Exam 19: Gross Income: Inclusions

Under the terms of their divorce agreement,Humphrey transferred Corporation H stock to his former wife,Greta,as a property settlement.At the time of the transfer,the stock had a basis to Humphrey of $40,000 and a fair market value of $55,000.What is the tax consequence of this transaction to Humphrey,and what is Greta's basis in the Corporation H stock?

Speak Corporation,a calendar-year,accrual-basis taxpayer,sell packages of foreign langauge lessons to individuals planning to work overseas.In December 2017,it sold and received payment for $600,000 of 24-month lesson packages to be provided evenly through 2018 and 2019.Speak Corporation will recognize the $600,000 of income

Distributions in excess of a corporation's current and accumulated earnings and profits are treated as a nontaxable recovery of capital unless they exceed the basis of the stock.

In common law states,all income is split evenly between the two spouses.

In order to be treated as alimony for tax purposes,payments must be made in cash.

Which of the following statements is false?

In community property states,income is generally taxed to the spouse who earned it.

On January 1,1997,Erika Greene purchased a single premium annuity for $15,000 that will pay her $5,000 every year for life beginning on January 1,2017.Based on actuarial tables published by the IRS,her life expectancy multiple is 10. a.What is the amount to be excluded in Erika's income for 2017? b.What is the amount to be excluded in Erika's income for the year 2027?

Lori had the following income and losses during the current year: What is Lori's adjusted gross income?

Under the terms of their divorce agreement executed in August of this year,Clint transferred Beta,Inc.stock to his former wife,Rosa,as a property settlement.At the time of the transfer,the stock had a basis to Clint of $55,000 and a fair market value of $68,000.Rosa subsequently sold the stock for $75,000.What is the tax consequence of first the stock transfer and then the stock sale to Rosa?

As a result of a divorce,Matthew pays Jasmine alimony of $75,000 in year one and $25,000 per year in subsequent years.How much is deductible by Matthew in year one?

For federal income tax purposes,income is allocated between a husband and wife depending on the state of residence.

Ellen is a single taxpayer with qualified dividend income of $5,000,and itemized deductions of $13,000. Required: Determine Ellen's taxable income and tax liability in 2017,assuming the following salaries a.$40,000. b.$100,000.

Qualified dividends received by individuals are taxed at the same rate as ordinary income.

David,age 62,retires and receives $1,000 per month annuity from his employer's qualified pension plan.David made $65,000 of after-tax contributions to the plan prior to his retirement.Under the simplified method,David's number of anticipated payments is 260.What is the amount includible in income in the first year of withdrawals assuming 12 monthly payments?

Gains realized from property transactions are included in gross income unless a nonrecognition rule applies.

The cash receipts and disbursements method of accounting is used by most individual taxpayers and most noncorporate businesses that do not have inventories.

Jonathon,age 50 and in good health,withdrew $6,000 from his pension plan during the current year.The withdrawal was not eligible for any exception to the 10% penalty.Jonathon had made $40,000 of after-tax contributions to the plan while his employer had contributed $80,000.In addition to relevant income taxes,how much penalty must Jonathon pay?

Mike won $700 in a football pool.This amount is not taxable.

Ellen,a CPA,prepares a tax return for Frank,a plumber,in exchange for installing a new sink.Since no cash changed hands,neither taxpayer is required to report any income.