Acc_547

* * * * * * * * * * * * * Week 3 Problem Solution Set Temitope Ajimotokan Accounting/547 September 22th, 2012 Christopher De Maline * * * * * * * * * * * * * * * * * * * * * * * * * * * * Comprehensive Problem 67 (Ch. 5) * a. illegal income = $1,200 (Gross income includes income from all sources either legal or illegal. b. Gain on stock sale = (32 x $1,000) - (31 x $1,000) * = $32,000 - $31,000 * = $1,000 c. Annuity = $25,000 - $210,000/20) * = $25,000 - $10,500 * = $14,500 d. Disability benefits are excluded because the taxpayer purchased the policy. e. Foreign-earned income = $91,500 x 181/365 * = $91,500 x 0.496 * = $45,384 (maximum exclusion) $18,000 excluded f. Scholarship = $200 (The $200 used towards car payment does not qualify for exclusion; the $300 used for books may be excluded). g. Paycheck from son = $0 (Under assignment of income doctrine, the income is taxed to the taxpayer who earned the income. h. State income tax refund = $50 i. Interest income = $30,000 ( included in gross income ) * * Gross income = $46,950 * * State Tax Refund/Tax Benefit Rule * 1. temized deductions with $610 overpayment = $5,750 2. 2009 Standard deduction = $5,700 (Single filing status) 3. Reduction in taxable income with $610 overpayment = $5,750 (greater of (1) and (2) 4. Itemized deductions without the $610 overpayment that was refunded * = $5,750 - $610 * = $5,140 5. Reduction in taxable income without the $610 overpayment that was refunded * = $5,700 ( greater of (2) and (4) * * Tax benefit from prior year $610 overpayment of state taxes * = $5,750 - $$5,700 * = $50 * * Comprehensive Problem 66 (Ch. 6) * $255,000 - 40,000 - 45,000 - 18,000 - 8,500-2000 - 4,500 - 1,250 -4,000 – 2000 = $129,750 After researching the following corrections have to be made:
The Johnson AGI $255,000 - $40,000 - $45,000 - $18,000 - $8,500 - $2,000 (They would also be allowed the $12 for the mileage on the move, however the meals would not be allowed $.24/mile x 50 mimles) - $4,500 - $1,250 - $4,000(Contribution to the 401k would be from AGI not for AGi) - $2,000 = $129,750. The couple would be allowed a deduction for the Alimony paid in for AGI calculations thus the net AGI would be $128,738 * Comprehensive Problem 81 (Ch. 8) a. $0 income. There is no need for Joe to include any income in year 0 from his contract with the city since the sale is contingent on a future sale. Joe does not have a fixed right to the income. b. $0 deduction. Entertainment is only deductible when there is a substantial business discussion on the day of the entertainment. Therefore, this payment is not deductible. c. $0 deduction. The insurance premiums on a key-man policy are not deductible because any life insurance proceeds paid to Joe would be tax exempt. d. $0 bad debt expense. Receivables identified as partially or completely uncollectible can be deducted next year. e. Under the economic performance rules, Joe will deduct $1,000 in year 0 and the remaining $2,000 in year 1. f. Joe can deduct the full cost of airfare ($300) and lodging ($350) as an ordinary and necessary business expense. However, Joe can only deduct half of the cost of meal ($250) and half of the cost of entertainment ($150). This is assuming his employee provided proper substantiation for the meals and entertainment. g. The 46 miles from his home to the factory is personal and therefore not deductible. Joe can either deduct the business portion of the operating costs of his car or a standard amount for each mile driven. If he elects the standard usage rate, Joe is entitled to $66 (.55 x 120) deduction. h. Joe can only deduct $25 for meals (trip away from home overnight), $20 for cab fare and $50 for the cost of symposium.