1.Tracy transfer to Glen a life insurance policy with a face value of $40,000 and a cash value of $8,000 in payment of a personal debt. Glen continues to make premium payments on the policy until Tracy's death. At that time, Glen had paid $3,500 in premiums.
a. How much income must Glen report when he receives the $40,000 in proceeds?
b. Would your answer be difference if Tracy were a shareholder and CEO of a corporation to which the policy was transferred? why?
2.Sherry had $5,600 withheld from her wages for state income taxes during 2011. In may of 2011, se received a $450 refund from her prior year tax return. The amount of Sherry's tax on her 2011 tax return is $6,100 and she pays the additional $500(6,100-5,600) when she files her return in April of 2012.
a. Assuming she elects to deduct the state income tax , how much should Sherry deduct on schedule A of form 1040 of her 2011 federal income tax return.?
b. How should Sherry report the $450 refund?
3. During 2011, Margaret and John received $24,000 in Social Security benefits. The amount of their adjusted gross income for the year before any SS income was $140,000 and they received $19,000 in tax-exempt income.
Explain the treatment of their SS income for tax purses and the likely percentage of the SS income that will be taxable to Margaret and John.
4.Ordinarily life insurance proceeds are included from gross income. Why would they be taxable if earlier the policy had been transferred for valuable consideration?
5. Peter is a self-employed attorney. He gives the following information about his business to his CPA for use in preparing his 2011 tax return:
Income
Fees from law practice $153,000
Expenses
Malpractice insurance $8,000
Office rent 12,000
office supplies 5,500
travel expenses 2,000
meals and entertainment 6,500
paralegal wages 25,500
country club dues ( Peter uses the club for business entertainment) 2,500
Peter also drove his car 445 mile per month for business and used the standard mileage method for computing transportation costs. How much will Peter show on his schedule C for 2011 for:
a. Income
b. Tax deductible expenses
c. Taxable income
a. How much income must Glen report when he receives the $40,000 in proceeds?
b. Would your answer be difference if Tracy were a shareholder and CEO of a corporation to which the policy was transferred? why?
2.Sherry had $5,600 withheld from her wages for state income taxes during 2011. In may of 2011, se received a $450 refund from her prior year tax return. The amount of Sherry's tax on her 2011 tax return is $6,100 and she pays the additional $500(6,100-5,600) when she files her return in April of 2012.
a. Assuming she elects to deduct the state income tax , how much should Sherry deduct on schedule A of form 1040 of her 2011 federal income tax return.?
b. How should Sherry report the $450 refund?
3. During 2011, Margaret and John received $24,000 in Social Security benefits. The amount of their adjusted gross income for the year before any SS income was $140,000 and they received $19,000 in tax-exempt income.
Explain the treatment of their SS income for tax purses and the likely percentage of the SS income that will be taxable to Margaret and John.
4.Ordinarily life insurance proceeds are included from gross income. Why would they be taxable if earlier the policy had been transferred for valuable consideration?
5. Peter is a self-employed attorney. He gives the following information about his business to his CPA for use in preparing his 2011 tax return:
Income
Fees from law practice $153,000
Expenses
Malpractice insurance $8,000
Office rent 12,000
office supplies 5,500
travel expenses 2,000
meals and entertainment 6,500
paralegal wages 25,500
country club dues ( Peter uses the club for business entertainment) 2,500
Peter also drove his car 445 mile per month for business and used the standard mileage method for computing transportation costs. How much will Peter show on his schedule C for 2011 for:
a. Income
b. Tax deductible expenses
c. Taxable income
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