Chapter 4

Chapter 4 - Acct 3400 Taxation of Individuals Chapter 4...

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Acct 3400 Taxation of Individuals Chapter 4 Practice Questions Question 1: Rachel purchased an antique vase for $50 at a garage sale. She then took the item to “Antique Roadshow,” a television program that appraises the value of antiques. The appraiser there said that the vase was created by a famous French artist and that the piece would be worth at auction at least $10,000. How much income does Rachel have to include in gross income after visiting with the Appraiser? Explanation: Rachel is not required to include any of the $10,000 in gross income because she has not yet had a realization event. Until she has such an event, which will include a transaction with another person and a significant change in her property rights, she will not include any of the value of the vase in income. Question 2: Tonia is a carpet cleaner who is a cash basis taxpayer. On December 31, of Year 1, the last day of her taxable year, she cleaned a customer’s carpet. The bill for the cleaning was $300. The customer was ready with checkbook in hand to pay Tonia, but in a rush to make it to a New Year’s Eve party, Tonia said should would bill the client rather than accepting the check. Tonia billed the client on January 2, Year 2, and the customer remitted payment on
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This note was uploaded on 03/26/2011 for the course ACTG 3400 taught by Professor Durkee during the Spring '11 term at Weber.

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Chapter 4 - Acct 3400 Taxation of Individuals Chapter 4...

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