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Chapter 4 Homework Solutions

# Chapter 4 Homework Solutions - Constructive Receipt 21 Leah...

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Constructive Receipt 21. Leah must include \$45,000 in her 2008 gross income. She had an absolute right to the money In 2008; therefore, she must recognize it as income in 2008. Gifts and Barter 23. Fred Miller has the following additional sources of income: (1) Services rendered in building house.. . . . . . . .. . . . . . . . . . . . . . . . . \$ 500 (2) Gasoline for van in return for tutorial services . . . . . . . . . . . . . . . . . . . 600 Total additional income includible in gross income . . .. . . . . . . . . . . . . \$1,100 The \$300 from his uncle is a gift as is the use of the van. Prizes and Awards 24. The \$3,000 scholarship is excluded. The \$6,000 per year for being a teaching assistant is Taxable income. Further, the cash and car are taxable. The scholarship is also taxable because she was not required to demonstrate academic achievement to receive the scholarship. What is being referred to here is an award or prize, not a scholarship. The \$2,000 travel expense money is income (she will offset her expenses later). Rent and Security Deposits 25. Cash Filer: Billy Dent has the following rental income: (1) Rent received in January 2008, but due in December 2007 . . . . . . .. . . . \$5,000 (2) Rent received in December 2008, not due until January 2009 . . . .. . . . . . 4,000 Total rental income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . \$9,000 Accrual filer: (1) Taxable income in 2008 (2) Taxable income in 2008 The security deposit is not considered income because it is refundable. Stock Dividends 27. No. None of the rules listed in ¶4401 have been violated.

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Stock Sales Gain Computation 28. Mr. Harrison owns 220 shares of Widget Company stock at a cost to him of \$1,600, or \$7.27 per share. His gain, therefore, is \$4.73 (\$12 - \$7.27) per share. X 100 \$473 Long term capital gain Forgiveness of Debt 30. None. This is a gift from his father. Leasehold Improvements 31. Rental income includes all rent received; therefore, the \$18,000 yearly rent plus the prepaid rent of \$3,000 equals a total rental income of \$21,000. The lessee's remodeling cost of \$4,500 is not considered rental income and is not taxable to Mr. Grant since it was not in lieu of rent, Any increase in value of the property due to the remodeling would be recognized as capital gain upon sale of the property.       Divorce Payments 32. Under tax law, property transferred pursuant to a divorce decree does not give rise to        income. Therefore, item (a) does not generate income. Item (b) is not treated as alimony.
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Chapter 4 Homework Solutions - Constructive Receipt 21 Leah...

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