CHAPTER 4--GROSS INCOME: CONCEPTS AND INCLUSIONS
As a general rule: Only I and II are true.
Income from property is taxed to the person who owns the property. II.
Income from services is taxed to the person who earns the income. III.
The assignee of income from property must pay tax on the income. IV.
The person who receives the benefit of the income must pay the tax on the income. Betty purchased an annuity for $24,000 in 2012. Under the contract, Betty will receive $300 each month for the rest of her life. According to the actuarial estimates, Betty will live to receive 96 payments and will receive a 3% return on her original investment. If Betty lives to collect more than 96 payments, all of the amounts collected after the 96th payment must be included in taxable income Darryl, a cash basis taxpayer, gave 1,000 shares of Copper Company common stock to his daughter on September 29, 2012. Copper Company is a publicly held company that has declared a $2.00 per share dividend on September 30th every year for the last 20 years. Just as Darryl had expected, Copper Company declared a $2.00 per share dividend on September 30th, payable on October 15th, to stockholders of record as of October 10th. The daughter received the $2,000 dividend on October 18, 2012.
The daughter must recognize the income because she owned the stock when the dividend was declared and she received the $2,000. Daniel purchased a bond on July 1, 2012, at par of $10,000 plus accrued interest of $300. On December 31, 2012, Daniel collected the $600 interest for the year. On January 1, 2013, Daniel sold the bond for $10,200. Daniel must recognize $300 interest income for 2012 and a $200 gain on the sale of the bond in 2013. Debbie is age 67 and unmarried and her only sources of income are $200,000 in taxable interest and $20,000 of Social Security benefits. Debbie’s adjusted gross income for the year is:
$217,000. Detroit Corporation sued Chicago Corporation for intentional damage to Detroit’s goodwill. Detroit had created its goodwill through providing high-quality services to its customers. Thus, no basis for the goodwill appeared on Detroit’s balance sheet. The suit was settled and Detroit received $1,500,000 for the damages to its goodwill.
The $1,500,000 is taxable because Detroit has no basis in the goodwill. For purposes of determining gross income, which of the following is true?
Embezzlement proceeds are included in the embezzler’s gross income because the embezzler has an obligation to repay the owner. Freddy purchased a certificate of deposit for $20,000 on July 1, 2012. The certificate’s maturity value in two years (June 30, 2014) is $21,218, yielding 3% before-tax interest.
Freddy must recognize $300 (.03 ´ $20,000 ´ .5) gross income in 2012. Gordon, an employee, is provided group term life insurance coverage equal to twice his annual salary of $125,000 per year. According to the IRS Uniform Premium Table (based on Gordon’s age), the amount is $12 per year for $1,000 of protection. The cost of an individual policy would be $15 per year for $1,000 of protection. Since Gordon paid nothing towards the cost of the $250,000 protection, Gordon must include in his 2012 gross income which of the following amounts?
$2,400. Green Inc provides group term life insurance for all of its employees. The coverage equals 2x the employee’s annual salary. Sam, a VP, worked all year for Green Inc & received $250,000 of coverage for the year at a cost to Green of $3,000. The Uniform Premiums (based on Sam’s age) are $.30 per month for $1,000 of protection. How much must Sam include in gross income this year? $720 Harry and Wanda were married in Texas, a community property state, but moved to Virginia, a common law state. The calculation of their income on a joint return: .
Will not change as a result of changing their state of residence. In the case of a below-market loan between family members, if the imputed interest rules apply, which of...
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