Explain the possible consequence on income tax due to the given transactions.

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Answer 1

Question

Chapter 3, Problem 1DQ

To determine

Explain the possible consequence on income tax due to the given transactions.

Expert Solution & Answer

Explanation of Solution

Income tax: Income tax is a tax levied on an individual’s income (taxable income). It is a direct tax which means it is levied on and paid by the same individual. It is a progressive tax which means the tax rates will change according to the changes in the level of income.

Possible consequence on income tax:

a. Gambling losses are deductible to the gambling gain but only to some extent.
b. Only the expenses for a dependent have an exception and there is no deduction for the payment of some other persons.
c. Refund of income tax is not income because it is an adjustment transaction to the previous expenditure.
d. There is no deduction for the payment of fines and penalties even it occurred due to personal or business activities.
e. There is no deduction for the political contribution even it provide benefit to Mr. A.
f. Borrowing money from bank or other person is not an income for individual or for the company.
g. Profit or loss earned by selling the personal use assets does not balance each other. If there is profit, then it is a taxable income and if it is loss, there is no deduction.
h. Funeral expenses cannot be claimed as deductions.
i. Premium paid for life insurance policy is also not deductible even it is paid for a dependent.

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Students have asked these similar questions

Peter Marwick, an accountant and accrual basis taxpayer, performed accounting services in Year One for Ellie Vader. Peter gave Ellie a bill for $30,000 in Year One. Ellie paid Peter $5,000 in Year One, but Ellie disputes that she owes the other $25,000 because she thinks his work is shoddy. Ellie agreed to put $25,000 in escrow until she and Peter could resolve their legal dispute over Peter's fees. In Year Three after litigation, the dispute is resolved in Peter's favor and he gets the money out of escrow. How much income does Peter have and when? Question 9 options: Peter has $30,000 income in Year 1 because he is on the accrual method. Peter has no income in Year 1 because there is a contested liability. Ellie has $25,000 in cancellation of indebtedness income in Year 1. Peter has $5,000 income in Year 1 and $25,000 in Year 3 under the Claim of Right Doctrine.

Strong Arm Steve, a cash basis calendar year taxpayer, runs an illegal protection business. Basically, small businesses in his neighborhood pay him money to gain protection from theft. During the current year, a bill, H.R. 55, is introduced into the state legislature which, if enacted, would legalize his protection racket. Strong Arm Steve had the following expenses for the year: Operating expenses in conducting his business Payoffs to the cops to allow him to bully small businesses Newspaper ads supporting H.R. 55, no mention of his business in the ad. Political contributions to legislators who support H.R. 55 Of these expenditures, Strong Arm teve may deduct: O $100,000. O $120,000. $125,000. O $135,000. $100,000 20,000 5,000 10,000

Vella owns and operates an illegal gambling establishment. In connection with this activity, he has the following expenses during the year: Rent Bribes Travel expenses Utilities Wages Payroll taxes Property insurance Illegal kickbacks $33,500 50,250 3,350 20,100 248,000 16,750 1,675 30,150 What are Vella's total deductible expenses for tax purposes?

Answer 2

Question

Chapter 3, Problem 1DQ

To determine

Explain the possible consequence on income tax due to the given transactions.

Expert Solution & Answer

Explanation of Solution

Income tax: Income tax is a tax levied on an individual’s income (taxable income). It is a direct tax which means it is levied on and paid by the same individual. It is a progressive tax which means the tax rates will change according to the changes in the level of income.

Possible consequence on income tax:

a. Gambling losses are deductible to the gambling gain but only to some extent.
b. Only the expenses for a dependent have an exception and there is no deduction for the payment of some other persons.
c. Refund of income tax is not income because it is an adjustment transaction to the previous expenditure.
d. There is no deduction for the payment of fines and penalties even it occurred due to personal or business activities.
e. There is no deduction for the political contribution even it provide benefit to Mr. A.
f. Borrowing money from bank or other person is not an income for individual or for the company.
g. Profit or loss earned by selling the personal use assets does not balance each other. If there is profit, then it is a taxable income and if it is loss, there is no deduction.
h. Funeral expenses cannot be claimed as deductions.
i. Premium paid for life insurance policy is also not deductible even it is paid for a dependent.

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Answer 3

Question

Chapter 3, Problem 1DQ

To determine

Explain the possible consequence on income tax due to the given transactions.

Expert Solution & Answer

Explanation of Solution

Income tax: Income tax is a tax levied on an individual’s income (taxable income). It is a direct tax which means it is levied on and paid by the same individual. It is a progressive tax which means the tax rates will change according to the changes in the level of income.

Possible consequence on income tax:

a. Gambling losses are deductible to the gambling gain but only to some extent.
b. Only the expenses for a dependent have an exception and there is no deduction for the payment of some other persons.
c. Refund of income tax is not income because it is an adjustment transaction to the previous expenditure.
d. There is no deduction for the payment of fines and penalties even it occurred due to personal or business activities.
e. There is no deduction for the political contribution even it provide benefit to Mr. A.
f. Borrowing money from bank or other person is not an income for individual or for the company.
g. Profit or loss earned by selling the personal use assets does not balance each other. If there is profit, then it is a taxable income and if it is loss, there is no deduction.
h. Funeral expenses cannot be claimed as deductions.
i. Premium paid for life insurance policy is also not deductible even it is paid for a dependent.

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Answer 4

Question

Chapter 3, Problem 1DQ

To determine

Explain the possible consequence on income tax due to the given transactions.

Expert Solution & Answer

Explanation of Solution

Income tax: Income tax is a tax levied on an individual’s income (taxable income). It is a direct tax which means it is levied on and paid by the same individual. It is a progressive tax which means the tax rates will change according to the changes in the level of income.

Possible consequence on income tax:

a. Gambling losses are deductible to the gambling gain but only to some extent.
b. Only the expenses for a dependent have an exception and there is no deduction for the payment of some other persons.
c. Refund of income tax is not income because it is an adjustment transaction to the previous expenditure.
d. There is no deduction for the payment of fines and penalties even it occurred due to personal or business activities.
e. There is no deduction for the political contribution even it provide benefit to Mr. A.
f. Borrowing money from bank or other person is not an income for individual or for the company.
g. Profit or loss earned by selling the personal use assets does not balance each other. If there is profit, then it is a taxable income and if it is loss, there is no deduction.
h. Funeral expenses cannot be claimed as deductions.
i. Premium paid for life insurance policy is also not deductible even it is paid for a dependent.

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Answer 5

Chapter 3, Problem 1DQ

To determine

Explain the possible consequence on income tax due to the given transactions.

Expert Solution & Answer

Explanation of Solution

Income tax: Income tax is a tax levied on an individual’s income (taxable income). It is a direct tax which means it is levied on and paid by the same individual. It is a progressive tax which means the tax rates will change according to the changes in the level of income.

Possible consequence on income tax:

a. Gambling losses are deductible to the gambling gain but only to some extent.
b. Only the expenses for a dependent have an exception and there is no deduction for the payment of some other persons.
c. Refund of income tax is not income because it is an adjustment transaction to the previous expenditure.
d. There is no deduction for the payment of fines and penalties even it occurred due to personal or business activities.
e. There is no deduction for the political contribution even it provide benefit to Mr. A.
f. Borrowing money from bank or other person is not an income for individual or for the company.
g. Profit or loss earned by selling the personal use assets does not balance each other. If there is profit, then it is a taxable income and if it is loss, there is no deduction.
h. Funeral expenses cannot be claimed as deductions.
i. Premium paid for life insurance policy is also not deductible even it is paid for a dependent.

Answer 6

Chapter 3, Problem 1DQ

To determine

Explain the possible consequence on income tax due to the given transactions.

Expert Solution & Answer

Explanation of Solution

Income tax: Income tax is a tax levied on an individual’s income (taxable income). It is a direct tax which means it is levied on and paid by the same individual. It is a progressive tax which means the tax rates will change according to the changes in the level of income.

Possible consequence on income tax:

a. Gambling losses are deductible to the gambling gain but only to some extent.
b. Only the expenses for a dependent have an exception and there is no deduction for the payment of some other persons.
c. Refund of income tax is not income because it is an adjustment transaction to the previous expenditure.
d. There is no deduction for the payment of fines and penalties even it occurred due to personal or business activities.
e. There is no deduction for the political contribution even it provide benefit to Mr. A.
f. Borrowing money from bank or other person is not an income for individual or for the company.
g. Profit or loss earned by selling the personal use assets does not balance each other. If there is profit, then it is a taxable income and if it is loss, there is no deduction.
h. Funeral expenses cannot be claimed as deductions.
i. Premium paid for life insurance policy is also not deductible even it is paid for a dependent.

Answer 7

Chapter 3, Problem 1DQ

To determine

Explain the possible consequence on income tax due to the given transactions.

Answer 8

Expert Solution & Answer

Explanation of Solution

Income tax: Income tax is a tax levied on an individual’s income (taxable income). It is a direct tax which means it is levied on and paid by the same individual. It is a progressive tax which means the tax rates will change according to the changes in the level of income.

Possible consequence on income tax:

a. Gambling losses are deductible to the gambling gain but only to some extent.
b. Only the expenses for a dependent have an exception and there is no deduction for the payment of some other persons.
c. Refund of income tax is not income because it is an adjustment transaction to the previous expenditure.
d. There is no deduction for the payment of fines and penalties even it occurred due to personal or business activities.
e. There is no deduction for the political contribution even it provide benefit to Mr. A.
f. Borrowing money from bank or other person is not an income for individual or for the company.
g. Profit or loss earned by selling the personal use assets does not balance each other. If there is profit, then it is a taxable income and if it is loss, there is no deduction.
h. Funeral expenses cannot be claimed as deductions.
i. Premium paid for life insurance policy is also not deductible even it is paid for a dependent.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Ch. 3 - Prob. 1DQ Ch. 3 - Which of the following items are inclusions in...Ch. 3 - Which of the following items are exclusions from...Ch. 3 - Prob. 4DQ Ch. 3 - In choosing between taking the standard deduction...Ch. 3 - Prob. 6DQ Ch. 3 - Prob. 7DQ Ch. 3 - Prob. 8DQ Ch. 3 - Prob. 9DQ Ch. 3 - Prob. 10DQ

Explain the possible consequence on income tax due to the given transactions.

Concept explainers

Explain the possible consequence on income tax due to the given transactions.

Explanation of Solution

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