Acc 547

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Week 3 Problem Solution Set
Temitope Ajimotokan
Accounting/547
September 22th, 2012
Christopher De Maline
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Comprehensive Problem 67 (Ch. 5)
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  a. illegal income = $1,200 (Gross income includes income from all sources either legal or illegal.
  b. Gain on stock sale = (32 x $1,000) - (31 x $1,000)
  * = $32,000 - $31,000
  * = $1,000
  c. Annuity = $25,000 - $210,000/20)
  * = $25,000 - $10,500
  * = $14,500
  d. Disability benefits are excluded because the taxpayer purchased the policy.
  e. Foreign-earned income = $91,500 x 181/365
  * = $91,500 x 0.496
  * = $45,384 (maximum exclusion) $18,000 excluded
  f. Scholarship = $200 (The $200 used towards car payment does not qualify for exclusion; the $300 used for books may be excluded).
  g. Paycheck from son = $0 (Under assignment of income doctrine, the income is taxed to the taxpayer who earned the income.
  h. State income tax refund = $50
  i. Interest income = $30,000 ( included in gross income )
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  * Gross income = $46,950
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  * State Tax Refund/Tax Benefit Rule
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  1. temized deductions with $610 overpayment = $5,750
  2. 2009 Standard deduction = $5,700 (Single filing status)
  3. Reduction in taxable income with $610 overpayment   = $5,750 (greater of (1) and (2)
  4. Itemized deductions without the $610 overpayment that was refunded
  * = $5,750 - $610
  * = $5,140
  5. Reduction in taxable income without the $610 overpayment that was refunded
  * = $5,700 ( greater of (2) and (4)
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  * Tax benefit from prior year $610 overpayment of state taxes
  * = $5,750 - $$5,700
  * = $50
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Comprehensive Problem 66 (Ch. 6)...