnosed with a vision problem that could be treated with either prescription glasses or a radial keratotomy. The divorce degree requires that Ahmad pay for all medical expenses incurred for his daughter. Identify the relevant tax issues for Ahmad.
2. Julia owns a principal residence in California, a condo in New York City, and a houseboat in Florida. All of the properties have mortgages on which Julia pays interest. What are the limitations on Julia's mortgage interest deduction? What strategy should Julia consider to maximize her mortgage interest deduction?
3. Jerry purchased a personal residence from Kim. In order to sell the residence, Kim agreed to pay $3,000 in points related to Jerry's mortgage. Discuss the deductibility of the points.
4. Even though Sylvia is a full-time employee at a major software developer, she has never given up her love for pottery. For many years, she has spent evenings and weekends working to develop a profitable pottery business by making original pieces to sell to the general public. How should Sylvia treat the income or loss generated by her pottery venture? What are the tax issues?
5. Laura owns an apartment building and videocassette and DVD rental business. She participates for more than 500 hours in the operations of each activity. Are the businesses active or passive? Explain.
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1 - He has to consider if the value of the gift will be included in the year it was received as taxable income. Free gifts are still considered to be taxable. He also has to consider that if he pays for glasses for the daughter instead of giving her the certificate for surgery, that he would likely be able to use the glasses as a medical expense deduction, assuming that he is also able to claim her on his tax returns. Even though the daughter lives with the ex-wife, there is generally an agreement in place ...
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