TAX4001 - Answers Chapter 4

TAX4001 - Answers Chapter 4 - H omework Answers Chapter 4...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Homework Answers Chapter 4 30. a. The $1,500 is a dividend from the corporation to Amos. The corporation was entitled to the rebate. The rebate was a reduction in the cost of the corporation’s automobile. The assignment of the $1,500 to Amos was an economic benefit realized solely because he was the controlling shareholder and thus is a dividend to him. b. The $50,000 payment received under the covenant is included in Amos’s gross income because the payment is an increase in wealth realized. c. The neighbor’s actions that increased the value of Amos’s property by $1,500 do not result in the realization of income by him. Amos’s wealth has increased, but the realization requirement is not satisfied, since he did not receive any additional property nor were any improvements made to his property. Amos will not realize this increase in wealth for tax purposes until he sells the property. pp. 4-8 and 4-9 31. a. Gross income using cash method: Cash collections from customers $150,000 Under the cash method, income is recognized when cash or its equivalent is actually or constructively received, regardless of when it was actually earned. Neither gross income nor taxable income is affected by the uncollectible accounts. Income was not recognized when the income was earned. The deposit is not Al’s money. Rather, Al is the agent holding the money on behalf of the client. b. Gross income using accrual method: Cash collections $150,000 Less: Beginning accounts receivable (25,000) Plus: Ending accounts receivable 60,000 $185,000 c. Al should use the cash method so that he will not have to pay income taxes on uncollected accounts receivable. pp. 4-8 to 4-10
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
35. a. The check is a cash equivalent and therefore the $800 must be included in the taxpayer’s 2009 gross income when it was actually received. b. The fact that the bank was closed is not relevant. The check is a cash equivalent and therefore the $800 must be included in 2009 gross income. c. The check is not a cash equivalent because of the restrictive conditions placed upon it. Therefore, a cash basis taxpayer does not include the $800 in gross income until 2010. p. 4-9
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 03/17/2010 for the course TAX 4001 taught by Professor Gonzalez during the Spring '10 term at Florida Memorial.

Page1 / 7

TAX4001 - Answers Chapter 4 - H omework Answers Chapter 4...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online