SU 4: Self-Employment, Farming, and Adjustments

John Budd files a joint return with his wife. Budd's employer pays 100% of the cost of all employees' group term life insurance under a qualified plan. Under this plan, the maximum amount of tax-free coverage that may be provided for Budd by his employer is

50,000

Frank Clarke, an employee was covered under a noncontributory pension plan. Frank died on April 15, 2014, at age 64 and, pursuant to the plan, his widow received monthly pension payments of $500 beginning May 1, 2014. Mrs Clarke also received an employee death payment of 10,000 in May 2014. How much should she include in her gross income for 2014?

14,000

Schedule C

Business Income

Schedule D

Capital Gains and Losses

1120

Corporations

Schedule B

Dividends and Interest

Schedule F

Farm Income

Schedule A

Itemized Deductions (From AGI)

Mock operates a retail business selling illegal narcotic substances. When Mock calculates business income, he may adjust for I. Cost of merchandise II. Business expenses other than the cost of merchandise

I. Cost of merchandise

1040

Individuals

Itemized Deductions (UNIT 5)

Medical expenses Taxes Interest Charitable contributions Casualty and theft losses Job expenses and miscellaneous deductions Other miscellaneous deductions

Under a "cafeteria plan" maintained by an employer

Participants may select their own menu of benefits

1065

Partnerships Information Return

Schedule E

Rental Income

Which of the following may use income averaging for farming?

S corporation shareholder

1120 S

S corporations

In 2010, Ross was granted an incentive stock option (ISO) by his employer as part of an executive compensation package. Ross exercised the ISO in 2012 and sold the stock in 2014 at a gain. Ross's profit was subject to the income tax for the year in which the

Stock was sold

Recasto owns a second residence that is used for both personal and rental purposes. During 2014, Recasto used the second residence for 50 days and rented the residence to Louis for 200 days. Which of the following statements is true?

Utilities and maintenance on the property must be divided between personal and rental use

Howard, an employee of Ogden Corporation, died on June 30, 2014. During July, Ogden made employee death payments of $10,000 to his widow and $10,000 to his 15-year-old son. What amounts should be included in gross income by the widow and son in their respective tax returns for 2014?

Widow- 10,000 Son 10,000

The self-employment tax is

partially deductible from gross income in arriving at adjusted gross income.

An employee who has had Social Security tax withheld in an amount greater than the maximum for a particular year may claim

the excess as a credit against income tax, if that excess resulted from correct withholding by two or more employers.