4-25
Billy Dent must include 5000+4000= 9,000 in his 2011 income tax return.
Rent is taxable when received. Security deposit that is refundable is not taxable. 4-32
a) There is no impact to Barbara or Arnolds taxable income due to the transfer of the home. She assumes the home with a basis of $400,000.
b) no impact to Arnold or Barbara's taxable income because the payments wouldn't be considered alimony. If there was a portion of the amount that was interest then Arnold could deduct that but it doesn't indicate any of th $18,000 was interest.
c) $1500 is for child support, which does not have any tax ramifications. The other half, $1500, is alimony paid to Barbara. Alimony is taxable to payee and deductible to payer. So Barbara should include $1500 in gross income and Arnold can deduct $1500 from his gross income.
5-26
US Series EE bonds: the interest on US Series EE bonds is tax exempt when the interest is used for educational purpose; otherwise, it's a tax deferred bond, which means the purchaser pays tax when he withdraws the money. Qualified veterans' mortgage bonds: Interest on a private activity bond that is a qualified bond is tax exempt. The interest is a preference item and may be subject to AMT.
6-29
· Salaries and wages to employees ......deductible ............. salaries and wages are business expense
· Purchase of new office building .............not deductible......capital expenditure is not deductible
· Payment of illegal parking fines ............. not deductible .......illegal or in violation of public policy
· President's daughter's wedding ................. not deductible.....it's considered personal expense
· Entertainment expenses related to business ............50% deductible meals & entertainment... expense is 50% deductible
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