A if the employee of a motel has the choice of free

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a. If the employee of a motel has the choice of free lodging on the premises (fair market value of$400 per week) or extra cash compensation and he is not required to live on premises, The $400 fair market value is includible in gross income.b. If an employee arranges to have his annual bonus of $1,000 paid directly to his son as a wedding give, the entire bonus is still income to the employee, not to his son.c. If an employee earns a salary of $500 per week and pursuant to a court order, $100 of his salary goes to his ex-wife for child support, the entire $500 salary is gross income to the employee as child support is not a deductible expense.34. Divorce Payments (¶4451)A: Under tax law, property transferred pursuant to a divorce decree does not give rise to income. Therefore, Item (a) does not generate incomeItem (b) is not treated as alimony. The payments do not end on deathItem (c) generates a tax deduction of $1,500 per month for Arnold and income to Barbara of $1,500 per month. Child support is not tax deductible nor is it included in the gross income of the recipient.39. Gross Income and Adjusted Gross Income (¶4301)Salary50000Dividends1300Gambling Winnings110Rents5600Term life insurance income155 (30 * $5.16)Gross Income$57,165Less:Rental Property Taxes($2,200)Rental Operation and Maintenance($2,650)Adjusted Gross Income$52,315* Interest on the toll road bonds, a state obligation, is exempt* Gambling losses are deductible in figuring taxable income only as itemized deductions41. ¶4485 Discharge or Forgiveness of Debt: When a debt is canceled for a consideration, in whole or in part, the debtor realizes taxable income for the amount of the debt discharged. If a creditor gratuitously cancels a debt, then the amount forgiven is not income but a nontaxable gift. Generally, income from a non-gratuitous discharge of indebtedness is includible in gross income unless the discharge occurs in a bankruptcy case or the taxpayer becomes insolvent.Q: Fran’s boutique has assets of $100,000 and liabilities of $140,000. Fran’s major creditor cancels $50,000 in liabilities. Discuss tax ramifications of this forgiveness of debt. Assume majority of Fran’s
assets are depreciable property. Discuss tax ramifications facing the Finery Corporation assuming it’s not in bankruptcy. Then, discuss the ramifications assuming the Finery Corporation is in bankruptcy.

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