Exam 19: Gross Income: Inclusions

Speak Corporation,a calendar-year,cash-basis taxpayer,sells packages of foreign language 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

Under both the accounting and tax law concepts of income,income must be "realized."

Under the economist's definition,unrealized gains,as well as gifts and inheritances,are income.

In addition to Social Security benefits of $8,000,Mr.and Mrs.Wells have adjusted gross income of $32,000 and tax-exempt interest of $1,000.They will file a joint return.The taxable portion of their Social Security benefits will be

Edward is considering returning to work part-time to supplement his pension and Social Security benefits.His current marginal tax rate is 15%.What should he consider from a tax perspective before returning to work?

Ms.Marple's books and records for 2017 reflect the following information: What is the amount Ms.Marple should include in her gross income in 2017?

Chance Corporation began operating a new retail business in the current year and had $500,000 of sales,$70,000 of which had not been collected by year-end.Total purchases were $350,000 on which $30,000 is still owed.Ending inventory is $60,000; operating expenses are $170,000,$50,000 of which is still owed at year-end. a.Compute net income from the business under the accrual method. b.Compute net income from the business under the cash method. c.Would paying the $50,000 she owes for operating expenses before year-end change her net income under the accrual method? Under the cash method?

Social Security benefits are excluded from taxation for all taxpayers.

Marcia and Dave are separated and negotiating a divorce agreement.They live in a common law state and have two children who will remain with Marcia.Dave is willing to transfer the jointly owned home to Marcia.He wishes to keep the couple's jointly owned boat.Dave will either transfer securities to Marcia ($100,000 adjusted basis,$150,000 fair market value)or will pay her $30,000 for 5 years with interest of 8%.What issues should Marcia and Dave consider when formulating their divorce agreement?

Hoyt rented office space two years ago to Harris,receiving the first and last months' rent plus a security deposit of $1,000.In early January of this year,Harris moves and Hoyt refunds $250 of the deposit and keeps the remainder to cover $500 which is spent for repairs to the office space and one week of unpaid rent that amounts to $250.How would this information be reflected on Hoyt's tax return this year?

The wherewithal-to-pay concept provides that a tax should be collected when the taxpayer has the financial resources to pay the tax.

Under the tax concept of income,all realized income is recognized and subject to tax.

Sheryl is a single taxpayer with a taxable pension of $200,000,taxable interest and dividends of $600,000,capital gains of $400,000 and Social Security benefits of $30,000.What is the amount of her taxable Social Security benefits?

Rocky owns The Palms Apartments.During the year,Molly Ann,a tenant,moved to another state.Molly Ann paid Rocky $1,500 to cancel the two-year lease she had signed.Rocky then rented the apartment to Elvis who paid the first and last months' rents of $500 each and a security deposit of $800.Rocky also owns a building used as a dance club.The owner of the club requested that Rocky add on another room to be used for private parties.Rocky refused but allowed the club owner to make the addition at a cost of $20,000.What amount should be included in Rocky's income with regard to these items?

As a result of a divorce,Michael pays Judy $75,000 in year one and $25,000 per year in subsequent years.How much of the $75,000 in year one is properly characterized as alimony and will not be recaptured later?

Earnings of a minor child are taxed to the child regardless of the state's property law system.

Eva and Lisa each retired this year and started receiving distributions from their respective retirement plans.Eva's plan was funded with all pre-tax contributions,whereas Lisa's plan was funded with only after-tax contributions (Roth plan).With respect to the tax treatment of their retirement plan distributions,

Which of the following constitutes constructive receipt in 2017? a.A check received on December 29,2017.The check was postdated January 5,2018. b.A check received on January 4,2018.It had been mailed on December 29,2017. c.A rent check,received on December 31,2017,by the manager of an apartment complex.The manager normally collects rent for the owner who is out of town. d.A salary check received at 5:30 p.m.on December 31,2017,after all banks are closed. e.A paycheck received on December 26,2017.The check was not honored by the bank because the employer's account did not have sufficient funds.

CT Computer Corporation,an accrual-basis taxpayer,sells service contracts on the computers it sells.At the beginning of January of this year,CT Corporation sold contracts with service to begin immediately: The amount of income CT Corporation must report for this year is

Amy's employer provides her with several fringe benefits.Which of the following are included in her taxable income?