MCGRAW-HILL'S TAX.OF INDIV.+BUS.2020
20th Edition
ISBN: 9781259969614
Author: SPILKER
Publisher: MCG
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Textbook Question
Chapter 5, Problem 77CP
Diana and Ryan Workman were married on January 1 of last year. Diana has an eight-year-old son, Jorge, from her previous marriage. Ryan works as a computer programmer at Datafile Inc. (DI) earning a salary of $96,000. Diana is self-employed and runs a day care center. The Workmans reported the following financial information pertaining to their activities during the current year.
- a) Ryan earned a $96,000 salary for the year.
- b) Ryan borrowed $12,000 from DI to purchase a car. DI charged him 2 percent interest ($240) on the loan, which Ryan paid on December 31. DI would have charged Ryan $720 if interest had been calculated at the applicable federal interest rate.
- c) Diana received $2,000 in alimony and $4,500 in child support payments from her former husband. They divorced in 2016.
- d) Diana won a $900 cash prize at her church-sponsored Bingo game.
- e) The Workmans received $500 of interest from corporate bonds and $250 of interest from a municipal bond. Diana owned these bonds before she married Ryan.
- f) The couple bought 50 shares of ABC Inc. stock for $40 per share on July 2. The stock was worth $47 a share on December 31. The stock paid a dividend of $1.00 per share on December 1.
- g) Diana’s father passed away on April 14. She inherited cash of $50,000 from her father and his baseball card collection, valued at $2,000. As the beneficiary of her father’s life insurance policy, Diana also received $150,000.
- h) The couple spent a weekend in Atlantic City in November and came home with gross gambling winnings of $1,200.
- i) Ryan received $400 cash for reaching 10 years of continuous service at DI.
- j) Ryan was hit and injured by a drunk driver while crossing a street at a crosswalk. He was unable to work for a month. He received $6,000 from his disability insurance. DI paid the premiums for Ryan, but it reported the amount of the premiums as compensation to Ryan on his year-end W-2.
- k) The drunk driver who hit Ryan in part (j) was required to pay his $2,000 medical costs: $1,500 for the emotional trauma he suffered from the accident, and $5,000 for punitive damages.
- l) For meeting his performance goals this year, Ryan was informed on December 27 that he would receive a $5,000 year-end bonus. DI (located in Houston, Texas) mailed Ryan’s bonus check from its payroll processing center (Tampa, Florida) on December 28. Ryan didn’t receive the check at his home until January 2.
- m) Diana is a 10 percent owner of MNO Inc., a Subchapter S corporation. The company reported ordinary business income for the year of $92,000. Diana acquired the MNO stock two years ago.
- n) Diana’s day care business collected $35,000 in revenues. In addition, customers owed her $3,000 at year-end. During the year, Diana spent $5,500 for supplies, $1,500 for utilities, $15,000 for rent, and $500 for miscellaneous expenses. One customer gave her use of his vacation home for a week (worth $2,500) in exchange for Diana allowing his child to attend the day care center free of charge. Diana accounts for her business activities using the cash method of accounting.
- o) Ryan’s employer pays the couple’s annual health insurance premiums of $5,500 for a qualified plan.
Required:
- a) Assuming the Workmans file a joint tax return, determine their gross income.
- b) Using your answer in part (a), complete page 2 of Form 1040 through line 6 and Schedule 1 for the Workmans.
- c) Assuming the Workmans live in California, a community property state, and that Diana and Ryan file separately, what is Ryan’s gross income?
- d) Using your answer in part (c), complete page 2 of Form 1040 through line 6 and Schedule 1 for Ryan Workman.
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MCGRAW-HILL'S TAX.OF INDIV.+BUS.2020
Ch. 5 - Based on the definition of gross income in 61 and...Ch. 5 - Based on the definition of gross income in 61,...Ch. 5 - Describe the concept of realization for tax...Ch. 5 - Prob. 4DQCh. 5 - Prob. 5DQCh. 5 - Prob. 6DQCh. 5 - Prob. 7DQCh. 5 - Compare how the return of capital principle...Ch. 5 - This year Jorge received a refund of property...Ch. 5 - Describe in general how the cash method of...
Ch. 5 - Prob. 11DQCh. 5 - Prob. 12DQCh. 5 - Contrast the constructive receipt doctrine with...Ch. 5 - Dewey is a lawyer who uses the cash method of...Ch. 5 - Clyde and Bonnie were married this year. Clyde has...Ch. 5 - Distinguish earned income from unearned income,...Ch. 5 - Prob. 17DQCh. 5 - Prob. 18DQCh. 5 - Prob. 19DQCh. 5 - George purchased a life annuity to provide him...Ch. 5 - Prob. 21DQCh. 5 - Prob. 22DQCh. 5 - Clem and Ida have been married for several years,...Ch. 5 - Larry Bounds has won the Gold Bat Award for...Ch. 5 - Prob. 25DQCh. 5 - Prob. 26DQCh. 5 - Prob. 27DQCh. 5 - Explain why an insolvent taxpayer is allowed to...Ch. 5 - Prob. 29DQCh. 5 - Prob. 30DQCh. 5 - Prob. 31DQCh. 5 - Prob. 32DQCh. 5 - Explain how state and local governments benefit...Ch. 5 - Prob. 34DQCh. 5 - Prob. 35DQCh. 5 - Prob. 36DQCh. 5 - Prob. 37DQCh. 5 - Tom was just hired by Acme Corporation and has...Ch. 5 - For the following independent cases, determine...Ch. 5 - Prob. 40PCh. 5 - Prob. 41PCh. 5 - Prob. 42PCh. 5 - Prob. 43PCh. 5 - Prob. 44PCh. 5 - Last year Acme paid Ralph 15,000 to install a new...Ch. 5 - Prob. 46PCh. 5 - L. A. and Paula file as married taxpayers. In...Ch. 5 - Clyde is a cash-method taxpayer who reports on a...Ch. 5 - Identify the amount, if any, that these...Ch. 5 - Ralph owns a building that he is trying to lease....Ch. 5 - Anne purchased an annuity from an insurance...Ch. 5 - Larry purchased an annuity from an insurance...Ch. 5 - Prob. 53PCh. 5 - Lanny and Shirley divorced in 2018 and do not live...Ch. 5 - Prob. 55PCh. 5 - Grady received 8,200 of Social Security benefits...Ch. 5 - Prob. 57PCh. 5 - Nikki works for the Shine Company, a retailer of...Ch. 5 - Prob. 59PCh. 5 - Prob. 60PCh. 5 - Grady is a 45-year-old employee with AMUCK Garbage...Ch. 5 - Prob. 62PCh. 5 - Prob. 63PCh. 5 - Cecil cashed in a Series EE savings bond with a...Ch. 5 - Prob. 65PCh. 5 - Prob. 66PCh. 5 - Terry was ill for three months and missed work...Ch. 5 - Prob. 68PCh. 5 - Prob. 69PCh. 5 - This year, Janelle received 200,000 in life...Ch. 5 - Prob. 71PCh. 5 - Prob. 72PCh. 5 - Charlie was hired by Ajax this year as a corporate...Ch. 5 - Irene is disabled and receives payments from a...Ch. 5 - Ken is 63 years old and unmarried. He retired at...Ch. 5 - Prob. 76CPCh. 5 - Diana and Ryan Workman were married on January 1...
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