TAX 610
What is the taxpayer's filing status for 2021? bill is unmarried an lives in an apartment. he supported his aged parents, who live in a separate home. bill provided over half of the cost of maintaining his parent's home and also provided over half of each of his parent's support.
Bill meets the requirements to file as head of household. parents do not need to live with the taxpayer
jack age 62 and blind, and his wife, who became 65 on january 1 of the following year, file a joint return. calculate the number of exemptions that could be claimed and the standard deduction that the tax payer is entitled to take in 2021
2 exemptions Standard deduction of $27,800 $25,100 basic standard deduction plus $1,350 for being blind and $1,350 for being over age 65
John, age 66 and his wife, age 64 file a joint return. calculate the number of exemptions that could be claimed and the standard deduction that the tax payer is entitled to take in 2021
2 personal exemptions Standard deduction of $26,450 $25,100 basic standard deduction plus $1,350 for being over the age of 65
Jim an marry both 52, contribute more than half the support for Jim's father, who lives with them. Jims father is 72 and blind. Jim and Marry file a joint return.calculate the number of exemptions that could be claimed and the standard deduction that the tax payer is entitled to take in 2021
3 personal exemptions Standard deduction of $25,100 Basic standard deduction of $25,100. No additional standard deduction for dependents
Billy Bob and his wife, marry sue, both 45, maintain a home for marry sue's friend, Jackie, age 17, who came t dinner one night several years ago and has lived with them since. Jackie attends school and has no income. billy bob and marry sue file a joint return. calculate the number of exemptions that could be claimed and the standard deduction that the tax payer is entitled to take in 2021
3 personal exemptions- Billy Bob, Marry sue and Jackie. Jackie is a member of the household $25,100 standard deduction
Joe, age 65, and his wife joAnee, age 64 maintain a home for their unmarried daughter age 23, who earned $4,000 and attends college on a part-time basis. Joe and JoAnne Contribute $6,000 towards her support. Joe and JoAnee file a joint return.calculate the number of exemptions that could be claimed and the standard deduction that the tax payer is entitled to take in 2021
3 personal exemptions- joe, Joanne and daughter. Daughter is not a qualifying child because she is not under 19 or a full time student under 24, but she is a qualifying relative because she has income less than $4,300 and her parents provide over half of her support. $26,450 standard deduction $25,100 basic standard deduction plus $1,350 for being over age 65
Dan and his wife, pam, maintain a household for and completely support 3 foster children. the children have been living in dan and pam's home all year. on December 31, of the tax year, pam gives birth to a son. calculate the number of exemptions that could be claimed and the standard deduction that the tax payer is entitled to take in 2021
6 personal exemptions - dan, pam, 3 foster children and son. $25,100 standard deduction
What is the taxpayer's filing status for 2021? Bill is unmarried and maintains a household for his 18 year old daughter and her husband. Bill pays over half of the support of his daughter. the daughter files a joint return with her husband.
Bill must file single. to qualify as head of household, a taxpayer must be able to claim a married child as a dependent. dependecy exemption is not allowed where a married child files a joint return with the spouse. However, if the joint return were filed only to claim a refund and no tax liability with exist for either spouse on separate returns, then bill would qualify as head of household
Actress Nola Talent sued her coworker, actor Burt Dirt, for slander, citing his speech at a press interview where he labeled her a "floozy" and an "incompetent excuse for an actress". in her suit she claimed that as a consequence of this slander, she not only felt degraded but was denied further acting roles. The court awarded her $100,000 in compensatory damages for damage to her acting career and $1,000 in punitive damages for the slander of her character. how does this reflect in her income tax?
Compensatory damages for lost wages are income, therefore $100,000 is taxable income. The $1,000 award for punitive damages is also taxable income
Leah is employed at Clevland Inc. at an annual salary of $45,000. Leah received $35,000 salary in 2021 from clevland inc. a prosperous company. the credited the unpaid salary to Leas's account. Leach only had to stop by the payroll office to receive her monty. In January 2022, Leah requested and received the remaining $10,000 of her salary. how much income must Leah report on her 2021 income tax return.
Leah must include $45,000 in her 2021 gross income. she had an absolute right to the money in 2021, therefore she must recognize it as income in 2021
In January 2021, Leon McLeod received a gift of a beach cottage valued at $250,000 form his great uncle who owned a number of such buildings. The cottage was rented each year to college students who occupied it during the school year. The annual net rental income received is $20,000 per year. The 2021 tax return would include what elements of this transaction?
Leon would not include the value of the cottage, since it was a gif. Income from the cottage does belong to Leon and is taxable income to him.
Linda Sue Carr Worked for a large food brokerage firm. In January of this year she was terminated. After a court battle, Linda was reinstated in her job and received from the firm in November $7,500 in punitive damages. Must Linda include the $7,500 in punitive damages in her 2021 gross income?
Yes, Punitive damages received on account of nonphysical injury may not be excluded from gross income
Duke and pat collins have adjusted gross income of $358,000. they have itemized deductions of $20,000 consisting of $8,000 in medical expenses that exceed 10% of adjusted gross income, $3,000 in property taxes, $4,000 in housing interest and $5,000 in miscellaneous itemized deductions. What is the amount of itemized deductions.
Medical expenses $8,000 total subject to reduction: Property taxes $3,000 Housing interest $4,000 Misc. Itemized deductions $5,000 Total subject to reduction = $12,000 Total itemized deductions = $20,000 ($8,000 + $12,000)
What is the standard deduction and the number of exemptions that a married couple will be allowed, assuming that they are not over 65 or blind, that they fully support the husbands 82 year old blind mother and that they have no other dependents?
The standard deduction for married people filing jointly for 2021 is $25,100. dependents do not help qualify a taxpayer for the additional standard deduction. they qualify for 3 personal exemptions.
Robert Careless was injured while working on the production line on july 8, 2021. He received the following payments as a result of his serious injury: Workers compensation $6,000 Medical Expense reimbursement $2,000 Damages for personal injury $5,000 During 2021 Robert earned $16,000 in wages. How much of the above listed amounts must Robert include in his gross income?
Workers compensation, medical expense reimbursement and damages for personal injury received by Robert are excluded from his gross income, but the $16,000 of earned wages is not excluded
Steven Spokesman, a high school teacher in a local school district, was fired for publicly criticizing the local school district. The court ruled that Steven's freedom of speech had been violated and the school district was required to pay $24,00 in damages. Steven paid his lawyer $8,000 to defend him. Determine (1) whether Steven must included the $24,000 in gross income (2) Whether her can deduct the $8,000 in legal fees
the $24,000 Steven received is included in gross income under the tax law. Costs incurred to secure the award are not deductible
Albert Armstrong sells for $800,000 a business building, which he purchased 14 years ago for $570,000. During the 14 years of ownership, he painted the building at a cost of $7,500, installed an air conditioning system for $60,000, cleaned carpeting for $3,000, repaired the fence for $5,000, installed permanent bookcases for $40,000, replaced the electrical wiring system at cost of $150,000 and partitioned off some of the rooms at a cost of $50,000. Albert has taken straight line depreciation on the building for a total of $420,000. what is his basis in the building at time of sale? what is his realized and recognized gain of the sale of the building?
$570,000 + $60,000 + $40,000 $150,000 + $50,000 = $860,000 $860,000 - $420,000 = $450,000 Adjusted basis Selling price $800,000 - adjusted basis $450,000 gain realized and recognized = $350,000 The $7,500 painting of the building, the $3,000 carpet cleaning and the $5,000 repairs on the fence are not capitalized to the building. They are repair and maintenance expenses not included in the adjusted basis.
Red Rexx purchased a business building on January 1, 2007 for $975,000 and used the straight line depreciation over 39 years. he took $25,000 depreciation for 2007 through 2018 and none for 2019 and 2020. he sold the building on January 2, 2021. What is Rex's adjusted basis in the building on January 2, 2021?
$975,000 - depreciation allowed or allowable of $350,000 = $625,000. Rex must reduce his basis by the grater of the depreciation allowed or allowable. in this case: $25,000 Depreciation allowed or allowable for 14 years (i.e $35,000) must be deducted from $975,000
William a 42 year old bachelor, pays $450 per month support for his 75 year old mother who is disabled and is living in a rest home. she receives a taxable pension of $100 per month and uses the entire $550 per month for routine living expenses. William's mother also receives $400 per month from dividends on stock she owns. she also uses this amount for routine living expenses. calculate the number of exemptions that could be claimed and the standard deduction that the tax payer is entitled to take in 2021
1 personal exemption- William. William now does not pay over half of support for his mother and she has too much income. $12,550 standard deduction for single
Benson a 45 year old widower, maintains a home for his 22 year old son, chester, who attends college full time. Chester contributes $4,000 per yer from his savings account instead of receiving it from the schollarship award. Chaster also works part time while at school earning $1,500 per year, Benson contributes $2,000 which constitutes the balance of chester's support for the year.calculate the number of exemptions that could be claimed and the standard deduction that the tax payer is entitled to take in 2021
1 personal exemption- benson support test is not met since monty from savings counts in support determination $12,550 standard deduction. chester is not a qualifying child or qualifying relative, so benson files single.
Richard a bachelor under 65 maintains a home in which a son of a deceased friend has live the entire year. Richard furnishes over on half of the support of the young man, who attends school. the young man also works part time after school earning $2,800 per year. calculate the number of exemptions that could be claimed and the standard deduction that the tax payer is entitled to take in 2021
2 personal exemptions - Richard and son of deceased friend. if son of deceased friend had more than $4,300 in income, then he would not qualify as a dependent. $12,550 standard deduction for filing single. a non-relative cannot qualify an individual for head of household status
Benson a 45 year old widower, maintains a home for his 22 year old son, chester, who attends college full time on a $4,000 per year scholarship. Chaster also works part time while at school earning $1,500 per year, Benson contributes $2,000 which constitutes the balance of chester's support for the year. calculate the number of exemptions that could be claimed and the standard deduction that the tax payer is entitled to take in 2021
2 personal exemptions- Benson and chestet. the scholarship does not count in support test. $18,800 standard deduction- head of household
William a 42 year old bachelor, pays $450 per month support for his 75 year old mother who is disabled and is living in a rest home. she receives a taxable pension of $100 per month and uses the entire $550 per month for routine living expenses. calculate the number of exemptions that could be claimed and the standard deduction that the tax payer is entitled to take in 2021
2 personal exemptions- William and mother $18,800 standard deduction for head of household. mother does not have to live with William for William to qualify as head of household.
Harry, age 66 is a widower who maintains a home for himself and his 22 year old son who attends college full time. harry provided more than on half of his sons support. calculate the number of exemptions that could be claimed and the standard deduction that the tax payer is entitled to take in 2021
2 personal exemptions- harry and his son Standard deduction $20,500 standard deduction Basic standard deduction for head of household $18,800 plus $1,700 for being over 65
Indicate the filing status and the number of exemptions allowed to sandy for 2021, 2022, 2023, and 2024 assuming her husband died in 2021 and sandy as been the sole support of her son since that time.
2021- married filing jointly and 3 personal exemptions. Sandy is allowed a joint return in the year of death. 2022- surviving spouse with 2 personal exemptions 2023- surviving spouse with 2 personal exemptions 2024- head of household with 2 personal exemptions
Jackson is 28 and his wife, joan is 27. they have two children, one three year old and the other 7 years old. on march 29 of this year, joan gave birth to a daughter who died the next day. jackson and joan file a joint return. calculate the number of exemptions that could be claimed and the standard deduction that the tax payer is entitled to take in 2021
5 personal exemptions- Jackson, Joan, 3 year old, 7 year old and deceased daughter. deceased daughter is included as a dependent because she was alive part of the year. $25,100 standard deduction
Compute taxable income for 2021. Jim is married and files a joint return. Jim and his wife have 2 dependent children. They have an Adjusted gross income of $30,000 and itemized deductions of $24,800
Adjusted Gross Income = $30,000 less: Standard deduction = $25,100 Taxable income = $4,900 standard deduction is used because $25,100 is greater than the itemized deductions of $24,800
Compute taxable income for 2021 Jim is single with no dependents. his adjusted gross income is $50,000 with itemized deductions of $10,800.
Adjusted Gross Income = $50,000 Less: Standard deduction = $12,500 Taxable income = $37,450 standard deduction is used because $12,500 is greater than the itemized deduction of $10,800
compute Stanley's taxable income for 2021 assuming he has $1,000 in wages from working in a grocery store and $2,300 in interest income from some bonds he owns. Stanley age 16 is eligible to be claimed as a dependent on his parent's return.
Adjusted gross income = $1,000 + $2,300 = $3,300 Less standard deduction = $1,000 + $350 = $1,350 Taxable income = $1,950
Compute taxable income for 2021. Jim is a full time college student under 24 supported by his father. Jim earned $2,600 from a part time job and had $500 of interest income. His itemized deductions were $600
Adjusted gross income = $2,600 + $500 = $3,100 Less: Standard deduction (earned income plus $350= $2,600 + $350 = $2,950 Taxable income = ($3,100 - $2,950) = $150
tom and linda are married tax payers who file a joint return. They hav itemized deductions of $28,10 and 4 exemptions. assuming their adjusted gross income of $40,000, what is their taxable income for 2021?
Adjusted gross income = $40,000 Less: Itemized deduction ( greater than standard deduction of $25,100) = $28,100 Taxable income = $11,900 ($40,000 - $28,100)
what is Mary's taxable income for 2021 assuming she has $6,150 of earned income and $800 of unearned income and is eligible to be claimed as a dependent by her parents?
Adjusted gross income = $6,150 + $800 = $6,950 Less:Standard deduction = $6,150 + $350 = $6,500 Taxable income = ($6,950 - $6,500) = $450
Compute taxable income for 2021. Jim is married but files separately and claims 2 dependent children. his adjusted gross income is $65,000 and he claims $12,900 of itemized deductions. his wife also itemizes on her return.
Adjusted gross income = $65,000 Less: itemized deduction $12,900 Taxable income = $52,100
Compute taxable income for 2021. m is married but files separately and claims 2 dependent children. his adjusted gross income is $65,000 and he claims $10,900 of itemized deductions. his wife also itemizes on her return.
Adjusted gross income = $65,000 less: itemized deduction $10,900 Taxable income = $54,100 must use itemized deduction even though standard deduction ($12,550) is higher because his wife is itemizing her her return. When married filing separately, rules require both spouses to either itemize or use standard deduction. if one spouse takes itemized deductions, the other spouse is required to itemize even if itemized deductions are less than the standard deduction for married individuals filing separately ($12,550).
compute Marie's taxable income for 2021 assuming she is single and claims 2 dependent children. her adjusted gross income is $70,000 and she has an itemized deduction of $19,800.
Adjusted gross income = $70,000 Less: itemized deduction (greater than standard head of household deduction $18,800) = $19,800 Taxable income = $20,200 ($70,000 - $19,800)
On May 1, 2021, Anthony was in an automobile accident whole on his way to work. Following doctor's advice, Anthony stayed home for 6 months to recover from his injuries. While at home, Anthony filed a law suit against the other driver. on December 1, 2021, the lawsuit was settled and Anthony received the following amounts: Compensation for lost wages $30,000 Personal Injury damages (none which was for punitive damages) $50,000 How much of the settlement must Anthony include in ordinary income on his 2021 tax return?
Anthony may exclude the $30,000 for compensation for lost wages and the $50,000 he received for personal injury damages because it was not punitive damages
Martha McDonald purchased an office building in 2001 for $630,000. in 2021, she sells the building for $950,000. over the years, she had replaced the window and doors at cost of $60,000, repainted the exterior at a cost of $15,000 and installed an elevator at a cost of $90,000. Martha had taken straight line depreciation on the building for 20 years for a total of $400,000. a) what is Martha's basis in the building at the time of sale? b)What is her realized gain? c) What is her recognized gain?
Basis = $630,000 + $60,000 +$90,000 - $400,000 = $380,000 The painting of the exterior is an expenses of maintaining the building and not capitalized b & c) selling price $950,000 less: Adjusted basis $380,000 realized and recognized gain $570,000
What is the taxpayer's filing status for 2021? Bill's wife died in 2020. bill maintained a household for his two dependent children in 2021.
Bill is entitled to file as a surviving spouse, using the same tax rate schedule as married persons filing jointly. However, he is entitled to claim only 3 personal exemptions in 2021
Felix Boots, a 35 year old male, is vice president of the kitty lit pet products company and earns $50,000 per year. the company provides paid group term life insurance of twice the officer's salaries for all officers of the company. The cost of the policy to the company for Mr. Boots is $650 per year. How much of the $650 must Felix include in his gross income? if kittly lit changed its policy so as to enable all employees to be covered at twice their annual salary, what would Felix have to include in his gross income?
Felix must include all $650 in gross income because the policy discriminates. if the company were to be changed, then the calculation would be: total Coverage $100,000 Less: Tax free maximum $50,000 Insurance subject to tax $50,000 Cost per thousand ($.09 * 12) = $1.08 Taxable income ($50 * $1.08) = $54
Eric is single and has no dependents for 2021. he earned $60,000 an had deductions from gross income of $1,800 and itemized deductions of $12,750. Compute eric's income tax for the year using the tax rate schedule
Gross income $60,000 less: deductions for adjusted gross income $1,900 Adjusted gross income $58,200 Less: itemized deductions $12,750 Taxable income $45,450 Tax from tax schedule $5,748
Hi Tech Accounting services changed its fringe benefit packages as of the first of this year. Employees are now eligible to receive group term life insurance equal to twice their annual salary, up to $100,000. Harry's salary is $90,000 per year. Prior to this year employees received group term life insurance up to $50,000. Harry is 52 years of age and has adjusted gross income of $78,000. Does harry suffer any tax consequences of this change in policy?
Harry must include in gross income the cost of the premium for the amount of insurance over $50,000 ($100,000 - $50,000). For an individual 50-54 years of age, the premium is assumed to be $2.76 per thousand per year. Harry must include in income $138 ($2.76 * 50)
The Hightown council refused to increase the town budget. Robert Read was laid off from work on August 4, 2021. Earlier in the year he had been temporarily disabled from a job related injury and had received disability benefits. At year end Robert Read and his wife have the following sources of income: Disability income $2,500 unemployment compensation $5,000 Salary Jan 1 - Aug 4 $10,000 Wife's salary $9,000 Supplemental unemployment compensation employer provided $3,000 What amount of Read's family income was includible in gross income?
Includible in gross income: Unemployment compensation $5,000 Robert's Salary $10,000 Wife's Salary $9,000 Supplemental unemployment compensation $3,000 Total Gross income $27,000 Disability income is excluded from gross income if the injury was job related
In January 2022, Judd Harrison decides to sell 100 shares in the Widget Company. He owns 200 shares for which he paid $1,600 in 1999. The BOD of the company decided to pay a 10% stock dividend in April 2021 for which Judd received 20 shares of stock. Since April 2021, no stick dividends had been paid by the company. On the date, the stock was sold the market price is $12 a share. what is the basis per share that Judd must sue when computing any gains or losses.
Judd owns 220 shares at a cost to him of $1,600 or $7.27 per share. His gain is $4.73 per share. ($12 - $7.27)
Margaret is attending school full time for the year. her parents paid $6,000 toward her support. she earned $5,000 from a part time job which she used toward her support. in addition, Margaret withdrew $1,500 from her savings account to help in her support. have her parents provided over one half of Margaret's support?
No. Support is determined based on amounts spent. Since Margaret spent $6,500 ($5,000 + $1,500) and her parents contributed only $6,000 towards Margaret's support, the parents did not pay over one half of Margaret's support
Cal Corey and his wife are living in Las Vegas, Nevada, and own an apartment house from which they receive $20,000 a year in net rental income. Cal's wife also owns an apartment house, which she purchased as an investment while she was working before their recent marriage. the net rental income from this building is $15,000 a year. if the Coreys file separate returns what would each file for rental income on their tax returns?
On separate returns the income from the property purchased after marriage is considered owned by them in common. The property the wife owned before the marriage is not community property in Nevada, therefore the wife has $25,000 of rental income to report and the husband must report $10,000
In 2021, Ollie and his wife have several endowment life insurance policies. on the first, which begins payment in 2022, but was fully paid by 2010, a dividend of $200 is declared and paid. On the second, which began payment in 2020, a $500 dividend is paid. on the third, which has 2 more years before it is paid up, a dividend of $100 is paid. how much of dividends received, if anything, is to be excluded from gross income? in non of the cases cited above has the taxpayer received dividends in excess of premiums paid.
Only on the second policy is the dividend taxable. Because the policy already had begun to pay benefits, any distributions are taxable. On the first policy, payments do not begin until 2022, so the dividend is not taxable. The third policy is not paid up, so the dividend is not taxable
Frank Fleming recently purchased some new equipment that he plans to use in his business. he paid $43,000 for the equipment. He also paid $2,500 in delivery and installation costs, $1,600 in legal fees, and $3,800 in sales taxes. What is franks basis in this equipment?
Price of equipment + delivery and installation costs + legal fees + sales tax $43,000 + $2,500 + $1,600 + $3,800 = $50,900
David and Renee Kimberly, ages 75 and 65, respectively, have the following sources of income: Private pension receipts $20,000 Social Security $12,000 Interest on bank deposits $2,500 dividends from domestic corporations $2,000 interest on tax exempt securities $700 Their itemized deductions total $11,000 Compute their taxable income
Private Pensions $20,000 1/2 social security $6,000 interest on bank deposits $2,500 dividends $2,000 interest (nontaxable) $700 modified adjusted gross income plus 1/2 social security benefits $31,200 since the $31,200 is less than the $32,00 amount allowed married couples filing a joint return, none of the social security benefits are taxable Taxable income: Private pensions $20,000 Interest on bank deposits $2,500 Dividends $2,000 total $24,500 Less: Standard deduction ($25,100 + $2,700) $27,800 taxable income = 0
Charles Adams, Who is single, retired on March 3, 2021, at the age of 65. For the year 2021 he received the following income: Salary $14,000 Interest income $2,000 Dividend income $1,000 Tax Exempt income $1,000 Social Security Benefits $5,000 Net rental income $6,000 What is Charles' modified AGI? What amount, if any, of his social security benefits must Charles include in his 2021 gross income? What is Charles' Taxable income for 2021?
Salary $14,000 + Interest income$2,000 + dividend income $1,000 + Tax Exempt income $1,000 + 1/2 social security benefits $2,500 + Net rental income 46,000 Provisional income $26,500 Excludable amount $25,000 excess $1,500 50% of excess $750 the maximum amount that Charles Adams must include in his gross income is the lesser of 50% of the excess ($750) or 50% of the social security benefits ($2,500) Adjusted income without social Security and tax exempt income $23,000 plus Social Secutiy $750 Adjusted gross income $23,750 less standard deduction ($12,550 + $1,700) $14,250 taxable income $9,500
A married taxpayer, age 57, has the following receipts: salary $50,000 dividends from stock of domestic corporation $1,455 interest on state toll road bonds $750 Gambling winnings $110 Rents $5,600 during the tax year, the taxpayer pays $2,200 in taxes for his rental property and $2,650 for its operation and maintenance. he had gambling losses of $65. he made no charitable contributions. Calculate the taxpayer's gross income, adjusted gross income and taxable income.
Salary $50,000 dividend income $1,455 Gambling income $110 Rental income $5,600 Total Gross income = $57,165 Interest on the toll road bonds, a state obligation, is exempt. altough taxes and operational expenses on the rental property are deductible in determining adjusted gross income and the gambling losses are deductible in figuring taxable income only as itemized deductions, the gross rental and gamblling receipts are included in gross income. Gross income $57,165 less: taxes on rental property $2,200 less: rental property operating and maintenance expenses $2,650 Adjusted gross income $52,315 less: standard deduction $25,100 Taxable income $27,215
Robert Reed, a bachelor, maintains his parents in a nursing home. they have no income of their own and are completely dependent on their son. His parents are 75 and 72 years of age. Robert has the following sources of income: Salary $70,000 Interest on Municipal Bonds $750 Interest on Bank accounts $800 Dividends on common stock of U.S corporation $500 Robert has itemized deductions of $19,000. Robert owns several apartment buildings. his net rental income was $3,00 for the year. Then, on December 31, one of his best tenants brought in a check for $500. this money covers the months of December and January. Robert is confused on how to account for this rental income. It is not included in the $3,000 listed above. Compute Robert's Taxable income.
Salary $70,000 Interest on bank accounts $800 Dividends $500 Rental income $3,000 Rental income (december and january) $500 Gross income= $74,800 less: Itemized deductions $19,000 Taxable income = $55,800 Interest on municipal bonds in not taxable. Rental income collected in December for both December and January is taxable when received. Reed is allowed a nonrefundable tax credit of $500 per qualifying dependent other than a child.
Fred Miller, a teacher, had several additional sources of income during 2021. He received $500 gift as a result of his helping a friend build a house, and was assigned $300 of interest due his uncle on bonds his uncle owns. He also had the use of a van (value of $1,000) for the year from his parents who were traveling. Further, he received free $600 of gasoline for the van because he tutored the son of the station owner free of charge. what of the additional income must be included in his income tax return?
Services rendered in building house $500 and gasoline for van in return for tutoring services $600 need to be included as additional sources of income on his income tax return. The $300 from his uncle is a gift along with the use of the van.
What filing status options are available to darlene, assuming she separated from her husband in march? darlene is the sole support of her daughter, who lives with darlene.
Since darlene is sill legally married, she may file a joint return with her husband. she also qualifies as a married individual filing separately. it is unlikes she would choose the latter status ash she qualifies as an abandoned spouse, which allows her to be classified as unmarried. as an unmarried taxpayer, she is eligible for single status or head of household status. In that case, Darlene's best filing status would be head of household as she is the sole support of her daughter.
Mike and ellen evans decide to part in April. Mike moves into an apartment 2 blocks away. the children spend each weekend with mike. what filing statuses are available to mike and ellen assuming they are not divorced before the end of the year?
Since mike and ellen are not divorced they are still eligible to file as married filing jointly. A second alternative would be for ellen to file as head of household since she has custody of the children and qualifies as an abandoned spouse, while mike would have to file as married filing separately. of course they could each file as married filing separately, but that is less favorable than ellen filing as head of household.
Roger Corby, a student, was employed 7 nights a week at the campus inn as a desk clerk. He was required to be on duty from 11pm to 6am and on call at various other hours, although he was rarely called after 12am. his employer also required that he live on the premises and furnished him with a room free of charge, adjacent to the desk. Roger used this room as his permanent living quarters. Roger also ate all of his meals free in the inn dining room. Roger excluded the value of all benefits from his tax return. what was the response of the IRS
The value of the lodging does not have to be included in Roger's gross income because the lodging furnished is for the convenience of the employer. the value of the meals when not on duty, however must be included because the employee is not required to have his meals on the premises. The meals while on duty are excludable
Allen has a taxable income of $75,475 for 2021. using the tax rate schedules in the appendix, compute allen's income tax liability before tax credits and prepayments for each of the following filing statuses. a) married filing jointly b) married filing separately c) single d) head of household
a) $1,990 + (12% * $55,575) = $8,659.00 b) $4,664 + (12% * $34,950) = $12,353 c) $4,664 + (12% * $34,950) = $12,353 d) $6,220 + (12% * $21,275) = $10,950
Maria Manna gives Peggy property worth $15,000. Maria's Basis in the property is $10,000. a) if Peggy sells the property for $17,000 what is her gain or loss on the sale? b) If Peggy sells the property for $5,500 what is her gain or loss? c)if the fair market value of the date of the gift is $7,500 and Peggy sells the property for $5,500 what is the gain or loss? d)if the fair market value is $7,500 and Peggy sells the property for $8,000 what is the gain or loss?
a) $17,000 - $10,000 = $7,000 gain b) $5,500 - $10,000 = $4,500 loss c) $5,500 - $7,500 = $2,000 loss d) no gain or loss because using the gain basis, one gets a $2,000 loss ($8,000 - $10,000) and using the loss basis one gets a $500 gain ($8,000 - $7,500)
In Febuary 2021, Judy Judd gave her son Steven a Mercedes for his graduation gift. the automobile had a basis of $55,000 to Judy but was worth $85,000 at the time of the gift. Judy paid $21,000 gift taxes on the gift. the taxable gift is $70,000 after the $15,00 exclusion. Assume that Steven used the car for business purposes. a) What is Steven's gain or loss if the automobile is sold in April 2021 for $86,000 b) What is the gain or loss recognied if the car was sold for $56,000? c) What is the gain or loss recognized if the fair market value at the time of the gift had been $45,000 indtead of $85,000 and Steven sold the cara for $86,000? d) What is the answer to (c) if the selling price is $44,000 e) what is the answer to (c) if the selling price is $47,000?
a) $86,000 - $64,000 = $22,000 gain for Steven. The adjustment in the basis for gift taxes paid is $9,000 = [($85,000 - $55,000) / $70,000 ] * 21,000 = $9,000 The $9,000 is added to the $55,000 to give $64,000 for the basis b) $56,000 - $64,000 = $8,000 loss c) $86,000 - $55,000 basis = $31,000 gain. The adjustment for the gift tax is not made here since there was no appreciation. d) $44,000 - $45,000 basis = $1,000 loss. the basis if the lesser of the basis in the hands of the donor or the fair market value at the time of the gift e) There is no gain or loss because the selling price of $47,000 is between the basis for gain of $55,000 and the basis for loss of $45,000
which of the following individuals are required to file a tax return for 2021? a) Rebecca, single and with no dependents, earned $12,950 for the year b)huge and jane are married and file a joint return. they have 4 children. their gross income is $30,000 and they have itemized deductions of $25,000. c)Peter has self employment income of $450. he is a full time college student and is claimed as a dependent on his parents return
a) A return is required. rebecca's income is greater than the standard deduction amount b) A return is required. Gross income is greater than $25,100 c) A return is required. Earnings from self employment exceed $400 ($450 *.9235 = $415.58)
Which is the best filing status in each of the following situations? a) Phillip and Catherine were married on Dec 31, 2021 b) John and Sandra were married in 2019. John left Sandra in March 2021 and she has not heard from him since that time. c)Melody and Werner were married during the year. Werner is a resident and citizen of Germany.
a) Married filing jointly- marital status is determined as of the last day of the year b) Married filing separately. to qualify as unmarried under the abandoned spouse rules, there must be a dependent child c) Married filing jointly. A special election can be made to treat the nonresident spouse as a U.S citizen, otherwise the taxpayer will file married filing separately
In 2021, Paula Pierce receives gift property with a fair market value of $95,000 (adjusted basis to the donor of $35,000). Assume the donor purchased the property in 2011 and paid gift tax of $12,000 on the transfer. a) what is Paula's basis for gain or loss? b) What is the holding period?
a) Paulas basis is $44,000. with the $15 gift tax exclusion, the taxable gift is $80,000. the appreciation is $95,000 - 35,000 = $60,000. the appreciation $60,000 / divided by the taxable gift of $80,000 give 75%. That percentage multipled by the gift tax of $12,000 gives us $9,000 which is added to $35,000 to give a basis for gain and loss purposes of $44,000 b) The holding period begins in 2011, when the donor acquired the gift.
Which of the following taxpayers should itemize? explain a) Robert is a single taxpayer. he has an itemized deduction of $12,750 b) Jane qualifies as head of household. her itemized deductions total $18,000 c)Brian is married and files separate return. he has itemized deductions of $12,750 d) lisa is a surviving spouse. her itemized deductions are $24,800
a) Robert should itemize. His itemized deductions ($12,750) are greater than his standard deduction ($12,550) b) Jane should not itemize. her standard deduction as head of household ($18,800) is greater than her itemized deductions ($18,000) c) Brian should itemize. His itemized deductions ($12,750) are greater than the standard deduction of married individuals filing separately ($12,550) d) Lisa should not itemize. a surviving spouses standard deduction ($25,100) is greater than her itemized deductions ($24,800)
has jodi provided more than 50 percent of the support in the following situations? a) jodi contributed $4,200 to her mother's support during the year. her mother received $5,300 in medicare payments that were used to pay her medical expenses. b)jodi's daughter was a full-time student. joid paid $5,000 towards her daughters living expenses. the daughter earned $4,800 from a part time job and spent that plus $600 form her savings to help support herself.
a) jodi has provided more than 50% of her mothers support. Basic medicare payments do not figure into the computation of support b) jodi has not provided over half of her daughters support. the daughter provided $5,400 of her own support
For each independent situation, determine the amount, if any that is includible in the gross income of the employee. a) The employee of a motel has the choice of free lodging on the premises (FMV of $400 per week) or extra cash compensation. he is not required to live on premises. he chooses the lodging. b) An employee arranges to have his annual bonus, $1,000 paid directly to his son. His objective is to make a wedding gift to the son. c) An employee earns a salary of $500 per week. pursuant to a court order, $100 of his salary goes to his ex wife for child support.
a) the $400 fair market value is includible in the gross income of the employee b) The entire bonus is income to the employee, not his son. c) The entire $500 salary is gross income to the employee.
In 2021, Windsor Knott, an employee of the victorian tie company, was seriously injured in the factory stockroom. He was hospitalized for 30 days and lost partial use of his left hand. During his hospitalization an recovery period her received the following: Workers' compensation $9,000 Medical expenses reimbursement $10,000 Disability insurance benefits (insurance paid by taxpayer) $4,000 accident and health insurance benefits (company policy benefits based on the degree of permanent injury) $9,500 Determine Knott's tax liability with regard to these payments. If the medical expenses had been deducted from Knott's 2021 tax return and reimbursement was received in 2022, how would the reimbursement be reflected in the 2022 return?
all mentioned insurance proceeds are excludable from Windsor's gross income. if medical expenses were deducted on his 2021 tax return, then at the time he received the reimbursement in 2022, he would have to recognize income to the extent that at tax benefit resulted from the deduction of the item in earlier year.
