Solved by verified expert :730. Amy
incurs and pays the following expenses during the year:
·
Alimony of
$14,000 to her former spouse, Ted.
·
Child
support of $12,000 to Ted for the care of their son, Bobby.
·
Medical
expenses of $8,000 for herself.
·
Charitable
contributions of $3,000 to her church.
·
Contribution
to her traditional IRA of $5,000.
·
Mortgage
interest on her residence of $11,000.
·
Property
taxes on her residence of $1,200.
·
State income
taxes for herself of $4,000.
Amy’s only income is a $100,000 salary. Calculate Amy’s deductions for AGI and from AGI.
731. Arnold
and Beth file a joint return. Use the following data to calculate their
deduction for AGI.
Mortgage
interest on personal residence
$ 4,000
Property
taxes on personal residence
2,000
Alimony
payments
12,000
Moving
expenses
6,000
Charitable
contributions
1,500
State income
taxes
5,000
Investment
interest ($8,000 of expenses limited to net investment income of $6,000)
6,000
Unreimbursed
employee expenses
2,500
Sales taxes
2,600
732. Ruth and
Jeff own an unincorporated hardware store. They determine their salaries at the
end of the year by using the amount required to reduce the net income of the
hardware store to $0. Based on this policy, Ruth and Jeff each receive a total
salary of $175,000. This is paid as follows: $10,000 per month and $55,000 on
December 31. Determine the amount of the salary deduction.
733. Sandra
owns an insurance agency. The following selected data are taken from the agency
balance sheet and income statement prepared using the accrual method.
Revenue
$250,000
Salaries and
commissions
100,000
Rent
10,000
Insurance
5,000
Utilities
6,000
Accounts
receivable, 1/1/2011
40,000
Accounts
receivable, 12/31/2011
38,000
Accounts
payable, 1/1/2011
12,000
Accounts
payable, 12/31/2011
11,000
Calculate Sandra’s net profit using the cash method for 2011.
734. Woody
owns a barber shop. The following selected data are taken from the barber shop
balance sheet and income statement prepared for 2010 using the cash method.
Revenue
$242,000
Salaries and
commissions
97,000
Rent
10,000
Insurance
5,000
Utilities
6,000
The following supplemental data also is provided.
Accounts
receivable, 1/1/2011
$40,000
Accounts
receivable, 12/31/2011
48,000
Accounts
payable, 1/1/20101
12,000
Accounts
payable, 12/31/2011
15,000
Calculate Woody’s net profit using the accrual method for 2011.
735. Taylor, a
cash basis architect, rents the building in which his office is located for
$5,000 per month. He commenced his practice on February 1, 2011. In order to
guarantee no rent increases during an 18-month period, he signed an 18-month
lease and prepaid the $90,000 on February 1, 2011. How much can Taylor deduct
as rent expense for 2011?
736. In order
to protect against rent increases on the building in which she operates a dance
studio, Mella signs an 18-month lease for $18,000. The lease commences on
November 1, 2011. How much of the $18,000 payment can she deduct in 2011 and
2012?
a.If Mella is an accrual basis taxpayer?
b.If Mella is a cash basis taxpayer?
737. Rose’s
business sells air conditioners which have a one-year warranty. Based on
historical data, the warranty costs amount to 14% of sales. During 2011, air
conditioner sales are $300,000. Actual warranty expenses paid in 2011 are
$37,000.
a.
Determine
the amount of the warranty expense deduction for 2011 if Rose’s business uses
the accrual method.
b.
How would
your answer change if Rose used the cash method for extended warranties and
the purchasers paid $20,000 for the warranties which covered the second and
third years of ownership?
738. Beige,
Inc., an airline manufacturer, is conducting negotiations for the sale of
military aircraft. One negotiation is with a U.S. assistant secretary of
defense. She can close the deal on the purchase of 50 attack helicopters if she
is paid $750,000 under the table. Another negotiation is with the minister of
defense of a third world country. To complete the sale of 20 jet fighters to
his government, he demands that he be paid a $1 million grease payment. Beige
makes the payments and closes the deals. How much of these payments are
deductible by Beige, Inc.?
739. Edward
operates an illegal drug-running business and has the following items of income
and expense. What is Edward’s adjusted gross income from this operation?
Income
$750,000
Expenses:
Rent
24,000
Utilities
8,000
Bribes to
police
40,000
Medical
expense
5,000
Legal fees
20,000
Depreciation
30,000
Illegal
kickbacks
35,000
Cost of
goods sold
300,000
740. Kitty
runs a brothel (illegal under state law) and has the following items of income
and expense. What is the amount that she must include in taxable income from
her operation?
Income
$200,000
Expenses:
Rent
8,000
Utilities
2,000
Bribes to
police
10,000
Medical
expense
5,000
Legal fees
20,000
Depreciation
14,000
Illegal
kickbacks
15,000
741. The
salaries of the top eight executives of Lemon, Inc. are as follows:
No. 1
$9.0 million
No. 2
6.5 million
No. 3
2.0 million
No. 4
1.3 million
No. 5
.7 million
No. 6
.4 million
No. 7
.3 million
No. 8
.25 million
a.
Determine
the amount Lemon may deduct for the salaries if it is a publicly traded
corporation.
b.
Determine
the amount Lemon may deduct for the salaries if it is a closely held
corporation.
