Exam 3: Determining Gross Income

Explain the doctrine of constructive receipt and the claim of right doctrine.

Which of the following explain why it is important to determine the period in which income is recognized?

What is the tax benefit rule? Provide an example of its application.

The assignment of income doctrine allows one taxpayer to assign income to another taxpayer for tax purposes.

Howard can invest $50,000 in land that is expected to increase in value by 8 percent per year.Alternatively he could invest in corporate bonds paying 8 percent interest,with interest reinvested at 8 percent.Howard's capital gains tax rate is 15 percent and his marginal tax rate is 28 percent.Which investment should Howard make and what is the advantage of this alternative over the other investment if he plans to sell the land in five years.

John and Ethel,a married couple,receive $21,000 in Social Security benefits in 2015.They also receive $82,000 in taxable pension payments and $6,000 in municipal bond interest.What is their adjusted gross income for 2015?

When is a taxpayer required to annualize income for a short tax year?

All of the following are acceptable methods of accounting for revenue and expenses for tax purposes except:

If a beneficiary of a life insurance policy receives the insurance proceeds over time in installments,then each installment received is fully taxable.

Clayton Corporation receives $100,000 to provide garbage service for the next four years:

Which type of book/tax differences are accounted for as deferred tax assets or deferred tax liabilities?

Billy's father owns a controlling interest in Big Top Corporation.Billy needed $20,000 to pay a gambling debt and the corporation made a loan to Billy at no interest for the $20,000.This transaction can be characterized as:

A business must have a permanent location within a state to establish nexus.

Gogo-a-gogo,a manufacturer of dance shoes located in France,is a 90% owned subsidiary of Dance-Togs,Incorporated,a calendar-year corporation.In 2014 it earned a total of $400,000 on its manufacturing operations in France and paid $120,000 in French income taxes on that income.It distributed a total of $60,000 to its parent corporation during the year.How much of Gogo-a-gogo's income must Dance-Togs include in its income for 2015?

When is money received in the form of a scholarship included in income?

International tax treaties help to alleviate the potential of double taxation when companies have business facilities in several countries.

Under the source principle of international taxation,income will be taxed in a particular jurisdiction if the source of that income is a business operating in that jurisdiction.

When a taxpayer has a tax year of less than 12 months,the taxpayer must always annualize income.

In 1997,Carol purchased a single life annuity for $150,000 that would pay her $15,000 per year for life beginning in 2009.Carol's life expectancy from 2009 forward on which the payments were based was 20 years. a.How much would Carol include in income if she is still receiving payments in 2029? b.If Carol dies in 2016 after receiving that year's payment,what is the unrecovered investment remaining? c.How is the unrecovered investment treated for tax purposes?

Wilma divorced Barney last year.This year she received the title to their boat that cost $45,000 and is now worth $55,000.Barney paid Wilma $1,500 per month,$500 for alimony and $1,000 for support of their two children.Wilma owed $60,000 to the bank for a loan on a failed business.To satisfy the debt,she transferred title of the boat to the bank and paid an additional $5,000.What are the tax consequences of these transactions for Barney and Wilma?