chpt 4 HW solutions

chpt 4 HW solutions - Individual Tax Accounting 2011...

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Individual Tax Accounting – 2011 edition Chapter 4 Homework Solutions 14. Tom must include in his gross income his share of the partnership’s income, regardless of whether the profits are actually distributed. Therefore, Tom must recognize as gross income from the partnership $120,000 ($300,000 × 40%) in 2010 and $320,000 ($800,000 × 40%) in 2011. pp. 4-18 and 4-19 23. Betty’s tax return for 2010 will reflect a loss on the annuity contract in 2010 because she collected on the policy for only 12 years when she was expected to collect for 20 years. The deductible loss is computed as follows: Cost of the policy $72,000 Annual payment $ 6,000 Expected number of payments (Table 4.1) × 20 Total expected return $120,000 Cost/Expected return ($72,000/$120,000) = Exclusion ratio percentage 60% Total payments received (12 × $6,000) $ 72,000 Basis recovery (Exclusion ratio × 12 payments received) (43,200) Unrecovered cost = loss allowed $28,800 pp. 4-28 to 4-31 54. a. Alice’s gross income from the excess coverage is computed as follows:
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chpt 4 HW solutions - Individual Tax Accounting 2011...

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