Determine the Amount of Gross Income the Taxpayer Must Report

Essay

Determine the amount of gross income the taxpayer must report in each of the following situations. Explain why the amount is taxable and how you determined the taxable amount.
a.Marlon purchased an annuity costing $13,000 that will pay him $300 per month for life upon reaching age 65. In 2018, when his life expectancy is 14 years, Marlon turns 65 and begins receiving the annuity payments. In 2018, Marlon receives $1,800 (6 payments) from the annuity.
b.Fargo Systems Corporation, an accrual basis taxpayer, leases computer time on its mainframe computer. In November 2018, Fargo enters into a two-year lease with Bismarck Processing, Inc. The lease agreement requires Bismarck to pay a $4,800 fixed fee when the lease is signed and $100 per hour of mainframe use, paid on a monthly basis. Fargo receives the $4,800 payment on November 1, 2018. Bismarck pays Fargo $800 on December 15, 2018 for November computer use and $1,200 on January 18, 2019 for December computer use.
c.Maria, a single taxpayer, is retired. During the current year she receives $19,000 from her employer's qualified pension plan, $1,000 in interest on a savings account, $30,000 in interest on tax-exempt municipal bonds, and $10,000 in Social Security benefits.
d.Stuart works for Prairie Surveyors of Kansas. During the current year, Prairie Surveyors replaces all of its computer equipment. Stuart makes a deal with his boss to purchase one of the old computers for $200. Prairie Surveyors received a $1,000 trade-in allowance on the other computers it replaced.?