Reference no: EM131881714

Question: 1. Will and Janine are divorced during the current year. Will is to have custody of their two children and will receive their house as part of the divorce sttlement. The house, which Will and Janine bought for $60000 is worth $100000. Janine is to receive one of their automobiles, for which they paid $21000 and which is now worth $9000. Will will get the other automobile, which cost $6000 and which is now worth $2000. Janine is to pay Will alimony of $900 per month. However, the alimony payment is to be reduced by $200 per month as each child reaches age 8 or if a child shoud die or marry before reaching age 18. What are the tax effects of the divorce settlement for Will and Janine?

2. Determine whether the following taxpayers have gross income from the payment of their expenses:

a. Julia's mother, Henriettam is short of cash when it comes time to pay her property taxes. July pays Henrietta's property taxes of $350.

b. Kurt fell asleep at the wheel one night and crashed his car into a telephone pole. Repairs to the car cost $600. Kurt isn't covered by insurance and doesn't have the cash to pay the repair shop, his employer pays the repair bill.

c. Leonard leases a building from the PLC Partnership for $800 per month. The lease agreement reuires Leonard to pay the property taxes of $1100 on the building.

d. On July1, Gino bought some land from Harco Corporation for $4000. As part of the sales agreement, Gino agrees to pay the property taxes of $700 for the year. Harco had paid $10000 for the land.

2.Determine the proper year(s) for reporting the income in each of the following cases:

a. Lagoonn Inc an accrual basis taxpayer, owns an amusemnt park.The park is open April through September. In October, Lagoon begins selling discounted season passes for the upcoming season. By the end of the year, Lagoon has received $40000 from the advance sale of the discounted passes.

b. Arnie sells and repairs televisions. In December of the current year, a customer special-orders a television that retails for $2600 ( Arnie's cost is $1300). Arnie reuires the customer to prepay $1500 as a condition of placing the order.

c. Quick Systems Inc an accrual basis taxpayer leases out computer equipment. During December, Quick receives $22000 from customers as advance rent for January

d. Trinh is a service representative for Harrington Corporation, Trinh and Harrington are cash basis taxpayers. In addittion to her salary, Trinh receives a bonus equal to 5% of all receopts collected from her customer during the year. On December 30, a customer gives he a $5000 check payable to Harrington for Trinh's work during the current year. Trinh returns to her office on January 3 and promptly gives the check to the company's controller.

3. How much income would an accrual basis taxpayer report in 2016 in each of the following situations?

a. Toby's Termite Services, Incm provide monthly pest control on a contract basis. Toby sells a 1-year contract for $600 and a 2 year contract for $1080. In October, Toby sells 10 one year contractss and 5 two year contracts.

b. John's Tractor Sales receives a $150 deposti from a customer for a new tractor that the customer order in December. The tractor arrives the following February, at which time the custome pays the remaining $9800 of the agreed upon sales price.

c. A customer of First Financial Lending sends First Financial two $600 checks in December in payment of December and January interest on a loan.

d. First Financial Lending receives interest payments totaling $8400 in January 2017 in payment of Dec 2016 interest on loans.