Intermediate Accounting

Prof. Frazier

Acct 553

Week 3 Assignments

Chapter 7

1. Differentiate between passive income, active income, passive income, and portfolio income. ( 2 points)

Passive income is income derived from passive activities, whereas active income derives from the direct efforts of the taxpayer, such as salary, commissions, wages, etc. Portfolio income is interest, dividends, annuities, and royalties not derived in the ordinary course of a trade or buisness.

2. Briefly, what is “material participation”? Why is the determination of whether a taxpayer materially participates important? ( 2 points)

Material participation requires a taxpayer to be involved in the operations of the activity on a regular, continuous, and substantial basis. ​​​​​​​​​​​​​

3. What carryback and carryforward procedures apply to business net operating losses? ( 2 points)

A business which has a net operating loss in one taxable year can carry the loss back to offset taxable income in the two preceding tax years or carry the loss forward to offset future taxable income for up to 20 years.

4. Problem—Chapter 7, Problem #36 (Page 7-32) ( 2 points)

5. Problem---Chapter 7, Problem #41 ( Page 7-41) ( 2 points)

Chapter 8

1. Rob and Perla Coleman have the following health expenses. Which expenses are deductible as medical expenses?

a. Toothpaste and dental floss for cavity prevention. Not deductible

b. Acupuncture treatments for Rob. Yes

c. Medical insurance premiums. Yes

d. Contact lenses for Perla. Yes

e. Cosmetic surgery (liposuction operation) for Perla. Not deductible

( 2 points)

2. Briefly describe the two major categories of qualified charitable organizations for tax purposes. ( 2 points) Public and Private charities.

The two major catergories of qualified charities organizations for tax purposes are; public or private charities organizations.

3. In order for employee expenses to be deductible for tax purposes, what basic requirement(s)...