Preview

Individual Taxation Chapter 5

Good Essays
Open Document
Open Document
2196 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Individual Taxation Chapter 5
Chapter 5 Problems 42. [LO 1] Although Hank is retired, he is an excellent handyman and often works part‐time on small projects for neighbors and friends. Last week his neighbor, Mike, offered to pay Hank $500 for minor repairs to his house. Hank completed the repairs in December of this year. Hank uses the cash method of accounting and is a calendar‐year taxpayer. Compute Hank’s gross income for this year from each of the following alternative transactions: a. b. Mike paid Hank $200 in cash in December of this year and promised to pay the remaining $300 with interest in three months. Mike paid Hank $100 in cash in December of this year and gave him a negotiable promissory note for $400 due in three months with interest. Hank sold the note in January for $350. Mike gave Hank tickets in December to the big game in January. The tickets have a face value of $50 but Hank could sell them for $400. Hank went to the game with his son. Mike bought Hank a new set of snow tires. The tires typically sell for $500, but Mike bought them on sale for $450. $200 this year. $500 this year if the value of the note at the time of the exchange was $400. Note the difference between a promise to pay in part a. (not gross income) and a negotiable promissory note which is included in gross income. $400 this year. The value of the tickets was $400 when Hank received them. $450. This is the fair market value of the tires at the time Mike transferred them to Hank.

c. d. a. b.

c. d. 46.

[LO1] L. A. and Paula file as married taxpayers. In August of this year they received a $5,200 refund of state income taxes that they paid last year. How much of the refund, if any, must L. A. and Paula include in gross income under the following independent scenarios? Assume the standard deduction last year was $11,600. a. b. c. Last year L. A. and Paula had itemized deductions of $10,200, and they chose to claim the standard deduction.

You May Also Find These Documents Helpful

  • Good Essays

    Timpanogos Inc. is an accrual-method calendar-year corporation. For 2012, it reported financial statement income after taxes of $1,149,000. Timpanogos provided the following information relating to its 2012 activities:…

    • 648 Words
    • 8 Pages
    Good Essays
  • Good Essays

    Homework Chapter 4

    • 1675 Words
    • 7 Pages

    12. Wade paid $7,000 for an automobile that needed substantial repairs. He worked nights and weekends to restore the car and spent $2,400 on parts for it. He knows he can sell the car for $13,000. His daughter’s college tuition is due in a few days. Would it matter, after taxes, whether Wade sells the car and pays the tuition or whether he gives the car to his daughter and she sells it for $13,000 and pays her tuitions?…

    • 1675 Words
    • 7 Pages
    Good Essays
  • Powerful Essays

    We have been requested to review and present to you our recommendations for the start of your new Pharmaceutical/Biotech Consulting Company. To begin, we would like to review the information that we have been given from you to KMCE&A. We understand that you have a background as a business executive as well as a scientific background. Your business plan states you are starting up a consulting company that will handle R&D monitoring for other companies that are in the Pharmaceutical/Biotech Industry. Your client base is mostly in the New Jersey and Pennsylvania area but hope to eventually expand to a global customer base. Your main investments will be in salaries in that as a services industry you will have minimal asset investments. Your personal preference is to have no personal liability. You would like to keep the ownership small and retain the majority ownership of 50% to 60% so that you can keep control of the decision making. However you are open to issuing stock if the funding of your business would benefit from this over financing through debt. You also expect to have a loss of approximately $25,000 in the first year due to start up costs and become profitable by year two. You initially will have three employees joining you at the start of the business. Two employees, Scott & Kate, will be contributing services of an IT specialist and a marketing/public relations as well as a program manager. The third member, Todd, who is an attorney, will not only contribute legal services but also an initial investment of $50,000. We also understand that you have $200,000 of personal funds to invest as well as have obtained an additional $500,000 in financing through securing your own personal assets.…

    • 5105 Words
    • 17 Pages
    Powerful Essays
  • Powerful Essays

    Acct 421a Chapter 16

    • 1305 Words
    • 6 Pages

    In 2011, the taxpayer became ineligible to use the cash method of accounting. At the beginning of the year, accounts receivable totaled $240,000, accounts payable for merchandise totaled $80,000 and the inventory on hand totaled $520,000. What is the amount of the adjustment due to the change in accounting method?…

    • 1305 Words
    • 6 Pages
    Powerful Essays
  • Good Essays

    Tom and Linda are married taxpayers who file a joint return. They have itemized deductions of $11,950 and four exemptions. Assuming an adjusted gross income of $40,000.00 what is their taxable income for 2012?…

    • 562 Words
    • 3 Pages
    Good Essays
  • Satisfactory Essays

    3) Molly sells her car, valued at $30,000, to her nephew Todd for $18,000. Molly has made a taxable gift.…

    • 9691 Words
    • 37 Pages
    Satisfactory Essays
  • Satisfactory Essays

    4) An advantage of filing a consolidated return is that losses of one affiliated group member may be offset against the taxable income of other group members in the same tax year.…

    • 11596 Words
    • 48 Pages
    Satisfactory Essays
  • Powerful Essays

    The annual withholding will not materially differ regardless of the pay period of the taxpayer. As the payroll period gets shorter, tax withholding per check will decrease, yet the total for the year will remain roughly the same.…

    • 4661 Words
    • 19 Pages
    Powerful Essays
  • Good Essays

    Chapter 20 Tax Homework

    • 647 Words
    • 3 Pages

    1. What is a flow-through entity, and what effect does this designation have on how business entities and their owners are taxed?…

    • 647 Words
    • 3 Pages
    Good Essays
  • Powerful Essays

    All inclusive income concept (all income received is taxable unless a specific provision in the tax law either excludes the income from taxation or defers its recognition to a future tax year) provides the basis for calculating gross income.…

    • 2557 Words
    • 11 Pages
    Powerful Essays
  • Powerful Essays

    Income Tax Chapter

    • 21755 Words
    • 166 Pages

    Tax rate schedules are provided for use by (relatively) higher income taxpayers while the tax tables are provided for use by (relatively) lower income taxpayers.…

    • 21755 Words
    • 166 Pages
    Powerful Essays
  • Good Essays

    Corporate Strategy

    • 3375 Words
    • 14 Pages

    28. A taxpayer is considering three alternative investments of $10,000. Assume the taxpayer is in the 28% marginal tax bracket for ordinary income and 15% for qualifying capital gains and dividends in all tax years. The selected investment will be liquidated at the end of five years. The alternatives are:…

    • 3375 Words
    • 14 Pages
    Good Essays
  • Satisfactory Essays

    3) The holding period of a partnership interest acquired in exchange for a contributed capital asset begins on the date the partner transfers the asset to the partnership.…

    • 13236 Words
    • 56 Pages
    Satisfactory Essays
  • Good Essays

    week 3 problem

    • 2103 Words
    • 9 Pages

    Ken reported the following financial information this year. Assume Ken’s modified adjusted gross income for purposes of the bond interest exclusion and for determining the taxability of his Social Security benefits is $70,000 and that Ken files as a single taxpayer. Determine Ken’s 2009 gross income.…

    • 2103 Words
    • 9 Pages
    Good Essays
  • Good Essays

    Arlene’s equestrian activity and home and barn design activity could be treated as a single integrated activity, and the single integrated activity was held for profit. Meanwhile, equestrian-related expenses should be considered expenses incurred in the integrated business rather than personal expenses. Therefore, Arlene’s position of reporting two activities on a single Schedule C is correct.…

    • 563 Words
    • 3 Pages
    Good Essays