Questions -
1. Billy Dent, as the owner of an apartment building, receives and makes the following payments during 2010:
Received in January 2010 rent that was due in December 2009........$5,000
Received in December 2010 rent not due until January 2011...........$4,000
Security deposit which is to be refunded when tenant vacates the apartment....$500
2. Arnold and Barbara Cane were divorced in Arnorld is obliged to perform as follows:
a. Transfer title of their personal home to Barbara. They purchased the house in 1992 and their basis today is $400,000. The fair market value of the house is $500,000. The house is subject to a 25-year, $250,000 mortgage.
b. Arnold is to continue making payments on the house until it is fully paid off. In 2010, Arnold made payments totaling $18,000.
c. Arnold is to make $3,000 per month payments to Barbara. Of this amount one-half is for child support. The divorce decree further states that alimony is to ease upon the death of the wife. In 2010, he made six payments.
How do the transactions in the divorce agreement affect Arnold's and Barbara's taxable income?
3. A. Fluent, an investor in stocks and bonds, wanted to increase his portfolio but wanted to minimize his tax liability on the income form the bonds. He is presented with the following alternative investments: US Series EE n=bonds, bonds for industrial development for mass transit, and qualified veterans' mortgage bonds. Which should he choose for his investment? Why?
4. Robert Provider purchases a joint and survivor annuity providing for payments of $200 per month for his life and upon his death for his wife, Robin, for the remainder of her life. As of the annuity starting date Robert is 68 and Robin is 66. The annuity cost Robert $36,000. Determine the exclusion ratio for the annuity.
5. Peter Seaman, at age 45, purchased an annuity which will pay him $250 a month for life once he reaches age 65. He paid in $25,000. At retirement, he will have quarterly payments from the annuity. Peter receives his first annuity payment three months after the starting date January 20. Perform the calculations and determine what amount he may exclude from gross income. What was the exclusion ratio? What was the adjusted multiple used to calculate the exclusion?