Question 1: Tom is 68 years old. His employer pays the premiums for group term life insurance coverage of $110,000. The cost for Tom's coverage is $3,000. a. If the plan providing this coverage is nondiscriminatory and Tom is not a key employee, how much gross income does Tom have?
a. How does your answer to (a) change if Tom is a key employee?
b. If the plan is discriminatory, but Tom is not a key employee, what is Tom's gross income?
c. How does your answer to (c) change if Tom is a key employee?
Question 2: Carrie owns a business that she operates as a sole proprietorship. The business had a net pro?t of $25,000 in 2016. This is Carrie's only earned income.
a. How much must she pay for self-employment taxes?
b. How much can she deduct on her tax return?
c. If the business had a net loss of $10,000 (instead of a $25,000 pro?t), how much in self-employment taxes must Carrie pay?
Question 3: Maureen operates a cosmetics sales business from her home. She uses 400 of 1,600 square feet of the home as an office for the entire year. Her income before her home office deduction is $3,400 and un-apportioned expenses for the home are as follows: Mortgage interest$5,000Property taxes 1,400 Utilities 1,200 Repairs and maintenance 600 Depreciation for entire home 6,000
a. How much can Maureen deduct for her home office if she uses the actual expense method?
b. How much can Maureen deduct for her home office if she uses the simplified method?
c. If any of the expenses are not deductible currently, how are they treated for tax purposes?
Question 4: Ken, owner of Kendrick Corporation, needs to send an employee on a temporary assign-ment at a plant in another state. He can either send one employee for 18-months or two employees for 9-months each. Kendrick Corporation will pay for all the meal and lodging expenses while the employees are on their out-of-town assignments. Does it make any difference from a tax perspective to Kendrick and to the employees which option Ken chooses?