Federal Taxation Essay

520 Words3 Pages
Problem 4-25 Billy Dent, as the owner of an apartment building, receives and makes the following payments during 2011: How much rental income must Billy Dent include on his 2011 income tax return? Answer: Billy Dent must include on his 2011 income tax return $9,000.00 Problem 4-32 Arnold and Barbara Cane were divorced in June 2011. Pursuant to the divorce decree, Arnold is obliged to perform as follows: * A. Transfer title of their personal home to Barbara. They purchased the house in 1998 and their basis today is $400,000. The fair market value of the house is $500,000. The house is subject to a 25-year, $250,000 mortgage. * B.Arnold is to continue making payments on the house until it is fully paid off. In 2011, Arnold made payments totaling $18,000. * C.Arnold is to make $3,000 per month payments to Barbara. Of this amount one-half is for child support. The divorce decree further states that alimony is to cease upon the death of the wife. In 2011, he made six payments. How do the transactions in the divorce agreement affect Arnold's and Barbara's taxable income? Answer: Transfer of property to spouse pursuant to divorce is not taxable. Arnold will get a deduction of $1500 per month for 6 months as an adjustment on his tax return toward Alimony. Barbara will include the same amount as income on her tax return. Problem 5-26 A. Fluent, an investor in stocks and bonds wanted to increase his portfolio but wanted to minimize his tax liability on the income from the bonds. He is presented with the following alternative investments: U.S. Series EE bonds, bonds for industrial development for mass transit, and qualified veterans' mortgage bonds. Which should he choose for his investment? Why? Answer: U.S. Series EE bonds, because Interest received on bonds is generally excludable from gross income. Problem 6-29 Which of the

More about Federal Taxation Essay

Open Document