Chapter 3 Homework
3. How does a tax deduction differ from a tax credit?
The difference between a tax deduction and a tax credit is a tax credit provides a dollar for dollar
reduction of your income tax and alternatively a t
Chapter 5 Homework
October 13, 2015
2.) An individual surrenders, for $20,000, an endowment life insurance policy in which he had a
$15,000 investment. How much of the $20,000 of proceeds must be included in gross income?
ACCT 409-62: Income Taxation
Chapter 1 Homework
4. A regressive tax is an applied uniformly tax that takes a larger percentage from low-income
citizens than from high-income individuals. Value Added Tax (Vat) is a type of consumption tax
23. Total coverage
Tax-free group insurance
Per $1,000 per year 0.23*12
Taxable income 50 x 2.76
Harry will include additional $138 in his gross income.
25. $650 should be included in his gross income
a. Business advertising - T for AGI
b. Interest expense on home mortgage P from AGI
c. Union dues of employee T from AGI
d. Bank service charges on business checking account - T for AGI
e. Entertainment expenses of employee not reimbursed by employer
29. The purchase of new office building is not deductible currently since it is a
capital expenditure. However it is depreciable (not calculated here because we dont
know the month it was placed in service). The payment of illegal parking fines is not
29. The exclusion ratio is 64.4 percent.
Annual annuity payments $200x12
Multiple from table 3
Expected return $2,400 x 23.3
Investment in annuity contract
Exclusion ratio $36,000/$55,920
Annual exclusion $2,400 x 64,38%
4. c. Trip to Hawaii for specialized surgery only performed by one doctor located in Hawaii
d. Crutch rental for period after surgery deductible
e. Cost of transportation to and from doctor
5. b. Acupuncture treatments
c. Medical insurance pr
a. The employee has to include the fair market value of the lodging ($400 per
week) received as compensation.
b. The bonus should be included in the employees gross income.
c. Child support payments are part of the payers income they are not
The injury was job-related therefore the disability benefits should not be
included in Reads family income.
Their 2016 income is $5,000+$10,000+$9,000+$3,000=$27,000
Medical expenses reimbursement should be included in the gross income as
it was d
40. a. If $4,200 $5,300 are the total of her mothers expenses. Medicare benefits are
disregarded in the computation of support. Therefore Jodi might be considered as
providing all the support of her mother.
b. Jodis daughter provided more than 50 percent
27. Distribution of stock shares is not a taxable dividend.
30. The initial basis was $1,600/200=$8 per share. When the company paid 10%
stock dividend the basis changed $1,600/(200+20)= $7.27 per share.
a. The property transfer is not recognized as i
1. a tax credit is a direct reduction of the tax due while a tax deduction is a reduction in income.
Tax deduction of 2,000 is greater than a tax credit of 400
2,000*15% = 300 which is less than a 400 tax credit