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John and Mary are divorcing. John is demanding that Mary pay him $75,000 of alimony in the first year after the divorce, $50,000 in the second year, and $25,000 in the third and all subsequent years u
Some politicians have proposed changing the way social security benefits are taxed. One proposal would increase the amount of Social Security benefits included in gross income to 100 percent
Your friend tells you that she read an article about something called “janitor's insurance.” The article said that companies took out life insurance policies on some, if not all, of their
Mango Corporation has before-tax income of $450,000 and is subject to a state income tax of 5 percent in addition to the federal income tax. What is Mango’s after-tax cash flow?
Mac gives his daughter, Alana, 600 shares of Highgrowth stock. Mac purchased the stock 10 months ago at $20 per share. On the gift date, the stock is worth $35 per share
Myra receives a $20,000 gift from her cousin and inherits $80,000 in corporate bonds from her Aunt. Myra receives $7,000 in interest income from the bonds. How much does Myra include in gross income?
The insurance company informs her that she has two options: (1) she can receive the entire $500,000 in one lump-sum payment or (2) she can receive annual installments of $58,000 for ten years.
Mark's employer pays for 55 percent of the premiums for a disability insurance policy and Mark pays for the other 45 percent. The policy pays Mark 65 percent of his normal salary
Larry receives a scholarship to attend the local college. The scholarship terms provide $7,000 for tuition, books, and related expenses for the academic year
Sandle Corporation, an accrual-basis, calendar-year taxpayer, sold $15,000 of its products on account to Jim in November, year 1. In year 2, Jim declares bankruptcy and Sandle writes off the account a
Markum Corporation owes a creditor $60,000. Markum transfers property to the creditor to satisfy the debt. Markum purchased the property four years ago for $45,000 and it is currently worth $60,000. D
Stu and Harriett divorce after eight years of marriage. Under the divorce decree, Harriett receives a vacation home that had been held jointly with Stu while they were married.
Mike suffered some injuries during the robbery and filed suit against Produce Market for not maintaining a secure environment for its customers. In an out-of-court settlement
Jeff, a single individual, receives $5,000 interest income from Treasury bills and $18,000 in social security benefits. What is Jeff's gross income?
Vera, a single individual, receives $18,000 of dividend income and $38,000 of interest income from tax-exempt bonds. Vera also receives Social Security benefits of $16,000. What is Vera's gross income
Julie wins a $15 million lottery payable over 30 years. In years 1 through 4, she receives annual installments of $500,000. At the beginning of year 5, Julie sells her right to receive the remaining
Barney retired from the Marlin Corporation where he worked for 25 years. Barney elects to receive his retirement benefits as an annuity over his remaining life, resulting in annual payments of $15,000
Charles pays $120,000 for a single-life annuity that pays him $11,000 a year for life.Treasury Department tables estimate his remaining life to be 15 years.
The Board of Directors of CYZ Corporation votes to issue two shares of stock for each share held as a stock dividend to shareholders. Just prior to the dividend, Cheryl owns 100 shares of CYZ Corporat
George owns 1,000 shares of ABC common stock and 3,000 shares of Brightstar mutual fund. George elects to participate in Brightstar's dividend reinvestment plan, reinvesting his annual dividends and c
Sheldon Corporation loans $80,000 interest-free for one year to Lynn, an employee. Assume that the applicable federal rate of interest is 5 percent. Lynn uses the loan to pay for personal debts.
Joshua loans his son, Seth, $100,000 interest-free for five years. Seth uses the money for a down payment on his home. Assume that the applicable federal rate of interest is 5 percent.
Jessica has $10,000 invested in corporate bonds with a stated interest rate of 8 percent and $10,000 in tax-exempt municipal bonds issued for governmental activities with a stated interest rate of 6 p
Carl paid $40,000 to the City of Hollywood for general revenue bonds. During the current year, he receives $2,300 interest income from the bonds. Market interest rates drop causing the value of the bo
The land has a basis to Randy of $8,500. The buyer makes a $6,000 down payment in year 1 and will make a $7,000 payment in year 2 and a $7,000 payment in year 3. In addition,