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.
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