Individual Income Taxes
43rd Edition
ISBN: 9780357109731
Author: Hoffman
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Textbook Question
Chapter 5, Problem 46P
LO.2, 5 Rosa’s employer has instituted a flexible benefits program. Rosa will use the plan to pay for her daughter’s dental expenses and other medical expenses that are not covered by health insurance. Rosa is in the 24% marginal tax bracket and estimates that the medical and dental expenses not covered by health insurance will be within the range of $4,000 to $5,000. Her employer’s plan permits her to set aside as much as $5,000 in the flexible benefits account. Rosa does not itemize her deductions.
- a. Rosa puts $4,000 into her flexible benefits account, and her actual expenses are $5,000. What is her cost of underestimating the expenses?
- b. Rosa puts $5,000 into her flexible benefits account, and her actual expenses are only $4,000. What is her cost of overestimating her expenses?
- c. What is Rosa’s cost of underfunding as compared with the cost of overfunding the flexible benefits account?
- d. Does your answer in part (c) suggest that Rosa should fund the account closer to the low end or to the high end of her estimates?
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Rosa's employer has instituted a flexible benefits program. Rosa will use the plan to pay for her
daughter's dental expenses and other medical expenses that are not covered by health insurance. Rosa
is in the 24% marginal tax bracket and estimates that the medical and dental expenses not covered by
health insurance will be within the range of $2,000 to $3,000. Her employer's plan permits her to set
aside as much as $2,750 in the flexible benefits account. Rosa does not itemize her deductions.
a. Rosa puts $1,750 into her flexible benefits account, and her actual expenses are $2,750. What is
her cost of underestimating the expenses?
b. Rosa puts $2,750 into her flexible benefits account, and her actual expenses are only $1,750. What
is her cost of overestimating her expenses? (Assume this is a "use or lose" plan).
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Jangyoun is a married taxpayer with a dependant 4-year-old daughter. His employer offers a
flexible spending account under which he can choose to receive cash or, alternatively, choose
from certain fringe benefits. These benefits include health insurance that costs $9,000 and
child care that costs $2,600. Assume Jangyoun is in the 28% tax bracket.
A) How much income tax will Jangyoun save if he chooses to participate in the employer's
health insurance plan? Assume that he does not have sufficient medical expenses to itemize
his deductions.
B) would you recommend that Jangyoun participate in the employer's health insurance plan if
his wife's employer already provides comparable health insurance coverage for the family?
C) Would you recommend that Jangyoun participate in the employer-provided child care
option if he has the alternative option of claiming a child care credit of $480?
Nicole's employer, Poe Corporation, provides her with an automobile allowance of $30,000 every other year. Her marginal tax rate is 32 percent. Answer the following questions relating to this fringe benefit. Required: What is Nicole's after-tax benefit if she receives the allowance this year? What is Poe's after-tax cost of providing the auto allowance?
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Chapter 5 Solutions
Individual Income Taxes
Ch. 5 - Prob. 1DQCh. 5 - Prob. 2DQCh. 5 - Prob. 3DQCh. 5 - Prob. 4DQCh. 5 - Prob. 5DQCh. 5 - Prob. 6DQCh. 5 - Prob. 7DQCh. 5 - Holly was injured while working in a factory and...Ch. 5 - Prob. 9DQCh. 5 - Prob. 10DQ
Ch. 5 - Ted works for Azure Motors, an automobile...Ch. 5 - Prob. 12DQCh. 5 - Eagle Life Insurance Company pays its employees...Ch. 5 - Several of Egret Companys employees have asked the...Ch. 5 - Prob. 15DQCh. 5 - Tammy, a resident of Virginia, is considering...Ch. 5 - Andrea entered into a 529 qualified tuition...Ch. 5 - Prob. 18DQCh. 5 - Prob. 19DQCh. 5 - Valentino is a patient in a nursing home for 45...Ch. 5 - Prob. 21CECh. 5 - Ellie purchases an insurance policy on her life...Ch. 5 - Prob. 23CECh. 5 - Leland pays premiums of 5,000 for an insurance...Ch. 5 - Jarrod receives a scholarship of 18,500 from...Ch. 5 - Prob. 26CECh. 5 - Prob. 27PCh. 5 - Prob. 28PCh. 5 - Prob. 29PCh. 5 - LO.2 What is the taxpayers gross income in each of...Ch. 5 - LO.2 Donald was killed in an accident while he was...Ch. 5 - Prob. 32PCh. 5 - Prob. 33PCh. 5 - Prob. 34PCh. 5 - LO.2 Leigh sued an overzealous bill collector and...Ch. 5 - LO.2 Determine the effect on gross income in each...Ch. 5 - Prob. 37PCh. 5 - Prob. 38PCh. 5 - Prob. 39PCh. 5 - LO.2 Belinda spent the last 60 days of 2019 in a...Ch. 5 - LO.2 Tim is the vice president of western...Ch. 5 - LO.2 Does the taxpayer recognize gross income in...Ch. 5 - Prob. 43PCh. 5 - Prob. 44PCh. 5 - Prob. 45PCh. 5 - LO.2, 5 Rosas employer has instituted a flexible...Ch. 5 - Prob. 47PCh. 5 - Prob. 48PCh. 5 - Prob. 49PCh. 5 - Prob. 50PCh. 5 - LO.2 Tonya, who lives in California, inherited a...Ch. 5 - Prob. 52PCh. 5 - Prob. 53PCh. 5 - Prob. 54PCh. 5 - Prob. 55PCh. 5 - Prob. 56PCh. 5 - LO.4 Vic, who was experiencing financial...Ch. 5 - Prob. 1RPCh. 5 - Prob. 2RPCh. 5 - Prob. 3RPCh. 5 - Prob. 4RPCh. 5 - Prob. 1CPACh. 5 - Jeffrey Dean, a Masters Degree candidate at North...Ch. 5 - Linda is an employee of JRH Corporation. Which of...Ch. 5 - Kim was seriously injured at her job. As a result...Ch. 5 - Danny received the following interest and dividend...Ch. 5 - Prob. 6CPA
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