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Homework Week 2

# Homework Week 2 - Week#2 HomeworkSolutions Problem425 Billy...

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Week #2 Homework Solutions

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Problem 4-25 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 (The security deposit is not considered income because it is refundable.)
Problem 4-32 Property transferred pursuant to a divorce decree does not give rise to income for tax purposes. Therefore: (a) does not generate income (b) is not treated as alimony, because the house payments do not end on death (c) generates a tax deduction of \$1,500 per month for Arnold and income to Barbara of \$1,500 per month. The child support portion of the payment is not tax deductible nor is it included in the gross income of the recipient.

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Problem 4-38 Salary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \$45,000 Interest on bank accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800 Dividends . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500 Rental income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000 Rental income (December and January) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500 Gross income . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \$49,800 Less: Itemized deductions . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,000) \$37,800 Less: Exemptions (3 × \$3,650) . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . (10,950) Taxable income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \$26,850 Note: Interest on municipal bonds is not taxable. Rental income collected in December for both Dec. and Jan. is taxable when received. Reed is allowed an exemption for each parent and himself.
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Homework Week 2 - Week#2 HomeworkSolutions Problem425 Billy...

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