Chapter Five Additional Practice Problems

Chapter Five Additional Practice Problems - Chapter Five...

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Chapter Five Additional Practice Problems 1) Suppose a contractor does small repairs for a copy shop in exchange for printed flyers for his business. Do these business owners recognize income? 2) Mark, a single taxpayer, owns a car worth $4,000, a small plot of land worth $1,500, and has $2,800 cash in his bank account. Mark is almost finished paying off his student loans, but still owes $5,000. He also still has a $2,000 loan on his car and owes Boone County Hospital $3,400 for medical expenses incurred in a bicycle accident. He receives a notice from the collection office at Boone County Hospital stating that $3,000 of his expenses are forgiven; he is no longer responsible for paying those expenses. How much, if any, of the discharge of indebtedness must Mark include in his gross income? 3) Patricia s parents loan her $150,000 to purchase a home. Patricia has agreed to pay back the full amount of the loan, plus interest at a rate of 3.5%. Assuming the federal interest rate is 6%, how is this transaction treated for Patricia’s income tax purposes?
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  • Spring '15
  • Debt, Sally, Boone County Hospital

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