{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

HOMEWORK FOR CHP 6 -2

HOMEWORK FOR CHP 6 -2 - Question 42 A The effect of the...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Question # 42 A. The effect of the illegal gambling business on Trevor’s AGI is as follows : Gross income = $52,000 Deductible expenses: Salaries + payout to winners ( $ 8,000 + $29000) = ($37000) Increase in AGI = $15,000 the bribe to police of $7,500 is not deductible since this expense violates public policy. Trevor also must include the tip income of $16,000 in his gross income B. Trevor’s taxable income also increases by $15,000 C. For an illegal drug activity, all of the expenses are not allowed. That’s why; illegal drug operation would increase Trevor’s AGI by $52,000. However, the $6,200 cost of goods sold is a reduction in calculating gross income rather than as an expense. Therefore, the illegal drug operation increases Trevor’s AGI by $45,800 ($52,000 – $6,200). QUESTION # 53 First of all I will calculate the rental income ; Rental income = $4,000 less-Taxes and interest (60/365 × $5,856) = (963) REMINDER = $3,037 Less: Utilities and maintenance (1/2 × $2,600) = (1,300) Remainder = $1,737 Less: Depreciation ($3,500, limited to $1,737) = (1,737) Net income from vacation home = $ –0– Note that $4,893 ($5,856 total-- $963 vacation home portion) of property taxes and mortgage interest on the vacation home are itemized deductions Income: Salary = $43,000 Dividend = $ 400
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern