Mirza_Assignment 2 - 1 Ayesha Afzal Mirza Federal Income...

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Ayesha Afzal Mirza Federal Income Taxation FALB09 - Sec A Instructor: Joseph Poletti Assignment 2 1
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Chapter 5 2. Only c, the price paid for drugs purchased for resale. 5. Payments to Lexington Law firm to lobby members of the Lexington City Council. 7. a. Although Jake receives interest payments of $4,000, this entire amount is excluded from his gross income. Interest on municipal bonds is tax- exempt. b. None of Jake’s interest payments of $4,100 on the loan can be deducted. The proceeds of the loan were used to purchase tax-exempt bonds. Consequently, the interest expense deduction is prohibited. Similarly, none of the principal payments of $1,000 can be deducted. 8. a. Drew and Cassie are trying to use the salaries to reduce the taxable income of Thrush to zero i.e. $800,000 – $400,000 – $300,000 – $100,000. By so doing, they can avoid the potential for double taxation. b. $100,000 / 4 = $25,000 reported gross income per child. 12. a. 0% charitable contributions limitation does not include the dividends received deduction or domestic production activities deduction.
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