Taxation of individuals and Business Entities 2010

Problem 72 (Ch. 2)

Latrell recently used his Delta Skymiles to purchase a free roundtrip ticket to Milan, Italy (value $1,200). The frequent flyer miles used to purchase the ticket were generated from Latrell’s business travel as a CPA. Latrell’s employer paid for his business trips, and he was not taxed on the travel reimbursement.Use an available tax research service to determine how much income, if any, does Latrell have to recognize as a result of purchasing an airline ticket with Skymiles earned from business travel.

Problem 49 (Ch. 3)

Bendetta, a high-tax-rate taxpayer, owns several rental properties and would like to shift some income to her daughter, Jenine. Bendetta instructsher tenants to send their rent checks to Jenine so Jenine can report the rental income. Will this shift the income from Bendetta to Jenine? Why, or why not?

Problem 40 (Ch. 4)

Marc and Michelle are married and earned salaries this year (2009) of $64,000 and $12,000, respectively. In addition to their salaries, they received interest of $350 from municipal bonds and $500 from corporate bonds. Marc and Michelle also paid $2,500 of qualifying moving expenses, and Marc paid alimony to a prior spouse in the amount of $1,500. Marc and Michelle have a 10-year-old son, Matthew, who lived with them throughout the entire year. Thus, Marc and Michelle are allowed to claim a $1,000 child tax credit for Matthew. Marc and Michelle paid $6,000 of expenditures that qualify as itemized deductions and they had a total of $5,500 in federal income taxes withheld from their paychecks during the course of the year.

a. What is Marc and Michelle’s gross income?

b. What is Marc and Michelle’s adjusted gross income?

c. What is the total amount of Marc and Michelle’s deductions from AGI?


d. What is Marc and Michelle’s taxable income?

e. What is Marc and Michelle’s taxes payable or refund due for the year? (Use the tax rate schedules.)

Problem 42 (Ch. 4)

Camille Sikorski was divorced last year. She currently owns and provides a home for her 15-year-old daughter, Kaly, and 18-year-old son, Parker. Both children lived in Camille’s home for the entire year, and Camille paid for all the costs of maintaining the home. She received a salary of $105,000 and contributed $6,000 of it to a qualified retirement account. She also received $10,000 of alimony from her former husband. Finally, Camille paid $5,000 of expenditures that qualified as itemized deductions. (The current year is 2009.)

a. What is Camille’s taxable income?

b. What would Camille’s taxable income be if she incurred $14,000 of itemized deductions instead of $5,000?

c. Assume the original facts except that Camille’s daughter, Kaly, is 25 years old and a full-time student. Kaly’s gross income for the year was $5,000.

Kaly provided $3,000 of her own support, and Camille provided $5,000 of support. What is Camille’s taxable income?