o the bank. Hal cashes in the CD (with no penalty) and lends Roy the funds at 2% interest. Hal is in the 32% marginal tax bracket. Roy, whose only so
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Roy decides to buy a personal residence and goes to the bank for a $150,000 loan. The bank tells him that he can borrow the funds at 4% if his father will guarantee the debt. Roy's father, Hal, owns a $150,000 CD currently yielding 3.5%. The Federal rate is 3%. Hal agrees to either of the following:
- Roy borrows from the bank with Hal's guarantee to the bank.
- Hal cashes in the CD (with no penalty) and lends Roy the funds at 2% interest.
Hal is in the 32% marginal tax bracket. Roy, whose only source of income is his salary, is in the 12% marginal tax bracket. The interest Roy pays on the mortgage will be deductible by him.
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- Carlos opens a dry cleaning store during the year. He invests 30,000 of his own money and borrows 60,000 from a local bank. He uses 40,000 of the loan to buy a building and the remaining 20,000 for equipment. During the first year, the store has a loss of 24,000. How much of the loss can Carlos deduct if the loan from the bank is nonrecourse? How much does Carlos have at risk at the end of the first year?Wrett purchases a new four-wheeler with a loan from his bank. The bank requires that he use his car, which is paid off, as collateral for the loan he secured from the bank. The value of the 4-wheeler is $2500.00. The value of the car is $15,000.00. Wrett defaults on his loan for the 4-wheeler and thus is forced to sell his car to repay the loan. Which statement below is true regarding this secured transaction? Multiple Choice Since the value of the car far exceeds the value of the 4-wheeler, the bank must accept an alternate good closer to value of the 4-wheeler. Wrett must dispose of his car and apply the proceeds to the loan and if there is any surplus the money belongs to Wrett. The bank will sell the car for the value of the loan of the 4-wheeler, not the actual fair market value of the car. Wrett must hand over physical possession and title to the car. In a workout, creditors are usually paid in all of the following ways except, Multiple Choice Bankruptcy…Roy decides to buy a personal residence and goes to the bank for a $150,000 loan. The bank tells him that he can borrow the funds at 4% if his father will guarantee the debt. Roy's father, Hal, owns a $150,000 CD currently yielding 3.5%. The Federal rate is 3%. Hal agrees to either of the following: Roy borrows from the bank with Hal's guarantee to the bank. Hal cashes in the CD (with no penalty) and lends Roy the funds at 2% interest. Hal is in the 32% marginal tax bracket. Roy, whose only source of income is his salary, is in the 12% marginal tax bracket. The interest Roy pays on the mortgage will be deductible by him. Considering only the tax consequences, answer the following. a. The loan guarantee:Hal's interest income from the CDs would be $ before taxes and $ after taxes. Roy's interest expense from the bank loan would be $ before taxes and $ after taxes. This arrangement would produce an overall cash flow after taxes to the family of $. b. The loan from Hal to Roy:Hal's tax…
- Wally is employed as an executive with Pay More Incorporated. To entice Wally to work for Pay More, the corporation loaned him $20,000 at the beginning of the year at a simple interest rate of 1 percent. Wally would have paid interest of $2,400 this year if the interest rate on the loan had been set at the prevailing federal interest rate. Required: Wally used the funds as a down payment on a speedboat and repaid the $20,000 loan (including $200 of interest) at year-end. a-1. Does this loan result in any income to either party? a-2. Indicate the amount below. Assume instead that Pay More forgave the loan and interest on December 31. What amount of gross income does Wally recognize this year?Wally is employed as an executive with Pay More Incorporated. To entice Wally to work for Pay More, the corporation loaned him $25,000 at the beginning of the year at a simple interest rate of 1 percent. Wally would have paid interest of $3,000 this year if the interest rate on the loan had been set at the prevailing federal interest rate. Required: a. Wally used the funds as a down payment on a speedboat and repaid the $25,000 loan (including $250 of interest) at year-end. a-1. Does this loan result in any income to either party? a-2. Indicate the amount of income to either party that results from the loan. b. Assume instead that Pay More forgave the loan and interest on December 31. What amount of gross income does Wally recognize this year? Complete this question by entering your answers in the tabs below. Required A1 Required A2 Required B བིཀ Wally used the funds as a down payment on a speedboat and repaid the $25,000 loan (including $250 of interest) at year- end. Does this loan…Cecil cashed in a Series EE savings bond with a redemption value of $13,000 and an original cost of $9,100. For each of the following independent scenarios, calculate the amount of interest Cecil will include in his gross income assuming he files as a single taxpayer: Note: Leave no answer blank. Enter zero if applicable. Required: Cecil plans to spend all of the proceeds to pay his son's tuition at State University. Cecil's son is a full-time student, and Cecil claims his son as a dependent. Cecil estimates his modified adjusted gross income at $53,400.
- Cecil cashed in a Series EE savings bond with a redemption value of $18,000 and an original cost of $12,600. For each of the following independent scenarios, calculate the amount of interest Cecil will include in his gross income assuming he files as a single taxpayer: a. Cecil plans to spend all of the proceeds to pay his son's tuition at State University. Cecil's son is a full-time student, and Cecil claims his son as a dependent. Cecil estimates his modified adjusted gross income at $65,400. Amount of interest to be included in gross income is: $0 b. Assume the same facts in part (a), except Cecil plans to spend $5,400 of the proceeds to pay his son's tuition at State University, and Cecil estimates his modified adjusted gross income at $61,200. Amount of interest to be included in gross income is: _____________Cecil cashed in a Series EE savings bond with a redemption value of $15,500 and an original cost of $10,850. For each of the following independent scenarios, calculate the amount of interest Cecil will include in his gross income assuming he files as a single taxpayer: Note: Leave no answer blank. Enter zero if applicable. Required: a. Cecil plans to spend all of the proceeds to pay his son's tuition at State University. Cecil's son is a full-time student, and Cecil claims his son as a dependent. Cecil estimates his modified adjusted gross income at $65,800. b. Assume the same facts in part (a), except Cecil plans to spend $4,650 of the proceeds to pay his son's tuition at State University, and Cecil estimates his modified adjusted gross income at $63,100. Complete this question by entering your answers in the tabs below. Required A Required B Cecil plans to spend all of the proceeds to pay his son's tuition at State University. Cecil's son is a full-time student, and Cecil claims his…Jessica is a professional consultant. She agrees to consulting services for Joe for $2,000. After she finishes, Joe does not have cash to pay Jessica, but he has an antique, collectible baseball card with a fair market value of $2,000 that he gives her to satisfy the payment. The baseball card cost Joe $500. How much should Jessica include in her gross income?
- Alex bought a used motorcycle from Sheldon's dealership for $28,000 to be paid in installments over three years. He traded in his old motorcycle for $8,000 at the same time, but Sheldon wanted to keep the two transactions separate for financial reasons and he promised to issue a bank draft to Alex for the trade-in. Sheldon assigned the $28,000 contract to SNL Finance. The first Alex knew of this was when he received copies of both contracts and an assignment notice to make the payments to SNL. This was a valid assignment as Alex was notified in writing. Alex had not yet received the $8,000 and, when he calls Sheldon, he finds the dealership has been sold to someone else and Sheldon's whereabouts are unknown. Multiple Choice Alex may deduct $8,000 from what he owes SNL and make payments to them totaling $20,000. SNL must try to find Sheldon and get the $8,000 from him, but if they cannot, Alex must pay them. None of the choices. Alex can try to find Sheldon and get his money from him,…Jan Guerra lends $9000 to her second cousin using a 180-day 10% simple interest note that was signed on October 30. Guerra subsequently has a car accident and desperately needs money, so she sells the note at a discount of 15% on January 3 to an investor. Find (a) the discount, (b) the proceeds, and (c) the amount of money Guerra gains or loses.Lionel is an unmarried law student at State University Law School, a qualified educational institution. This year Lionel borrowed$24,000from County Bank and paid interest of$1,440. Lionel used the loan proceeds to pay his law school tuition. Calculate the amounts Lionel can deduct for interest on higher-education loans under the following circumstances: Note: Leave no answer blank. Enter zero if applicable. a. Lionel's AGI before deducting interest on higher-education loans is$50,000.