Accounting

Week 2 Assignment

Kelvin L. Hollman

Acc401/Federal Income Taxes

Instructor: Jacob Burdick

January 23, 2013

Ch. 4

53. Under the terms of divorce decree executed May 1, 2010, Rob transferred a house worth $650,000 to his ex-wife, Linda and was to make alimony payments of $3,000 per month. The property has a tax basis to Rob of $300,000.

a. How much of this must be reported on Linda’s tax return?

Answer:

Linda must report the alimony payments of $3,000 per month on her tax return.

b. Of that amount, how much is taxable gain or loss that Linda must recognize related to the transfer of the house?

Answer:

The transfer of the house to Linda is a property settlement pursuant to a divorce. Therefore, she does not recognize any taxable gain transfer on the house. Linda will only recognize gain if she sells the home for an amount greater than the transferred basis.

55. Indicate whether each of the following items is considered for AGI, (above the line) deduction for the 2010 tax year?

a. Student loan interest

b. Gambling losses

c. Early withdrawal penalty

d. Child support payments

e. Charitable contributions

f. One- half of self-employment taxes

g. Alimony

h. Scholarships for tuition and books

i. Moving expenses

j. Property taxes

k. Self-employed health insurance premiums

Answer:

For AGI deductions – A, C, F, G, I, and K.

Ch.5

54. Steve purchased a personal residence from Adam. In order to sell the residence, Adam agreed to pay $4,500 in points related to Steve’s mortgage. Discuss the tax consequences from both Steve’s and Adam’s perspectives.

Answer:

Mortgage points paid on a personal residence are deductible if paid by the taxpayer. If the seller pays the points (as is the case here), the buyer is still treated as paying the points if the amount is subtracted from the purchase

61. Reynaldo and Sonya, a married couple, had flood damage in their home...