Quiz3 Questions - Points Awarded Points Missed Percentage...

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Points Awarded 14.00 Points Missed 6.00 Percentage 70.0% 1. Sharon made a $60,000 interest-free loan to her son, Todd, who used the money to start a new business. Todd’s only sources of income were $25,000 from the business and $490 of interest on his checking account. The relevant Federal interest rate was 5%. Based on the above information: A) Todd’s business net profit will be reduced by $3,000 (.05 × $60,000) of interest expense. B) Sharon must recognize $3,000 (.05 × $60,000) of imputed interest income on the below- market loan. C) Todd’s gross income must be increased by the $3,000 (.05 × $60,000) imputed interest income on the below market loan. D) Sharon does not recognize any imputed interest income and Todd does not recognize any imputed interest expense. E) None of the above is correct. Points Earned: 2.0/2.0 2. In 2010, Todd purchased an annuity for $180,000. The annuity is to pay him $2,000 per month for the rest of his life. His life expectancy is 150 months. Which of the following is correct? A) Todd is not required to recognize any income until he has collected 90 payments (90 × $2,000 = $180,000). B) If Todd collects 30 payments and then dies in 2012, Todd’s estate should amend his tax returns for 2010 and 2011 and eliminate all of the reported income from the annuity for those years. C) For each $2,000 payment received in the first year, Todd must include $1,200 in gross
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This note was uploaded on 02/20/2011 for the course ACCNT 2411 taught by Professor Hartman during the Spring '11 term at Palo Alto College.

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Quiz3 Questions - Points Awarded Points Missed Percentage...

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