Individual Income Taxes
43rd Edition
ISBN: 9780357109731
Author: Hoffman
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 4, Problem 48P
To determine
Identify the option which will take full advantage of after-tax wealth.
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Wally is employed as an executive with Pay More Incorporated. To entice Wally to work for Pay More, the corporation loaned him $20,000 at the beginning of the year at a simple interest rate of 1 percent. Wally would have paid interest of $2,400 this year if the interest rate on the loan had been set at the prevailing federal interest rate.
Required:
Wally used the funds as a down payment on a speedboat and repaid the $20,000 loan (including $200 of interest) at year-end.
a-1. Does this loan result in any income to either party?
a-2. Indicate the amount below.
Assume instead that Pay More forgave the loan and interest on December 31. What amount of gross income does Wally recognize this year?
Wrett purchases a new four-wheeler with a loan from his bank. The bank requires that he use his car, which is paid off, as collateral for the loan he secured from the bank. The value of the 4-wheeler is $2500.00. The value of the car is $15,000.00. Wrett defaults on his loan for the 4-wheeler and thus is forced to sell his car to repay the loan. Which statement below is true regarding this secured transaction?
Multiple Choice
Since the value of the car far exceeds the value of the 4-wheeler, the bank must accept an alternate good closer to value of the 4-wheeler.
Wrett must dispose of his car and apply the proceeds to the loan and if there is any surplus the money belongs to Wrett.
The bank will sell the car for the value of the loan of the 4-wheeler, not the actual fair market value of the car.
Wrett must hand over physical possession and title to the car.
In a workout, creditors are usually paid in all of the following ways except,
Multiple Choice
Bankruptcy…
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Chapter 4 Solutions
Individual Income Taxes
Ch. 4 - According to the Supreme Court, would it be good...Ch. 4 - Prob. 2DQCh. 4 - Prob. 3DQCh. 4 - Ben lost his job when his employer moved its...Ch. 4 - Howard buys wrecked cars and stores them on his...Ch. 4 - On December 29, 2019, an employee received a 5,000...Ch. 4 - Prob. 7DQCh. 4 - A Series EE U.S. government savings bond accrues...Ch. 4 - The taxpayer performs services with payment due...Ch. 4 - Wade paid 7,000 for an automobile that needed...
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