Required information[The following information applies to the questions displayed below.]Louis files as a single taxpayer. In April of this year he received a $900 refund of state income taxes that he paid last year.How much of the refund, if any, must Louis include in gross income under the following independent scenarios? Assumethe standard deduction last year was $12,400. (Leave no answer blank. Enter zero if applicable.)c. Last year Louis claimed itemized deductions of $13,840. Louis's itemized deductions included state income taxes paid of $2,750 andno other state or local taxes.Refund to be included in gross income

A taxpayer is sometimes required to pay taxes in advance which is paid on estimation basis without…

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SWFT Comprehensive Vol 2020

43rd Edition

ISBN:9780357391723

Author:Maloney

Publisher:Maloney

Chapter10: Deduct Ions And Losses: Certain Itemized Deduct Ions

Section: Chapter Questions

Problem 4BCRQ

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Kurstie received a 800 state income tax refund this year. Kurstie deducted 3,000 of state income taxes paid in the prior year as part of her itemized deductions. Which of the following statements regarding the taxability of Kursties refund is true? a. If Kursties itemized deductions exceeded the standard deduction by 200, then the 800 refund is included in gross income. b. If Kursties itemized deductions exceeded the standard deduction by 200, then 200 of the refund is included in gross income. c. If Kurstie claimed the standard deduction instead, then the 800 refund is taxable. d. Kurstie must include 3,000 in gross income in the current year.
Determine whether the taxpayer has income that is subject to taxation in each of the following situations: a. Capital Motor Company is going out of business. As a result, June is able to purchase a car for 12,000; its original sticker price was 25,000. b. Chuck is the sole owner of Ransom, Inc., a corporation. He purchases a machine from Ransom for 10,000. Ransom had paid 50,000 for the machine, which was worth 30,000 at the time of the sale to Chuck. c. Gerry is an elementary school teacher. She receives the Teacher of the Month Award for February. As part of the award, she gets to drive a new car supplied by a local dealer for a month. The rental value of the car is 400 per month. d. Payne has worked for Stewart Company for the last 25 years. On the 25th anniversary of his employment with Stewart, he receives a set of golf clubs worth 1,200 as a reward for his years of loyal service to the company. e. Anna enters a sweepstakes contest that was advertised on the back of a cereal box, and wins 30,000. The prize will be paid out in 30 annual installments of 1,000. She receives her first check this year. f. Terry buys an antique vase at an estate auction for 780. Upon returning home, she accidentally drops the vase and finds that a 100 bill had been taped inside it.
Troy, a cash basis taxpayer, is employed by Eagle Corporation, also a cash basis taxpayer. Tray is a full-time employee of the corporation and receives a salary of 60,000 per year. He also receives a bonus equal to 10% of all collections from diems he serviced during the year. Determine the tax consequences of the following events to the corporation and to Troy: a. On December 31, 2019, Troy was visiting a customer. The customer gave Troy a 10,000 check payable to the corporation for appraisal services Troy performed during 2019. Troy did not deliver the check to the corporation until January 2020. b. The facts are the same as in part (a), except that the corporation is an accrual basis taxpayer and Troy deposited the check on December 31, but the bank did not add the deposit to the corporations account until January 2020. c. The facts are the same as in part (a), except that the customer told Troy to hold the check until January 2020 when the customer could make a bank deposit that would cover the check.

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