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In each of the following problems, identify the tax issue(s) posed by the facts presented. Determine the possible tax consequences of each issue that you identify.
Binh met Anika 10 years ago at a cocktail party. Anika was a wealthy investor with extensive holdings in the oil and gas industry. Binh was a real estate agent earning about $35,000 a year. Several months later, Binh proposed marriage and Anika accepted. Just before the wedding, Anika told Binh that she had a “mental hangup” about marriage, and Binh agreed to live with her without being married. In return, Anika promised to leave Binh her entire estate. In the ensuing years, they had an intimate, marriage-like relationship, attending social, business, and family functions together. Anika died in 2015. No will was found immediately. A few months after Anika’s death, her sister found a one-page paper signed by Anika. The paper left Anika’s entire estate to her brothers and sisters and named her sister as executor of the estate. Binh sued Anika’s estate and won a judgment of $2 million for services rendered to Anika during their relationship. The estate appealed the decision, which was affirmed as to liability but reversed and remanded for a new trial on the amount of the judgment. Binh and the estate subsequently worked out an agreement in which the estate paid Binh $1.2 million to settle his claim.
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Chapter 4 Solutions
CONCEPTS IN FED.TAX.,2020-W/ACCESS
- On May 1, Dark Horizons Inc. had a beginning cash balance of $200. April sales were $500, and May sales were $600. During May, the firm had cash expenses of $150 and payments on accounts payable of $300. The firm's accounts receivable period is 30 days. What is Dark Horizons Inc.'s beginning cash balance on June 1?arrow_forwardANSWER?arrow_forwardSerfass Corporation's contribution format income statement for July appears below: Sales Variable expenses $307,800 $153,900 Contribution margin $153,900 Fixed expenses $40,010 Net operating income $113,890 The degree of operating leverage is closest to: a. 0.37 b. 0.74 c. 2.00 d. 1.35arrow_forward
- Hito’s Auto Spa has $95,000 of fixed costs and variable costs equal to 65% of sales. How much total sales are required to achieve a net income of $160,000? Helparrow_forwardOslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units): Sales Variable expenses $22,400 12,800 Contribution margin 9,600 Fixed expenses 7,968 Net operating income $1,632 What is the degree of operating leverage?arrow_forwardTech Solutions, Inc. is looking to achieve a net income of 18 percent of sales. Here’s the firm’s profile: Unit sales price is $12; variable cost per unit is $7; total fixed costs are $50,000. What is the level of sales in units required to achieve a net income of 18 percent of sales?arrow_forward
Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT