Business Income and Expenses, Part I

Chapter Two

Group Two- Problems

1- A- E

B- I

C-I

D-I

E-I

F-I

G-I

H-E

J-E

K-I

2- $ 8,000

3- $300, Because is a service fee

4- Yes

5- 0%, 15%, 20%

6- The interested may be reported in the year the bonds are cashed or the year they mature.

7- See the form

8- A- 1- None, 2- $200/ month, B- 1- None , 2- $400,000

9- Arlen $2,000, Jane, $2,000

10- Cindy- None, Allen $500,000

11- A- $50,000

B- $350

C- $1,000,000

D- $50,000

12- A- $4,000

B- $15700

C- $3,500

13- $13333,332

14- $7,000

15- 1- $1600

2- $40,000

3- 260

4-$3, 9740

5- $317,920

6- 0

7- $40,000

8- $40,000

9- $24,000

16- $56000= (Because $100,000 total proceed)- $30,000 (Value) + $14,000( Premiums paid).

17- $1200

18- $20,000

19- $200,000

20- $7,500 because the $125,000 is excluded fair market value.

21- None

22- None

23- $20,000

24- $100,000

25- $2000 Because Allen is excluded the monthly payment and the $1500 is deductible and is excluded tax.

26- A- Meals and lodging are excluded from gross income provided they are for the convenience of the employer and they are furnished on the business premises.

B- Meals and lodging are excluded from gross income provided they are for the convenience of the employer and they are furnished on the business premises.

27- 8.33%

28- % 5 Because taxpayer in low tax brackets are likely to find that they earn a higher overall return investing in taxable bonds rather than comparable tax- free municipal bonds.

29- $3,250

30- $750

31- Yes, because the medical flexible spending account is excluded from employee’s gross income.

32- 1- $6,000

2- $3.000

3- $18,000

4- $ 30,000

5- $ 51,000

6- 0

7- $51,000

8- $25,000

9- $26,000

10- $9,000

11- 0

12- $9,000

13- $4,500

14- $3,000

15- 0

16- $3,000

17- $5,100

18- $3,000

33- A- Yes B- $20,000 C- %50