61. (LO4) Assuming Alexa receives $20,000 in gross rental receipts, answer the following questions: Gross rental receipts $20,000 Less Tier 1 (2,000) (property taxes) Income after Tier 1 18,000 Less Tier 2 (5,900) (insurance, rep & main, utilities) Income after Tier 2 12,100 Less Tier 3 (14,500) Taxable rental income (loss) (2,400) a. What effect does the rental activity have on her AGI for the year? According to the text, a rental activity (including a second home rental) is considered to be a passive activity. Because they are passive losses, losses from rental property are generally not allowed to offset other ordinary or investment type income.
Because their AGI was over $43,000, Tim and Martha are entitled to a credit equal to 20% of their expenses, or $840. ($4,200 x .20 = $840) If the couple had AGI of $36,000 earned only by Tim, the credit would be zero because there would be no child care expenses. Because Martha was not employed, no credit is allowed. Expenses which are allowed are limited to the smaller of the earned income of the taxpayer or the taxpayers spouse. Therefor Martha had zero income no credit is allowed.
$4,000 4) The interest paid for the loan for stocks, bonds, and securities is only deductable up to the Net Income amount of the Interest Income. If interest income was $7,000 and expenses were $500, then Net Interest Income is $6,500. Mike and Sally paid $15,000 of interest on the loan for the stocks, bonds, and securities so they are allowed to deduct $6,500 and the leftover expense, can be carried forward to the next year. THEREFORE: The total deductable interest is $13,000. (2,500+4,000+6,500=$13,000) 8-40) A) Charlie is allowed the tax deduction of the charitable contribution at the basis price of $600 because it is defined as ordinary income property.
Assume the original facts except that they also incurred a loss of $5,000 on the sale of some of their investment assets. What effect does the $5,000 loss have on their taxable income? The taxpayers deduction losses which is on the disposition of investment assets is only limited to $3,000. The Jacksons would only be allowed to deduct $3,000 of the $5,000 loss that is against their taxable income. The remaining $2,000 would have to carryover to next year.
A 401(k) plan is a retirement plan offered by many companies. Such plans are tax-deferred savings vehicles, meaning that any deposits you make into the plan are deducted from your current pretax in- come, so no current taxes are paid on the money. For example, assume your salary will be $50,000 per year. If you contribute $3,000 to the 401(k) plan, you will only pay taxes on $47,000 in income. There are also no taxes paid on any capital gains or income while you are invested in the plan, but you do pay taxes when you withdraw money at retirement.
2. Based on the following, calculate the costs of buying and of leasing a motor vehicle. Purchase Costs Leasing Costs Down payment $1,500 Security deposit $500 Loan payment $450 for 48 months Lease payment $450 for 36 months Estimated value at End of loan $4,000 End of lease charges $600 Opportunity cost interest rate: 4 percent 3. You can purchase a service contract for all of your major appliances for $180 a year. If the appliances are expected to last for 10 years, and you earn 5 percent on your savings, what would be the future value of the amount you would pay for the service contract?
Most men only lived until 58 years for age, and most women only lived to 62 years of age, back in the thirties. They could not receive full benefits until age 65. Even though social security was passed in 1935, it did not start collecting monies until January 1, 1937 and “was to be payable beginning in 1942 to persons aged 65 and over who had paid Social Security taxes for at least 5 years. The benefit was to be withheld from an otherwise qualified person in
-Contributions as little as $5.00 per pay period can be made to the account ("Marion County Oregon-FSA-Advantages and Disadvantages"). Disadvantages of a Flexible Spending Account -The Health Care and Dependent Care accounts contain an IRS Section 125 provision, which specifies if the individual contributes more than what they submit for reimbursement, the unused amount is forfeited at the end of the year ("Marion County Oregon-FSA-Advantages and Disadvantages"). The accounts are known as "USE IT OR LOSE IT" accounts. -As stated above, FSA's do not roll over into the next year, and if the individual does not spend everything allocated in the account, they forfeit the remaining amount (Bond). -Unless the individual's domestic partner is a qualified tax-dependent, the expenses for that domestic partner do not qualify ("Marion County Oregon-FSA-Advantages and Disadvantages").
This shows us that discounting the machine will not bring positive cash flows to the buying company. This GRAPH shows us that even though they would’ve met their 5 years maximum plan this opportunity of an investment would not be good because the values we get from the Buyers DCF is less than the current cost of the investment. I would have to decline this bid. Year | Number of Plates | Old Price Per Plate | New Price Per Plate | Buyer Cash Flow | Buyer DCF | Seller Cash Flow | Seller DCF | 1 | 225 | 5.00 | $2.00 | ($5,325) | ($5,325) | $2,335 | $2,335 | 2 | 225 | 5.15 | $2.06 | $695 | $695 | $329 | $329 | 3 | 225 | 5.30 | $2.12 | $716 | $716 | $342 | $342 | 4 | 225 | 5.46 | $2.19 | $738 | $738 | $357 | $357 | 5 | 225 | 5.63 | $2.25 | $760 | $760 | $371 | $371 | Year | Number of Plates | Old Price Per Plate | New Price Per Plate | Buyer Cash Flow | Buyer DCF | Seller Cash Flow | Seller DCF | | | | Totals | $584 | $584 | $3,734 | $3,734 | Client-Specific Parameters | | | | | | | Salvage Value (new machine) | $3,000 | | Salvage value of a new
For example, in 1983 employees were allowed to contribute up to $30,000 pre-tax income including employer matches (401(k) Plans: A 25 Year Retrospective). In 1986 Congress passed the Tax Reform Act, which significantly reduced the contribution limits for employees to $7,000 (401(k) Plans: A 25 Year Retrospective). In 2010 the current contribution limit is $16,500 or $22,000 if age 50 or older (Sahadi). The way employees can contribute is by automatic deductions from their payroll (Guy). The benefits of automatic deductions is the employee does not need to worry about how much to deduct from each paycheck and not have to figure out how much money was pre-tax money when they file their taxes (Guy).