ACC 456 Week 3 Practice Problem (4-33, 4-34, 4-35, 6-33, 6-35, 7-31, 7-40, 7-42) NEW
Complete the problems in Chapter 4:
Complete the problems in Chapter 6:
Complete the problems in Chapter 7:
Click the Assignment Files tab to submit your assignment as a Microsoft® Word document.
Excludable Gifts. Which of the following would be includable in gross income?
· a.Alice appeared on a TV quiz show and received a prize of $5,000.
· b.Bart received $500 from his employer because he developed an idea that reduced the employer’s production costs.
· c.Chuck borrowed $500 from his mother in order to finance his last year in college. Upon his graduation, Chuck’s mother told him he did not have to repay the $500. She intended the $500 to be a graduation present.
Life Insurance Proceeds. Don is the beneficiary of a $50,000 insurance policy on the life of his mother, Anna. To date, Anna has paid premiums of $16,000. What amount of gross income must be reported in each of the following cases?
· a.Anna elects to cancel the policy and receives $20,000, the cash surrender value of the policy.
· b.Anna dies and Don receives the face amount of the policy, $50,000.
· c.Anna dies and Don elects to receive $15,000 per year for four years.
Transfer of Life Insurance. Ed is the beneficiary of a $20,000 insurance policy on the life of his mother. Because Ed needs funds, he sells the policy to his sister, Amy, for $6,000. Amy subsequently pays premiums of $9,000.
· a.How much income must Amy report if she collects the face value of the policy upon the death of her mother?
· b.Would Amy have to report any income if her brother had given her the policy? Assume the only payment she made was $9,000 for the premiums.
For or From AGI Deductions. Roberta is an accountant employed by a local firm. During the year, Roberta incurs the following unreimbursed expenses:
a. Identify which of these expenses are deductible and the amount that is deductible by Roberta. Indicate whether they are deductible for or from AGI.
b. Would the answers to Part a change if the accounting firm reimburses Roberta for these expenses under an accountable plan?
c. Assume all of the same facts as in Part a, except that Roberta is self-employed. Identify which of the expenses are deductible, and indicate whether they are deductions for or from AGI.
Capitalization vs. Expense. Sam owns a small apartment building (this is the only rental building Sam owns). During the year Sam incurs the following expenditures:
Discuss the proper tax treatment for these expenditures.
Wayne and Maria file a joint tax return on which they itemize their deductions and report AGI of $50,000. During the year they incurred $1,500 of medical expenses when Maria broke her leg. Furthermore, their dentist informed them that their daughter, Alicia, needs $3,000 of orthodontic work to correct her overbite. Wayne also needs a new pair of eyeglasses that will cost $300. What tax issues should Wayne and Maria consider?
Deduction of Taxes. Joyce is a single, cash-method taxpayer. On April 11, 2014, Joyce paid $120 in state income taxes with her 2013 state income tax return. During 2014, Joyce had $1,600 in state income taxes withheld. On April 13, 2015, Joyce paid $200 with her 2014 state tax return. During 2015, she had $2,100 in state income taxes withheld from her paycheck. Upon filing her 2015 tax return on April 15, 2016, she received a refund of $450 for excess state income taxes withheld. Joyce had total AGI in 2015 and 2016 of $51,000 and $53,500, respectively. In 2015, Joyce also paid $5,500 in qualified residence interest.
· a.What is the amount of state income taxes Joyce may include as an itemized deduction for 2014?
· b.What is Joyce’s allowed itemized deduction for state income taxes for 2015?
· c.What is Joyce’s taxable income for 2015?
· d.What is her AGI for 2016?
Deduction of Taxes. Dawn, a single, cash-method taxpayer, paid the following taxes in 2015: Dawn’s employer withheld $5,400 for federal income taxes, $2,000 for state income taxes, and $3,800 for FICA from her 2015 paychecks. Dawn purchased a new car and paid $600 in sales tax and $70 for the license. The car’s FMV was $20,000 and it weighed 3,000 pounds. The county also assessed a property tax on the car. The tax was 2% of the car’s value and $10 per hundredweight. Dawn uses the car 100% of the time for personal purposes. Dawn sold her house on April 15, 2015. The county’s property tax on the home for 2015 is $1,850, payable on February 1, 2015. The county’s real property tax year is the calendar year. Dawn’s AGI for 2015 is $50,000 and her other itemized deductions exclusive of taxes are $4,000 (disregard any leap year).
· a.What is Dawn’s deduction for taxes in 2015?
· b.Where on Dawn’s tax return should she report her deduction for taxes?