JMU Inclusions and Exclusions and Adjusted Gross Income Questions

Complete the following. In these problems, apply  your knowledge of the inclusions and exclusions recorded for tax  purposes on income tax forms.

Problem 34:
In 2013 Marie borrowed $10,000. In 2018 the debt was forgiven. Marie does not believe she
should report the forgiveness of debt as income because she received nothing at the time the debt
was forgiven in 2018. Do you agree or disagree? Support your position.
Problem 38:
Determine the amount of tax liability in the following situations. In all cases, the taxpayer is
using the filing status of married filing jointly.
a.
b.
c.
d.
e.
Taxable income of $62,449 that includes a qualified dividend of $560.
Taxable income of $12,932 that includes a qualified dividend of $322.
Taxable income of $144,290 that includes a qualified dividend of $4,384.
Taxable income of $43,297 that includes a qualified dividend of $971.
Taxable income of $262,403 that includes a qualified dividend of $12,396.
Problem 39:
Each of the following taxpayers received a state income tax refund in 2018. In all cases, the
taxpayer has a filing status of married filing jointly. What amount of the refund is properly
included in 2018 income?
a. Refund of $729; taxpayer did not itemize deductions in 2017.
b. Refund of $591; taxpayer had $13,291 of itemized deductions in 2017.
c. Refund of $927; taxpayer had itemized deductions of $13,000 in 2017.
Problem 41:
Carl and Karina file a joint return. Karina earned a salary of $38,000 and received dividends of
$3,000, taxable interest income of $2,000, and nontaxable interest of $1,000. Carl received
$9,000 of social security benefits and a gift of $6,000 from his brother. What amount of social
security benefits is taxable to Carl and Karina?
Problem 43:
Burger Store is located near many large office buildings, so at lunch it is extremely busy. Burger
Store management previously permitted lunchtime employees a half-hour off-premises lunch
break. However, employees could not easily return in a timely manner. Thus a new policy was
instituted to allow employees a 20-minute break for free lunch (only on the Burger Store
premises). The company’s accountant believes that the cost of these meals must be allocated to
employees as additional compensation because the meals do not qualify as a nontaxable fringe
benefit for employee discounts. In your opinion, should the cost of these meals be taxable or taxfree to employees? Support your answer.
Problem 45:
Zach attended Champion University during 2013–2017. He lived at home and was claimed by
his parents as a deduction during his entire education. He incurred education expenses of
$10,000 during college of which $2,000 was paid for by scholarships. To finance his education,
he borrowed $7,000 through a federal student loan program and borrowed another $3,000 from a
local lending institution for educational purposes. After graduation, he married and moved with
his spouse to a distant city. In 2018 he incurred $700 of interest on the federal loans and $300 on
the lending institution loan. He filed a joint return with his spouse showing modified AGI of
$128,000. What amount of student loan interest can Zach and his spouse deduct in 2018, if any?
Problem 47:
Fabian, a single, member of the military, was stationed at White Sands, New Mexico. On July 1,
2018, his army company transferred him to Florida as a permanent duty station. Fabian worked
full time for the entire year. During 2018 he incurred and paid the following expenses related to
the move:
Pre-move house-hunting costs
Lodging and travel expenses (not meals)
while moving
Cost of moving furniture and personal
belongings
$1,500
1,800
2,700
He did not receive reimbursement for any of these expenses from the army; his AGI for the year
was $35,500. What amount can Fabian deduct as moving expenses on his 2018 return?
Problem 50:
Juan, who is single, is a self-employed carpenter as well as an employee of Frame It, Inc. His
self-employment net income is $35,000, and he received a W-2 from Frame It for wages of
$25,000. He is covered by his employer’s pension plan, but his employer does not offer a health
plan in which he could participate.
a. Up to how much of his self-employed health insurance premiums could he deduct for this
year, if any? Why?
b. How much of Juan’s self-employment taxes would be deductible?
Problem 53:
Under the terms of a divorce decree executed May 1, 2018, Ahmed transferred a house worth
$650,000 to his ex-wife, Farah, and was to make alimony payments of $3,000 per month. The
property has a tax basis to Ahmed of $300,000.
a. How much of this must be reported on Farah’s tax return?
b. Of that amount, how much is taxable gain or loss that Farah must recognize related to the
transfer of the house?
Problem 55:
Indicate whether each of the following items is considered a for AGI (above-the-line) deduction
for the 2018 tax year:
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
Student loan interest.
Gambling losses.
Early withdrawal penalty.
Child support payments.
Charitable contributions.
One-half of self-employment taxes.
Alimony.
Scholarships for tuition and books.
Moving expenses for service members.
Property taxes.
Self-employed health insurance premiums.