Individual Income Taxes
43rd Edition
ISBN: 9780357109731
Author: Hoffman
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Textbook Question
Chapter 5, Problem 36P
LO.2 Determine the effect on gross income in each of the following cases:
- a. Eloise received $150,000 in settlement of a sex discrimination case against her former employer.
- b. Nell received $10,000 for damages to her personal reputation. She also received $40,000 in punitive damages.
- c. Orange Corporation, an accrual basis taxpayer, received $50,000 from a lawsuit filed against its auditor who overcharged for services rendered in a previous year.
- d. Beth received $10,000 in compensatory damages and $30,000 in punitive damages in a lawsuit she filed against a tanning parlor for severe burns she received from using its tanning equipment.
- e. Joanne received compensatory damages of $75,000 and punitive damages of $300,000 from a cosmetic surgeon who botched her nose job.
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Classify each of the following cases as "Included in" or "Excluded from" gross income.
Included in/Excluded from
Gross Income
a. Eloise received $150,000 in the settlement of a sex discrimination case against her former employer.
b. Nell received $10,000 for damages to her personal reputation.
Nell also received $40,000 in punitive damages.
c. Orange Corporation, an accrual-basis taxpayer, received $50,000 from a lawsuit it filed against its auditor, who overcharged for services rendered in a previous year.
d. Beth received $10,000 in compensatory damages in a lawsuit she filed against a tanning parlor for severe burns she received from using the parlor's tanning equipment.
Beth also received $30,000 in punitive damages in the lawsuit against the tanning parlor.
e. Joanne received compensatory damages of $75,000 from a cosmetic surgeon who botched her nose job.
Joanne also received $300,000 in punitive damages from the cosmetic surgeon who…
Determine the taxpayer's current-year (1) economic income and (2) gross income for tax purposes from the
following events: (LO.1)
a. Ja-ron's employment contract as chief executive of a large corporation was terminated, and he was
paid $500,000 not to work for a competitor of the corporation for five years.
b. Elliot, a six-year-old child, was paid $5,000 for appearing in a television commercial. His parents put
the funds in a savings account for the child's education.
c. Valery found a suitcase that contained $100,000. She could not determine who the owner was.
d. Winn purchased a lottery ticket for $5 and won $750,000.
e.
Larry spent $1,000 to raise vegetables that he and his family consumed. The cost of the vegetables in
a store would have been $2,400.
f. Dawn purchased an automobile for $1,500 that was worth $3,500. The seller was in desperate need of
cash.
Margaret, a married taxpayer filing a joint return, engaged in two business activities this year. Business A earned $420,000 of profit.
Business B incurred a loss of $(995,000).
Required:
How much of Margaret's net business loss is not currently deductible?
Note: Negative amount should be entered with a minus sign.
Margaret's excess business loss not currently deductible
Chapter 5 Solutions
Individual Income Taxes
Ch. 5 - Prob. 1DQCh. 5 - Prob. 2DQCh. 5 - Prob. 3DQCh. 5 - Prob. 4DQCh. 5 - Prob. 5DQCh. 5 - Prob. 6DQCh. 5 - Prob. 7DQCh. 5 - Holly was injured while working in a factory and...Ch. 5 - Prob. 9DQCh. 5 - Prob. 10DQ
Ch. 5 - Ted works for Azure Motors, an automobile...Ch. 5 - Prob. 12DQCh. 5 - Eagle Life Insurance Company pays its employees...Ch. 5 - Several of Egret Companys employees have asked the...Ch. 5 - Prob. 15DQCh. 5 - Tammy, a resident of Virginia, is considering...Ch. 5 - Andrea entered into a 529 qualified tuition...Ch. 5 - Prob. 18DQCh. 5 - Prob. 19DQCh. 5 - Valentino is a patient in a nursing home for 45...Ch. 5 - Prob. 21CECh. 5 - Ellie purchases an insurance policy on her life...Ch. 5 - Prob. 23CECh. 5 - Leland pays premiums of 5,000 for an insurance...Ch. 5 - Jarrod receives a scholarship of 18,500 from...Ch. 5 - Prob. 26CECh. 5 - Prob. 27PCh. 5 - Prob. 28PCh. 5 - Prob. 29PCh. 5 - LO.2 What is the taxpayers gross income in each of...Ch. 5 - LO.2 Donald was killed in an accident while he was...Ch. 5 - Prob. 32PCh. 5 - Prob. 33PCh. 5 - Prob. 34PCh. 5 - LO.2 Leigh sued an overzealous bill collector and...Ch. 5 - LO.2 Determine the effect on gross income in each...Ch. 5 - Prob. 37PCh. 5 - Prob. 38PCh. 5 - Prob. 39PCh. 5 - LO.2 Belinda spent the last 60 days of 2019 in a...Ch. 5 - LO.2 Tim is the vice president of western...Ch. 5 - LO.2 Does the taxpayer recognize gross income in...Ch. 5 - Prob. 43PCh. 5 - Prob. 44PCh. 5 - Prob. 45PCh. 5 - LO.2, 5 Rosas employer has instituted a flexible...Ch. 5 - Prob. 47PCh. 5 - Prob. 48PCh. 5 - Prob. 49PCh. 5 - Prob. 50PCh. 5 - LO.2 Tonya, who lives in California, inherited a...Ch. 5 - Prob. 52PCh. 5 - Prob. 53PCh. 5 - Prob. 54PCh. 5 - Prob. 55PCh. 5 - Prob. 56PCh. 5 - LO.4 Vic, who was experiencing financial...Ch. 5 - Prob. 1RPCh. 5 - Prob. 2RPCh. 5 - Prob. 3RPCh. 5 - Prob. 4RPCh. 5 - Prob. 1CPACh. 5 - Jeffrey Dean, a Masters Degree candidate at North...Ch. 5 - Linda is an employee of JRH Corporation. Which of...Ch. 5 - Kim was seriously injured at her job. As a result...Ch. 5 - Danny received the following interest and dividend...Ch. 5 - Prob. 6CPA
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- Troy, a cash basis taxpayer, is employed by Eagle Corporation, also a cash basis taxpayer. Tray is a full-time employee of the corporation and receives a salary of 60,000 per year. He also receives a bonus equal to 10% of all collections from diems he serviced during the year. Determine the tax consequences of the following events to the corporation and to Troy: a. On December 31, 2019, Troy was visiting a customer. The customer gave Troy a 10,000 check payable to the corporation for appraisal services Troy performed during 2019. Troy did not deliver the check to the corporation until January 2020. b. The facts are the same as in part (a), except that the corporation is an accrual basis taxpayer and Troy deposited the check on December 31, but the bank did not add the deposit to the corporations account until January 2020. c. The facts are the same as in part (a), except that the customer told Troy to hold the check until January 2020 when the customer could make a bank deposit that would cover the check.arrow_forwardDetermine whether the taxpayer in each of the following situations is in constructive receipt of income. If not, explain when the income will be constructively received. Regan is an employee of BIF Manufacturing, earning $3,000 per month. She purchases merchandise from BIF costing $2,000 in January of the current year. To pay for the merchandise, BIF agrees to deduct $75 per month from her pay, reducing it to $2,925 per month before other withholdings. Answer: see the attached file. My question: I don't understand why $75 is the constructive receipt of income. Regan is not receiving anything and it is not available to him. Also, why would Regan include $3,000 include in gross income? isn't it 3000-75?arrow_forwardKendra is a self-employed taxpayer working exclusively from her home office. Before the home office deduction, Kendra has $6,000 of net income. Her allocable home expenses are $10,000 in total. How are the home office expenses treated on her current year tax return? a.Only $3,000 a year of the home office expenses may be deducted. b.All home office expenses may be deducted, resulting in a business loss of $4,000. c.Only $6,000 of home office expenses may be deducted, resulting in a net business income of zero. None of the remaining $4,000 of home office expenses may be carried forward or deducted. d.Only $6,000 home office expenses may be deducted, resulting in net business income of zero. The remaining $4,000 of home office expenses may be carried forward and deducted in a future year against business income.arrow_forward
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