Exam 2: Income Tax Concepts

Match each term with the correct statement below. -Entity Concept

Kiki fell asleep one night while driving home from work and severely damaged her car. Repairs to the car cost $4,600. Her insurance company reimbursed her for $4,100 of the repairs. Has Kiki realized a loss? Under what conditions can she deduct the loss?

Withholding of taxes from the taxpayers wages and quarterly estimated tax payments are a result of the

Dreamland Corporation purchased 10,000 shares of Sleepytime, Inc. common stock for $200,000 on February 19, 2017. On December 31, 2017, the value of the Sleepytime stock declines to $180,000. Dreamland sells the Sleepytime stock for $170,000 on January 10, 2018. Dreamland does not recognize a loss on the stock in 2017, but does recognize a loss of $30,000 in 2018. Which of the following Concepts, Constructs, and/or Doctrines form the basis for this treatment? I.Realization Concept. II.Related Party Provisions. III.Capital Recovery Concept. IV.Tax Benefit Rule. ​

Television station Channel 2 receives $200,000 from Harry's Auto Parts, Inc., to air Harry's commercials during a local automotive repair talk show in December 2018. December's ratings drop sharply when the show's star quits to work as a mechanic with a NASCAR team. Shortly thereafter, Harry contacts Channel 2 indicating that he wants to discontinue his sponsorship and requests return of $125,000 of the payment. The station continues to air the commercials and keeps the $200,000. Harry initiates a legal suit to recover the $125,000. Why is the $200,000 included in Channel 2's 2018 gross income? I.All-inclusive Income Concept. II.Capital Recovery Concept. III.Wherewithal-To-Pay Concept. IV.Claim of Right Doctrine. V.Constructive Receipt Doctrine. ​

Match each term with the correct statement below. -Taxable entity

The Claim-of-Right Doctrine I.explains why Carla does not report $10,000 of income on her tax return when she borrows $10,000 from the First Savings Bank. II.differs from the constructive receipt doctrine in that constructive receipt applies where an amount has been received, and the tax question is whether the amount is taxable in the current year. III.explains why Samuel reports $45 of interest credited to his savings account on December 31, 2018, on his 2017 tax return, even though he does not actually receive the cash in 2018. IV.applies when a taxpayer has no definitive obligation to repay the amount received. ​

Isabel is a self-employed electrician. All cash payments she receives from customers are deposited into a bank account held in the name of her son. Isabel does not have use of the funds. Therefore, she does not think she needs to include the cash receipts in her gross income. What concept or doctrine applies to this situation?

Mario is an employee of Flores Company. The company regularly pays its employees by direct deposit on or before the last day of each month. Mario's regular paycheck is deposited on December 31, 2018, but Mario was away on vacation and didn't return until January 15, 2019. The gross amount of the check is included in Mario's 2018 income. Which of the following concepts or doctrines best explains this treatment?

Riley owns some land, which has an oil deposit underneath it. His annual royalties are usually around $100,000. Because Riley is in the highest marginal tax rate bracket, he would like to have some (or all) of the royalty income taxed to his son, Mark, thus lowering the overall tax on the royalty income. To do this I.Riley can gift part of the land to Mark. II.Riley can gift all of the land to Mark. ​

Will is a partner in Oil Exploration Limited Partnership. For the current year, the partnership reports net income of $130,000. Will's share of the income is $1,300. Will reports that amount in his gross income. The partnership pays no income tax on its earnings. What concept, construct, or doctrine applies here?