Individual Income Taxes
43rd Edition
ISBN: 9780357109731
Author: Hoffman
Publisher: CENGAGE LEARNING - CONSIGNMENT
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 4, Problem 35P
Trip Garage, Inc. (459 Ellis Avenue, Harrisburg, PA 17111), is an accrual basis taxpayer that repairs automobiles. In late December 2019, the company repaired Samuel Mosley’s car and charged him $1,000. Samuel did not think the problem had been fixed and refused to pay; thus, Trip refused to release the automobile. In early January 2020, Trip made a few adjustments and convinced Samuel that the automobile was working properly. At that time, Samuel agreed to pay only $900 because he did not have the use of the car for a week. Trip said “fine,” accepted the $900, and released the automobile to Samuel. An IRS agent thinks Trip, as an accrual basis taxpayer, should report $1,000 of income in 2019, when the work was done, and then deduct a $100 loss in 2020. Prepare a memo to Susan Apple, the treasurer of Trip, with the recommended treatment for the disputed income.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
On July 15, 2019, Travis purchased some office furniture for $20,000 to be used in his business. He did not elect to expense the
equipment under $179 or bonus. On December 15, 2021, he sells the equipment. What is his cost recovery deduction for 2021?
gemini auto repair is a calendar year taxpayer. In
2019, the repair shop purchased a light weight
truck for $44,000 that it used to drive customers
back and forth to their cars while the shop worked
on their cars (i.e. for business purchases). in 2020,
the repair shop sold the truck dor $33,000. assume
that the lightweight truck was the only asset
Gemini purchased in 2019. Gemini auto repair
opted out of Sec. 179 and bonus depreciation for
2019.
do not use any macrs tables to calculate regular
depreciation, instead just assume that the
depreciation deductions gemini actually took for
the truck for 2019 and 2020 were $6,000 and
$7,000, respectively. what was the total amount of
gain(or loas) for Gemini in 2020 on the sale of the
truck?
1. $11,000 loss
2. $5,000 loss
3. $4,000 loss
4. $33,000 gain
5. $2,000 gain
Imani, an accrual basis taxpayer, sold goods in December 2023 for $20,000. The customer was unable to pay cash. So the customer gave Imani a note for $
20,000 that was payable in April 2024. The note bore interest at the Federal rate. The fair market value of the note at the end of 2023 was $18,000. Imani
collected $20, 500 from the customer in April 2024, $20,000 principal plus $500 interest. Under the accrual method, Imani must recognize gross income of: a. $
20, 500 in 2024. b. $20, 500 in 2023. c. $18,000 in 2023 and $2,500 in 2024. d. $20,000 in 2023 and $500 in 2024.
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...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Rodney, a resident taxpayer is employed by subiaco function center as a marketing manager. during the 2023 income year, Rodney used his private car for wpork related travel to meetings. he maintained fuel receipts amounting to $4000 and noted that he had travelled a total of 6000n work related kilometers during the year. rodney has not maintained a logbook. From the above information, calculate the maximum deduction available to Rodney for car expenses in respect of the 2023 income year. a)$3900 b) $4000 c) $4680 d) $0arrow_forwardodney, a resident taxpayer, is employed by Subiaco Function Centre as a marketing manager. During the 2023 income year, Rodney used his private car for work related travel to meetings. He maintained fuel receipts amounting to $4,000 and noted that he had travelled a total of 6,000 work related kilometres during the year. Rodney has not maintained a logbook. From the above information, calculate the maximum deduction available to Rodney for car expenses in respect of the 2023 income year Question 23Select one: $ 3,900 $ 4,000 $ 4, 680 $ 0arrow_forwardRiley operates a delivery business . In 2021 , the van he used was totally destroyed in a traffic accident . The van was origin for $ 20,000 and had an adjusted basis of $ ,680 at the time Although the van was worth $ 8,000 at the time of accident , only paid Riley $1,200 for the loss. Assume Riley did not rep the amount of Riley's gain or loss recognized in 2021 due to indicate amount of gain or loss, if any - and make sure you in amount is a gain or loss)? * with complete explanation step by step.arrow_forward
- Keith is an employee of a real estate company. He has negotiated car benefits with his employer. Keith was provided with the car for the period 1 April 2021 to 31 March 2022. The leased car value was $36,000 on 1 April 2021, and the car had only been leased for a year at that time. Keith is required to pay for any petrol and other maintenance costs, which he has determined to be $1,600 for the period. Advise Keith's employer as to the FBT consequences (using statutory formula method) arising out of the use of the car.arrow_forwardOn November 5, 2021, MILES TRUCK RENTAL Co. was in an accident with an automatic driven by MORALES. MILES received notice on January 12, 2022 of a lawsuit for P700,000 damages for personal injuries suffered by Jayson. MILES's counsel believes it is probable that MORALES will be awarded an estimated amount in the range of P250,000 and P450,000 and that P300,000 is the best estimate of potential liability. MILES's accounting year ends on December 31 and 2021 financial statement were issued on March 2, 2022. How much loss should Miles accrue on December 31, 2021? a. NIL b. 250,000 c. 300,000 d. 350,000arrow_forwardMr. O’s employer requires him to use his own vehicle for work and pay all of the vehicle’s operating costs. Mr. O. is not paid commissions. Mr. O. purchased a vehicle on July 1, 2020 for $37,290 including HST. Mr. O. drove this vehicle 25,000 kilometers, of which 15,000 were for work. The capital cost allowance for 2020 is $15,255. During the 6 months he owned vehicle he paid: bank loan interest $1,950 gas and oil 1,840 maintenance 300 insurance 1,400 licence plates 100 Calculate the amount Mr. O. can deduct from employment income. Show all calculations.arrow_forward
- T uses frequent flyer miles to take his family on a vacation. T received the miles duringbusiness travel paid for by his employer. The normal airfare for his vacation wouldhave cost $7,000.a. T must realize and recognize $7,000 as income.b. Although T has realized income, he will not be required to recognize it becausethe IRS has chosen, as a matter of administrative convenience, not to requiretaxpayers to recognize the value of frequent flyer tickets earned duringemployer-paid travel.c. Had T earned the frequent flyer miles during travel he had paid for himself, theissue of income realization and recognition would not arise.d. Both (a) and (c) are correct.e. Both (b) and (c) are correct. T buys a parcel of real estate for $100,000, which he finances by giving the seller a nonrecoursemortgage for the full purchase price. The debt is due in one balloon payment inYear 5. When the debt becomes due in Year 5, T decides to give the property back to theseller in satisfaction of the debt…arrow_forwardPeter 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.arrow_forwardIn 2020, Susan (who files as single) had silverware worth $10,000 (basis $6,000) stolen from her home due to a federal declared disaster area. Her insurance company told her that her policy did not cover the theft. In 2020, Susan’s other itemized deductions were $2,000, and she had AGI of $40,000. In February 2021, Susan’s insurance company decided that Sarah’s policy did cover the theft of the silverware and they paid Susan $4,000. Determine the tax treatment of the $4,000 received by Susan during 2021. a. None of the $4,000 should be included in gross income. b. $2,000 should be included in gross income. c. $4,000 should be included in gross income. d. Last year’s return should be amended to include the $4,000.arrow_forward
- Sam is an employee at a large land development company. He has negotiated car benefits with his employer. Sam was provided with the car for the period 1 April 2020 to 31 March 2021. The leased car value was $22,000 on 1 April 2020, and the car had only been leased for a year at that time. Sam is required to pay for any petrol and other maintenance costs, which he has determined to be $1,300 for the period 1 April 2020 to 31 March 2021. Advise Sam’s employer as to the FBT consequences (using statutory formula method) arising out of the use of the car. You may assume that any benefits are Type 1 fringe benefits.arrow_forwardIn January of year 0, Justin paid $9,400 for an insurance policy that covers his business property for accidents and casualties. Justin is a calendar-year taxpayer who uses the cash method of accounting. What amount of the insurance premium may Justin deduct in year 0 in each of the following alternative scenarios? Note: Leave no answers blank. Enter zero if applicable. a. The policy covers the business property from April 1 of year 0 through March 31 of year 1. b. The policy begins on February 1 of year 1 and extends through January 31 of year 2. c. Justin pays $10,600 for a 24-month policy that covers the business from April 1, year 0, through March 31, year 2. Note: Do not round intermediate calculations. d. Instead of paying an insurance premium, Justin pays $9,400 to rent his business property from April 1 of year 0 through March 31 of year 1.arrow_forwardSimon rents his cottage when he and his family are not using it. It qualifies as a vacation home rental. In 2021, he had rental income of $5,200. His deductible expenses were: Advertising $350 Commissions $775 Depreciation (rental portion) $1,500 Maintenance (rental portion) $750 Mortgage interest (rental portion) $1,250 Pest control (rental portion) $300 Prior-year carryover $500 Real estate tax $800 What amount of unallowed expense will Simon carry forward to next year? $0 $500 $1,025 $1,500arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT
Individual Income Taxes
Accounting
ISBN:9780357109731
Author:Hoffman
Publisher:CENGAGE LEARNING - CONSIGNMENT
Depreciation -MACRS; Author: Ronald Moy, Ph.D., CFA, CFP;https://www.youtube.com/watch?v=jsf7NCnkAmk;License: Standard Youtube License