Questions -
1. Sol and his brother Sam each provide 20% of their mother's support. Their mother lives alone and received the remaining 60% from an unrelated third party. Under a multiple support agreement who above may claim the mother as a dependent? Explain.
2. Sarah Crowly uses the cash receipts method of accounting for her accounting business. On December 25, 2012, she received a $1,000 check in payment for her services. The following year she was told that the check had bounced. One client offered to give her a check for $500 on December 31, 2012, but Sarah asked him to give it to her the next year, which the client did. Another client gave her a check for $750 on December 31, 2012, but after the bank had closed. Both the $500 and $750 checks cleared the next year.
How much does Sarah have to include in her gross income for 2012?
3. A and L are married and have two sons J and K, ages 13 and 16. Both sons are properly claimed as dependency exemptions. A and L had taxable income of $167,500 in 2012 and they file a joint return. J and K had part time jobs as well as some unearned income.
Below is a summary of their income for 2012:
J had wages of $600, interest of $300 and dividend from stocks of $1,300.
K had wages of $2,400, interest of $250 and dividend from stocks of $1,900.
Compute the taxable income and tax liability of J and K for 2012.
4. Harvey Hill, an unmarried taxpayer received the following amounts during 2012:
Interest on savings account $1,400
Interest on municipal bonds 700
Dividends on General Steel common stock 900
Dividends on life insurance policy 150
How much taxable income should Henry report in 2012?
5. Manny and Mavis are both 67 years of age. Manny still works and earned $38,000 last year. Manny and Mavis also have the following income: Interest, $3,000; and Social Security, $10,000. Determine their taxable income.
6. During 2012, Milton was granted a divorce from his wife. The divorce decree stipulated that he was to pay both alimony and child support for a specified period of time. In examining his records for 2012 the following information is available: salary, $50,000; interest received on savings account, $2,000; interest received on municipal obligations, $1,000; alimony paid, $3,600; and child support paid, $4,800. What is Milton's adjusted gross income for 2012?
7. In 2012, Larry Jones was involved in a collision which totally destroyed his car. The automobile, which cost $12,000 and had a fair market value of $5,100 right before the accident, was used solely for personal use. The car had no value after the accident. Assuming that Larry had adjusted gross income of $35,000 and carried no collision insurance, what amount can he deduct as a net casualty loss for the year?
8. Are any of the following items deductible on an individual's income tax return? If so, is the item deductible ‘for' or ‘from' AGI? Explain your answer to each item:
a. Payment of a $100 speeding fine related to the individual's Schedule C business.
b. A cost of $345 for having a federal income tax return prepared by a CPA.
c. A legal fee of $2,500 for estate planning advice of which 50% was related to tax planning advice.
9. Dirk and Diane are both employed solely by XYZ Corporation and each earned $15,000 in wages for 2009. With respect to the following items, what amounts should be reported as income in addition to their wages? Explain.
a. Advance payment for services to be performed in the future, $1,500.
b. Payments by XYZ under a qualified plan for dependent care, $2,000.
c. Sick pay due to illness paid under XYZ's insurance plan, $3,000.
d. Cash allowance to pay for meals during work hours, $300.
e. Payments by XYZ to a qualified pension plan, $1,000.
f. Group-term life insurance paid by XYZ on insurance coverage of $50,000, $200.
10. A company offers its employee, Sam (age 59), $95,000 of group term life insurance coverage. The annual premium paid is $400. The company pays the entire premium. According to the Uniform Premium Table, if Sam is not a key-employee, what is the taxable amount of this fringe benefit?