T11F-Chp-04-2-HW-Sol-2011 - Updated September 4 2011 Page 1...

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Updated September 4, 2011 32280caf5e617155f9ecc18949c23154aedab852.doc. Page 1 of 3 First & Last Name: Home work-Chapter 4. Prepare your solutions for this homework before the chapter is covered in class. Note: answers may be rounded to nearest dollar. The current year is 2011, unless the question indicates another year. 1 On March 1, 2010, Lois Rice inherited 1,000 shares of Elin Corp. stock under the will of her uncle, Pat Prevor. Pat Prevor had paid $5,000 for the Elin stock in 2001. FMV of the Elin stock on March 1, 2010, the date of Pat's death, was $8,000. FMV was $11,000 six months later. The executor of Pat's estate did not elect the alternate valuation date (for all assets in the estate) for estate tax purposes. Lois sold the Elin stock for $9,000 on May 1, 2011. How much should Lois include in her income on her 2010 individual income tax return for the inheritance? a. $0 b. $ 5,000 c. $ 8,000 d. $11,000 [CPA Exam] A 2 See preceding problem for Lois Rice. How much gain or loss is reported by Lois in 2011 as a result of the sale of this stock? [CPA Exam] a. $1,000 gain b. $ 4,000 gain c. $ 2,000 loss d. Other A 3 In 1995, your Father bought 20,000 shares of Duke Energy stock at a total cost of $200,000. On January 1, 2010, your father gave you one-half of his Duke Energy stock (10,000 shares) having a value of $250,000 on the date of the gift. No gift tax was paid. On August 1, 2010, your father died and left you the remaining 10,000 shares of Duke Energy stock having a value at date of death of $300,000. On December 31, 2010, you sold all 20,000 shares of Duke Energy for $600,000. What is your gain? a. $0 b. $50,000 c. $200,000 d. $250,000 e. $400,000 C 4 Mrs. Jones, a widow whose husband died in November 2006, chose to receive the proceeds of her husband's $150,000 life insurance policy in twenty yearly installments of $10,000 each. How much of each payment is interest income to be included in Mrs. Green's gross income in 2011? a. $1,500 b. $2,500 c. $5,000 d. Other B 5 Clyde is a degree candidate at a local college. During the fall semester he received a $3,000 scholarship from a local foundation. Clyde spent the entire $3,000 and another $1,500 from a student loan during this semester. He paid the following expenses: tuition $2,000, books $500, and room and board $2,000. How much of the $3,000 scholarship should Clyde report as income? a. $500 b. $-0- c. $3,000 d. $1,000 A 6 Mary is a degree candidate at State University. In February, Mary applied for a scholarship and was notified that she would receive $9,500 for the fall semester. The scholarship will pay $6,500 for tuition, $600 for books and fees of $400. Mary will serve as a tutor for a few hours a week for $2,000. Mary's taxable income from the scholarship is:
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T11F-Chp-04-2-HW-Sol-2011 - Updated September 4 2011 Page 1...

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