1. Are the following includable in the employee's gross income? Cite relevant tax code and where it would appear on the 1040. a. Employee charges the cost of materials for a presentation at work on her personal credit card and gets reimbursed by her employer. b. Employee of Big Burger chain gets a discount in all Big Burger stores across the country. c. Employer provides a dinner to employees who work late on Friday night. d. Employer gives employee a $50 gift certificate each month to encourage eating lunch at a nearby healthy eatery instead of fast food.
2. JJ got married on December 31, 2012. His new wife has a dependent child. A) What filing status is most advantageous for him in 2012? B) His new wife wants to file as married filing separately, because she thinks they will get extra deductions. Is this true? Provide proof.
3. Susan Trader buys 300 shares of Metlife stock and 500 shares of GE on December 31, 2009. She then buys 300 shares of WaMu stock on January 4, 2010. She sells of her stock on March 11, 2012. She ends up with an $8,000 gain from Metlife, a $10,000 loss from GE, and a $5,000 loss from WaMu. How much loss can she take against her ordinary income in 2012? What is the amount and character of the loss that she carries forward into the next year?
4. President Obama has asked that you drop everything in order to advise him on his new tax policy. He is trying to raise tax revenue through progressive measures. He is looking for you to come up with some ideas based on what you have learned during this course. Are there deductions he should modify or do away with? Is there a fair way for him to raise the income tax? Where should he look for other sources of revenue? Would you suggest that the entire tax system be dramatically overhauled? Which code sections do you recommend changing first and how would you alter them? Explain and justify your answer using current tax codes and examples from your text.
5. Does our current system of taxing capital gains meet the maxims of "Good Tax"? Would you advocate taxing capital gains at ordinary income rates or preferential rates? Explain and justify your answer.
6. You work in City A and your commute is 24 miles. You get a new job in City B, which is 96 miles from your home. If you move to City B, can you deduct your moving expenses? Why or why not? If so, what expenses are deductible?
7. Clumsy Dwarf falls in Wal-Mart and wins a personal injury lawsuit. He is awarded $25,000 for medical expenses, $5,000 for pain and suffering, and $10,000 as punitive damages. What does he report as income and why?
8. Each year, a group of college students get together and have a mock awards ceremony for a person or company whose music is the most offensive. The prize of $1,000 comes with a night of humiliation, which the angry award winner suffers through and then leaves. Does this year's winner have to report the $1,000 as income? Explain and justify your answer.
9. Marsha and Greg are divorced but are still living together in order to care for their young children. Greg pays Marsha alimony in accordance with their divorce decree. He pays $30,000 in year one; $25,000 in year two, and $15,000 in year three. He moves out beginning in year three because they really don't get along and he is dating someone else. For each year, who has to include the alimony payments as income, given that they still live together for the majority of that time? Explain and justify your answer.