20111001 Solutions to Homework - P2-56 56 d For the...

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P2-5656. d. For the six-year statute of limitations to apply, Maude would have had to omit in excess of 25 percent ofgross income. In computing gross income, revenues from the sale of goods or services are not to be reducedby cost of goods sold. Also, gross income includes capital gains. Thus, 25 percent of $440,000 is $110,000.P2-5858. a. Advise clientP2-6969. Standard Deduction: Code Sec. 63; Trade or Business Expenses: Code Sec. 162; Losses: Code Sec. 165;Medical Deductions: Code Sec. 213; Moving Expenses: Code Sec. 217.P3-4848. 2010—Married fi ling jointly and three personal exemptions. Allowed a joint return in year of death.2011—Surviving spouse with two personal exemptions.2012—Surviving spouse with two personal exemptions.2013—Head of household with two personal exemptions.P3-5050a. No return is required. Rebecca’s income is less than the total of the standard deduction amount plus thepersonal exemption. However, if Rebecca is eligible to be claimed as a dependent of someone else, sheis required to fi le a return because her earned income exceeds $5,700.b. A return is not required. Gross income is less than $18,700.c. A return is required. Earnings from self-employment exceed $400 ($450 × .9235 = $415.58).P3-5353a. $11,231.25 ($9,362.50 + 25% of $7,475)b. $15,254.75 ($13,343.75 + 28% of $6,825)c. $15,050.00 ($4,681.25 + 25% of $41,475)d. $13,716.25 ($6,235.00 + 25% of $29,925)P3-5555. b. Decedent’s fi ling status is married fi ling separate return. A joint return cannot be fi led because hissurviving spouse has remarried.P4-2121. Leah must include $45,000 in her 2010 gross income. She had an absolute right to the money in 2010;therefore, she must recognize it as income in 2010.P4-2323. Fred Miller has the following additional sources of income:(1) Services rendered in building house $500(2) Gasoline for van in return for tutorial services 600Total additional income includible in gross income $1,100The $300 from his uncle is a gift as is the use of the van.P4-3131. Rental income includes all rent received; therefore, the $18,000 yearly rent plus the prepaid rent of $3,000equals a total rental income of $21,000. The lessee’s remodeling cost of $4,500 is not considered rentalincome and is not taxable to Mr. Grant since it was not in lieu of rent.P4-4141a. Chris has a long-term capital gain of $22,000 in Year 3 (($47 − $25) × 1,000). $17,000 of this (thespread at exercise) is an adjustment item for purposes of the alternative minimum tax in the year ofexercise.b. Faraway receives no deductions.c. Since Chris did not hold the stock more than one year the price spread at exercise, $17,000, is ordinaryincome (and an AMT adjustment) upon sale in Year 3. The remaining $5,000 is a short-term capital gain.Faraway receives a deduction for the ordinary income portion.P5-2020. The amount of Read’s family income includible in gross income is $27,000, computed as follows:Unemployment compensation $5,000Salary—Robert 10,000Salary—Wife 9,000Supplemental unemployment compensation 3,000$27,000 Disability income is excluded from gross income if the injury was job-related.

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