Identify the amount, if any, that these individuals must include in gross income in the following independent cases. Assume that the individuals are on the cash method of accounting and report income on a calendar-year basis.
a. Elmer was an extremely dil
a. Elmer should include in gross income the $1,200 gross pay he received for the three days he was not required to work but still received compensation.
b. Amax employees should include the value of the furniture ($250) in gross income.
Anne purchased an annuity from an insurance company that promised to pay her $34,000 per year for the next ten years. Anne paid $231,200 for the annuity, and in exchange she will receive $340,000 over the term of the annuity.
a. How much of the first $34,
a. $10,880. A part of each payment represents a return of the original $231,200 investment, and the remainder ($108,800) is income. The original investment ($231,200) is 68.00 percent of the expected value ($231,200 / $340,000). Hence, $23,120 of each pay
For each of the following independent situations, indicate the amount the taxpayer must include in gross income:
a. Phil won $840 in the scratch-off state lottery. There is no state income tax.
b. Ted won a compact car worth $25,200 in a TV game show. Ted
a. All $840 is economic income realized this year and is, therefore, included in gross income.
b. The value of the car, $25,200, is economic income realized this year and is, therefore, included in gross income.
c. The entire award is excluded and therefo
For each of the following situations, indicate how much the taxpayer is required to include in gross income: (Leave no answer blank. Enter zero if applicable.)
1. Steve was awarded a $9,700 scholarship to attend State Law School. The scholarship pays Stev
a. The $9,700 scholarship is excluded from gross income because it is used to pay Steve's tuition and fees.
b. The $24,700 scholarship is included in gross income because the terms of the scholarship require Hal to perform services.
Irene is disabled and receives payments from a number of sources. The interest payments are from bonds that Irene purchased over past years and a disability insurance policy that Irene purchased herself.
Interest, bonds issued by City of Austin, Texas $3,
Interest, U.S. Treasury bills $ 2,650
Interest, bonds issued by Ford Motor Company 3,100 Interest, bonds issued by City of Quebec, Canada 760
Distributions from qualified pension plan 6,100
Gross income $ 12,610
Louis files as a single taxpayer. In April of this year he received a $900 refund of state income taxes that he paid last year.
How much of the refund, if any, must Louis include in gross income under the following independent scenarios? Assume the standa
a. Louis received a tax benefit for the lesser of the refund ($900) or the excess of the itemized deductions above the standard deduction ($6,450 ? $6,200 = $250). Hence, Louis must include $250 of the $900 refund in gross income.
b. Because he didn't ite
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 s
a. Because they did not itemize their deductions, L. A. and Paula received no benefit from the $5,200 tax overpayment. Hence, none of the refund is included in gross income.
b. L. A. and Paula received a tax benefit for the lesser of the refund ($5,200) o
Clyde is a cash-method taxpayer who reports on a calendar-year basis. This year Paylate Corporation has decided to pay Clyde a year-end bonus of $1,000.
Determine the amount Clyde should include in his gross income this year under the following circumstan
a. Clyde is taxed on the $1,000 under the constructive receipt doctrine.
b. Clyde is taxed on the $100 - the remaining $900 is taxed in the next year.
c. Clyde is taxed on $1,000 unless the mail was not delivered until after year-end. Clyde would need to
Lanny and Shirley are recently divorced and do not live together. Shirley has custody of their child, Art, and Lanny pays Shirley $22,000 per year. All property was divided equally.
a. How much should Shirley include in income if Lanny's payments are made
a. $22,000 is includible in Shirley's gross income as alimony. The payments do not continue after Shirley's death. It is not important that the payments may cease earlier than Shirley's death.
b. $10,000 is includible in Shirley's gross income as alimony.
Larry purchased an annuity from an insurance company that promises to pay him $1,500 per month for the rest of his life. Larry paid $170,820 for the annuity. Larry is in good health and he is 72 years old. Larry received the first annuity payment of $1,50
a. [525] A part of each payment represents a return of the original $170,820 investment but to calculate the income you need the expected amount. The expected amount is calculated using the expected return multiple for Larry's age group (14.6 for a 72 yea
For each of the following independent situations, indicate the amount the taxpayer must include in gross income: (Leave no answer blank. Enter zero if applicable.)
a. Phil won $500 in the scratch-off state lottery. There is no state income tax.
b. Ted won
a. All $500 is economic income realized this year and is, therefore, included in gross income.
b. The value of the car, $17,000, is economic income realized this year and is, therefore, included in gross income.
c. The entire award is excluded and therefo
Grady received $8,200 of Social Security benefits this year. Grady also reported salary and interest income this year.
What amount of the benefits must Grady include in his gross income under the following five independent situations?
a. Grady files singl
a. [$0]
Grady excludes the entire $8,200 because the sum of his modified AGI plus 50 percent of his Social Security benefits ($12,100 + $250 + $4,100 (50% of Social Security benefits) = $16,450) is below the minimum amount ($25,000 or less for single taxp
Nikki works for the Shine Company, a retailer of upscale jewelry. How much taxable income does Nikki recognize under the following scenarios? (Leave no answer blank. Enter zero if applicable.)
a. Nikki buys a diamond ring from Shine Company for $10,000 (n
a. Because Nikki's 28.57% discount (1 ? $10,000/$14,000 = 0.2857) is less than Shine Company's gross profit percentage, the bargain purchase from her employer does not result in taxable income.
b. Nikki will recognize $25 of taxable income from the discou
Jimmy has fallen on hard times recently. Last year he borrowed $250,000 and added an additional $50,000 of his own funds to purchase $300,000 of undeveloped real estate. This year the value of the real estate dropped dramatically, and Jimmy's lender agree
a. [$0]
Jimmy recognizes no income. The loan reduction generates $20,000 of income from discharge of indebtedness, but Jimmy can exclude this income because he is insolvent even after the discharge (assets of $175,000 versus liabilities of $230,000).
b. [
Grady is a member of a large family and received the following payments this year. For each payment, determine whether the payment constitutes realized income and determine the amount of each payment Grady must include in his gross income. (Leave no answe
A:
Is this payment realized income? Yes
Amount to be included: $0
B:
Is this payment realized income? Yes
Amount to be included $0
C:
Is this payment realized income? Yes
Amount to be included $0
D:
Is this payment realized income? No
Amount to be include