True or False questions: 1. Bob owns a tract of land worth $100,000 with an adjusted basis of $50,000. Bob needs $50,000 to pay for a new house. If Bob elects to borrow $50,000 against the land rather than sell the land, this is a tax recognition event.
True or False questions: 1. Bob owns a tract of land worth $100,000 with an adjusted basis of $50,000. Bob needs $50,000 to pay for a new house. If Bob elects to borrow $50,000 against the land rather than sell the land, this is a tax recognition event.
Chapter16: Accounting Periods And Methods
Section: Chapter Questions
Problem 36P
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Transcribed Image Text:True or False questions:
1. Bob owns a tract of land worth $100,000
with an adjusted basis of $50,000. Bob needs
$50,000 to pay for a new house. If Bob elects
to borrow $50,000 against the land rather
than sell the land, this is a tax recognition
event.
2. Susan, whose marginal tax rate is 35%, is
offered the choice of a $10,000 raise in her
salary or a $10,000 employer payment
toward the costs of her group health
insurance as a nontaxable fringe benefit.
Susan is probably better off tax-wise to take
the health insurance payment by the
employer because that, unlike the raise, in not
an income recognition event.
3. Even when tax rates are constant, delaying
income recognition or accelerating expense
recognition can be beneficial.
Transcribed Image Text:4. George is currently in the 39.6% marginal
tax bracket. However, he plans to retire on
January 15, 2021 on his 40th birthday and has
no plans to work for the remainder of 2021.
Instead, he intends to live off of his very large
non-IRA savings account for the remainder of
2021. He wants to make a large charitable
donation to DBU in the near future. Assuming
that he will itemize in both years (maybe not
the best assumption under current tax law),
George will be better off to make the
charitable deduction in 2020.
Please explain if the answer is false, thank
you!
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