In 2020, Juan entered into a contract to write a book. The publisher advanced Juan $50,000, which was to be recovered out of futureroyalties. If the book was not completed by the end of 2021, however, Juan would be required to repay the publisher for the advance. Juandid not complete the book in 2021, and in accordance with the agreement, he repaid the $50,000 to the publisher in 2022. Juan is a cashbasis taxpayer.a. What are the tax consequences to Juan of the repayment assuming Juan's marginal tax rate is 15% in 2020 and 35% in 2022?Indicate whether the following statements are "Correct" or "Incorrect".• Juan could elect to include the $50,000 advance as gross income in either 2020 or 2021.• In 2021, he would be allowed a deduction for $7,500.Since he can defer reporting the advance until it is earned, he has no income when theadvance is received. Therefore, he has no offsetting deduction when the advance is repaid.• The deduction in 2022 would reduce his taxes by $17,500.b. What if Juan's marginal tax rate was 35% in 2020 and 12% in 2022?Juan would owe tax of $on the advance when it is reported as income. Therefore, according to § 1341, he is permitted toreduce his taxes in 2022 by $

Marginal tax Rate: It is the additional tax payable for every additional dollar earned as income.…

Answered: In 2020, Juan entered into a contract…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Rita is a self-employed taxpayer who turns 39 years old at the end of the year (2023). In 2023, her net Schedule C income was $314,000. This was her only source of income. This year, Rita is considering setting up a retirement plan. What is the maximum amount Rita may contribute to the self-employed plan in each of the following situations? Note: Round your intermediate calculations and final answers to the nearest whole dollar amount. Problem 13-85 Part a (Algo) a. She sets up a SEP IRA. Maximum contribution
Erin is the landlord of a single-family home, which she leased to Carlos in February 2022. Prior to moving in, Carlos paid $1,000 for the first month's rent and an additional $1,000 for the last month's rent (for a total of $2,000 advance rent). He then paid $10,000 in rent during the remainder of the tax year. What amount does Erin include in gross rental income for this property in 2022?
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Jessica purchased a home on January 1, 2019, for $580,000 by making a down payment of $230,000 and financing the remaining $350,000 with a loan, secured by the residence, at 6 percent. During 2019 and 2020, Jessica made interest-only payments on this loan of $21,000 (each year). On July 1, 2019, when her home was worth $580,000, Jessica borrowed an additional $145,000 secured by the home at an interest rate of 8 percent. During 2019, she made interest-only payments on the second loan in the amount of $5800. During 2020, she made interest-only payments on the second loan in the amount of $11,600. What is the maximum amount of the $32,600 interest expense Jessica paid during 2020 that she may deduct as an itemized deduction if she used the proceeds of the second loan to finish the basement in her home and landscape her yard? (Assume not married filing separately.) (Enter only numbers with no dollar signs or other punctuation.)
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Ashford, age 45, is an active participant in his employer's defined benefit retirement plan, but he would also like to make a deductible contribution to a traditional IRA this year. Ashford is married, files a joint return with his spouse, and has an AGI of $114,000 in 2021. What is the maximum deductible contribution that Ashford can make to a traditional IRA?
Ted and Alice were divorced in January 2018. The provisions of the divorce decree and Alices's obligations follow: 1. Transfer the title in their resort condo to Ted. At the time of the transfer, the condo had a basis to Alice of $95,000, a fair market value of $115,000; it was subject to a mortgage of $85,000. 2. Alice is to make the mortgage paynents for 17 years regardless of how long Ted lives. Alice paid $12,000 in 2020. 3. Alice is to pay Ted $1,000 per month, beginning in 2018, for 10 years or until Ted dies. Of this amount, $500 is designated as child support. Alice made five payments of $900 each in 2021 (January - May). What is the amount of alimony from his settlement that is includible in Ted's gross income for 2021?
Christie sued her former employer for a back injury she suffered on the job in 2021. As a result of the injury, she was partially disabled. In 2022, she received $240,000 for her loss of future income, $160,000 in punitive damages because of the employer's flagrant disregard for the employee's safety, and $15,000 for the reimbursement of medical expenses. What's Christie's gross income in 2021? Please explain.
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Wilma and Fred's divorce was finalized on November 2, 2018. Wilma received the following income in 2022. What amount of her income is taxable? Wages Interest Income Child support Alimony Worker's compensation Lottery Winnings $45,000 $6 $12,000 $5,000 $2,500 $500

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