Reference no: EM132997130

Questions -

Q1a) Joe's Cross Fit, an accrual-method taxpayer, provides personal training services. On September 30, 2019, Barbie pays Joe's Cross Fit $2,400 cash for 24 months of personal training services ($100/month). Barbie's training sessions beginning on October 1, 2019.

For book purposes, Joe's Cross Fit will recognize $300 in income in 2019, $1,200 in 2020, and $900 in 2021.

For tax purposes, how much of the $2,400 must Joe's Cross Fit include in gross income in 2019 if Joe's elects to defer prepaid income to the maximum extent possible?

Q1b) Same facts as previous question.

For tax purposes, how much of the $2,400 must Joe's Cross Fit include in gross income in 2020?

Q1c) Same facts as previous two question.

For tax purposes, how much of the $2,400 must Joe's Cross Fit include in gross income in 2021?

Q2) XYZ Corp., an accrual-method taxpayer, owns a rental building. Mr. King, an individual, entered into a two-year lease to rent the building from XYZ Corp. at a rate of $10,000/month. The lease starts on December 1, 2019 and runs through Nov. 30, 2021. On December 1, 2019, Mr. King prepaid his rent for the entire lease ($240,000).

For book purposes, XYZ Corp. will not recognize the rental revenue until it is earned ($10,000 in 2019, $120,000 in 2020 and $110,000 in 2021).

For tax purposes, how much of the $240,000 must XYZ Corp. include in gross income for 2019?

Q3) Walt Corp. received the following in 2020:

$46,000 payment for the provision of services

$5,000 gain on the sale of a state bond sold in 2020

$1,000 interest on savings account

$2,000 interest on municipal bond

$1,000 interest on corporate bond

$3,000 dividends

$100,000 life insurance proceeds - Walt Corp. was named as the beneficiary on key person life insurance policy taken out on a corporate executive, and the corporate executive passed away in 2020.

What is Walt Corp.'s gross income for 2020?