# Arnold did not repay the loan during the year and

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Arnold did not repay the loan during the year and used the money for living expenses. Calculate Arnold’s adjusted gross income for the year.
114. Ted loaned money to a business acquaintance. The loan was for \$100,000 and was to be repaid at the rate of \$13,000 each year for ten years. The effective interest rate was 5%. He also purchased an annuity contract for \$100,000 that would pay him \$13,000 each year for ten years. Will Ted’s gross income for the first year differ with the loan as compared to the annuity contract? Explain your answer.
115. Sarah, a widow, is retired and receives \$20,000 interest income and dividends and \$10,000 in Social Security benefits. Sarah is considering selling a stock at a \$8,000 gain. What will be the increase in Sarah’s gross income as a result of the sale of the stock?
increase by \$4,000, which is the lesser of the following: · 50%(\$10,000) · 50%[\$28,000 + 50%(\$10,000) – \$25,000] Therefore, the \$8,000 gain will cause Sarah’s gross income to increase by \$12,000 (\$8,000 + \$4,000). 116. Roy is considering purchasing land for \$10,000. He expects the land to appreciate in value 8% each year (compounded) and he will sell it at the end of 10 years. He also is considering purchasing a bond for \$10,000. The bond does not pay any annual interest, but will pay \$21,589 at maturity in 10 years. The before-tax rate of return on the bond is 8%. Roy is in the 40% (combined Federal and State) marginal tax bracket. Roy has other investments that earn a 8% before-tax rate of return. Given that the compound interest factor at 8% is 2.1589, and at 4.8% the factor is 1.5981, which alternative should Roy choose?
117. In January 2012, Tammy purchased a bond due in 24 months. The cost of the bond is \$857 and its maturity value is \$1,000. No interest is paid each year, but the compound interest rate on the bond is 8%. Tammy also purchased a Series EE United States