T uses frequent flyer miles to take his family on a vacation. T received the miles during business travel paid for by his employer. The normal airfare for his vacation would have cost $7,000. a. T must realize and recognize $7,000 as income. b. Although T has realized income, he will not be required to recognize it because the IRS has chosen, as a matter of administrative convenience, not to require taxpayers to recognize the value of frequent flyer tickets earned during employer-paid travel. c. Had T earned the frequent flyer miles during travel he had paid for himself, the issue of income realization and recognition would not arise. d. Both (a) and (c) are correct. e. Both (b) and (c) are correct. T buys a parcel of real estate for $100,000, which he finances by giving the seller a nonrecourse mortgage for the full purchase price. The debt is due in one balloon payment in Year 5. When the debt becomes due in Year 5, T decides to give the property back to the seller in satisfaction of the debt (the property is worth only $50,000 at that time). a. T will realize $100,000 of income in Year 1 because the debt was non-recourse. b. T will realize no income in Year 1, regardless of whether the debt was recourse or non-recourse. c. T would realize $100,000 of income in Year 1, regardless of whether the debt was recourse or non-recourse. d. None of the above.
T uses frequent flyer miles to take his family on a vacation. T received the miles during
business travel paid for by his employer. The normal airfare for his vacation would
have cost $7,000.
a. T must realize and recognize $7,000 as income.
b. Although T has realized income, he will not be required to recognize it because
the IRS has chosen, as a matter of administrative convenience, not to require
taxpayers to recognize the value of frequent flyer tickets earned during
employer-paid travel.
c. Had T earned the frequent flyer miles during travel he had paid for himself, the
issue of income realization and recognition would not arise.
d. Both (a) and (c) are correct.
e. Both (b) and (c) are correct.
T buys a parcel of real estate for $100,000, which he finances by giving the seller a nonrecourse
mortgage for the full purchase price. The debt is due in one balloon payment in
Year 5. When the debt becomes due in Year 5, T decides to give the property back to the
seller in satisfaction of the debt (the property is worth only $50,000 at that time).
a. T will realize $100,000 of income in Year 1 because the debt was non-recourse.
b. T will realize no income in Year 1, regardless of whether the debt was recourse
or non-recourse.
c. T would realize $100,000 of income in Year 1, regardless of whether the debt
was recourse or non-recourse.
d. None of the above.
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