Homework Chapter 20

Homework Chapter 20 - though presented to the spouse...

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Homework Chapter 2 Problem 1: Yes, because the Cesarini’s have not clearly realized any accession to wealth. The piano may be worth more than they thought, but until they have an event which triggers recognition (i.e. selling the piano), there is no gross income. An analogy would be to think of an investment in the stock market – if it goes up, you do not pay tax on it until you sell and turn it into cash.
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Real Life Example Given the result in the previous problem, do you think the IRS would be successful in asserting the “Sudden Receipt of Income” theory published in several major newspapers?
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Homework Chapter 2 Problem 3: Clearly, the $40,000 salary will be includible in gross income. The stock payment also represents gross income to the tune of $20,000 of compensation in property. The car should also be considered gross income even
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Unformatted text preview: though presented to the spouse indirect compensation/accession to wealth of an additional $15,000. What if the stock was not to be given to the employee until he completed his two additional years of service? In this case, the stock value would NOT be included in taxable income until the end of the second year when he was presented with the share certificates. It would also be valued at the date the shares are turned over, so if the company goes up in value, so doe the compensation. Homework Chapter 2 Problem 4a: The kickbacks are considered compensation includbile in gross income. Problem 4b: Even though against local law, the income tax code does not discriminate between income obtained legally and that obtained illegally, thus the kickbacks are still required to be included in gross income....
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Homework Chapter 20 - though presented to the spouse...

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