Individual Income Taxes
43rd Edition
ISBN: 9780357109731
Author: Hoffman
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 4, Problem 17DQ
To determine
Identify the effect of the annuity on Mr. C’s final tax return.
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In 2018, Max is 85 years of age and single. He received Social Security payments totaling $14,000 (this includes Medicare premium of $600), dividend and interest income of $21,000, a pension of $30,000 and a taxable IRA benefits of $16,000. What is Max's adjusted gross income for 2018? What is his taxable income? What is his tax owed?
Ralph has a $130,000 IRA with Red Investments. For personal reasons, he decides to move his funds to Blue Investments. He requests that his funds be distributed to him on August 20, 2018.
What amount will Ralph receive from Red Investment?
What is the last day Ralph can deposit the funds from Red Investments and avoid taxation in the current year?
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Kelsey (age 30) purchased an annuity
for $120,00. The annuity will pay her
$1,200 per month for life beginning
when she turns age 60. At age 60, her
life expectancy is 25 years.
a. When Kelsey receives the first $1,200
monthly annuity payment, how much will be
taxable and how much will be a nontaxable
return of basis?
b. Kelsey lives to age 92. What is the tax
effect of each monthly annuity payment she
receives after age 85?
c. Instead, Kelsey dies after receiving all of her
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Chapter 4 Solutions
Individual Income Taxes
Ch. 4 - According to the Supreme Court, would it be good...Ch. 4 - Prob. 2DQCh. 4 - Prob. 3DQCh. 4 - Ben lost his job when his employer moved its...Ch. 4 - Howard buys wrecked cars and stores them on his...Ch. 4 - On December 29, 2019, an employee received a 5,000...Ch. 4 - Prob. 7DQCh. 4 - A Series EE U.S. government savings bond accrues...Ch. 4 - The taxpayer performs services with payment due...Ch. 4 - Wade paid 7,000 for an automobile that needed...
Ch. 4 - Prob. 11DQCh. 4 - Prob. 12DQCh. 4 - A divorce agreement entered into in 2017 requires...Ch. 4 - Prob. 14DQCh. 4 - Patrick and Eva are planning to divorce in 2019....Ch. 4 - Prob. 16DQCh. 4 - Prob. 17DQCh. 4 - Prob. 18DQCh. 4 - Prob. 19DQCh. 4 - Prob. 20DQCh. 4 - On January 1, 2019, Kunto, a cash basis taxpayer,...Ch. 4 - Bigham Corporation, an accrual basis calendar year...Ch. 4 - LO.3 Simba and Zola are married but file separate...Ch. 4 - Casper and Cecile divorced in 2018. As part of the...Ch. 4 - LO.4 Elizabeth made the following interest-free...Ch. 4 - Prob. 26CECh. 4 - Prob. 27CECh. 4 - Prob. 28PCh. 4 - Prob. 29PCh. 4 - Determine the taxpayers gross income for tax...Ch. 4 - Prob. 31PCh. 4 - Prob. 32PCh. 4 - Prob. 33PCh. 4 - Your client is a partnership, ARP Associates,...Ch. 4 - Trip Garage, Inc. (459 Ellis Avenue, Harrisburg,...Ch. 4 - Prob. 36PCh. 4 - Marlene, a cash basis taxpayer, invests in Series...Ch. 4 - Drake Appliance Company, an accrual basis...Ch. 4 - Freda is a cash basis taxpayer. In 2019, she...Ch. 4 - Prob. 40PCh. 4 - Prob. 41PCh. 4 - Troy, a cash basis taxpayer, is employed by Eagle...Ch. 4 - Prob. 43PCh. 4 - Prob. 44PCh. 4 - Prob. 45PCh. 4 - Nell and Kirby are in the process of negotiating...Ch. 4 - Alicia and Rafel are in the process of negotiating...Ch. 4 - Prob. 48PCh. 4 - Prob. 49PCh. 4 - Prob. 50PCh. 4 - Prob. 51PCh. 4 - Prob. 52PCh. 4 - For each of the following, determine the amount...Ch. 4 - Prob. 54PCh. 4 - Prob. 55PCh. 4 - Linda and Don are married and file a joint return....Ch. 4 - Charles E. Bennett, age 64, will retire next year...Ch. 4 - Donna does not think she has an income tax problem...Ch. 4 - Prob. 1RPCh. 4 - Prob. 2RPCh. 4 - Prob. 3RPCh. 4 - Prob. 1CPACh. 4 - Fred and Wilma were divorced in year 1 (before...Ch. 4 - Bill and Jane Jones were divorced on January 1,...Ch. 4 - Jake pays the following amounts to his former...Ch. 4 - Mary purchased an annuity that pays her 500 per...
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- Minnie owns a qualified annuity that cost 78,000. The annuity is to pay Minnie 650 per month for life after she reaches age 65. Minnie turns 65 on September 28, 2019, and receives her first payment on November 1, 2019. a. How much gross income does Minnie have from the annuity payments she receives in 2019? b. Shortly after receiving her payment on October 1, 2034, Minnie is killed in an automobile accident. How does the executor of Minnies estate account for the annuity on her return for the year 2034? c. Assume that the accident does not occur until November 1, 2043. How does the executor of Minnies estate account for the annuity on her 2043 return?arrow_forwardjohn's mother passed away during 2019. She received $200,000 in life insuranceproceeds. Because she was in school, her only other income was scholarships of$2,500 during 2019. What is john's taxable income?arrow_forwardHillary gets divorced in 2020 and is required to pay her ex-spouse $200 per month until her son reaches 18 years of age in 7 years and $120 per month thereafter. How much of her 2021 payments are deductible as alimony?arrow_forward
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- 7. Larry purchased an annuity from an insurance company that promises to pay him $220 per month for the rest of his life. Larry purchased the annuity and paid $37,000 for the policy. He is 62 and in good health, and received his first monthly payment on August 1st, 2017. How much must Larry include in his 2017 income?arrow_forwardDerek plans to retire on his 65th birthday. However, he plans to work part-time until he turns 71.00. During these years of part-time work, he will neither make deposits to nor take withdrawals from his retirement account. Exactly one year after the day he turns 71.0 when he fully retires, he will wants to have $2,749,902.00 in his retirement account. He he will make contributions to his retirement account from his 26th birthday to his 65th birthday. To reach his goal, what must the contributions be? Assume a 4.00% interest rate. Derek will deposit $2,596.00 per year into an account starting today and ending in year 9.00. The account that earns 15.00%. How much will be in the account 9.0 years from today?arrow_forwardSansa opened a savings account in 2020 and deposited $8,000. She received $200 of interest on the account in 2021, but did not withdraw the money. What year does Sansa include the interest income on her tax return? a. Interest income is never taxable. b. 2020, the year she deposited the money. c. 2021, the year she earned the interest. d. She does not pay tax on the interest until she withdraws the money.arrow_forward
- 1. Armando retired when he was 58 years old and began receiving annuity. The annuity pays him $800 per month for life from a qualified retirement plan from his former employer. The annuity began in on January 1, 2020. His investment in the annuity contract was $90,000. What is the amount of Armando's taxable income from this annuity contract for 2023? Show your work. Taxable amount for 2023 2. If Armando dies in 2049, what would be his taxable income from this annuity in tax year 2048? Taxable amount for 2048arrow_forwardLola, age 64 began receiving $1,200 as a monthly annuity in 2019 when her husband died. She received nine payments in 2019. Her husband contributed $54,800 to a qualified employee plan. Use the Simplified Method Worksheet (See image) to calculate Lola’s taxable amount from the annuity. (Show all computations)arrow_forwardBarney and Betty got divorced in 2018. In the divorce decree Betty agreed to pay Barney $21,400 per year for five years (or until Barney's death or remarriage) and $10,800 per year until their daughter, Pebbles, turns 19 years old. What amount (if any) is included in Barney's gross income in 2020? Question 5 options: $32,200 $33,800 $10,800 None of the payments are included in gross income. $21,400arrow_forward
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