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ACC_415_F10_ch._4_solutions

ACC_415_F10_ch._4_solutions - ACC 415(do not distribute...

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ACC 415 (do not distribute) Outline Solutions: Ch. 4: 1. T, 2. (below market Q) F, 3. (a) $2,500 recovered in 2006 is income due to tax benefit rule, (b) (refund of state tax) T, 4. (Tom’s loan) F Homework Solutions (2011 edition): Ch. 4: 2. a. The $950,000 is economic income and gross income for tax purposes. Sue realized $950,000 from the termination of her coaching contract and must include the entire amount in her gross income. Pay for not performing is treated the same as pay for performing. b. The $10,000 is economic income and gross income for tax purposes. c. The increase in value of $100,000 is economic income but is not gross income for tax purposes because the realization requirement has not been satisfied. For tax purposes, the gross income is $0. The taxpayer is not required to recognize the increased value as income until it is realized (e.g., when the property is sold). d. Winn’s economic income is $899,995 (the winnings less the cost of the ticket). For tax purposes, he has $900,000 in gross income.
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