1) responding to the questions below, and 2) completing and submitting the Federal Tax Form 1040 based on the information given in question 5....
This assignment has two major parts: 1) responding to the questions below, and 2) completing and submitting the Federal Tax Form 1040 based on the information given in question 5. Submit your answers to the questions in a 4- to 5-page Microsoft Word document.
Answer the following questions:
The ACME Co., a cash basis taxpayer, allows its customers to pay by the month ($50 each month), by the year ($500 per year), or two years in advance ($1,000). In December 2013, the company collected the following amounts applicable to future services:
| January 2014–December 2015 services (two-year contracts) | $280,000 |
| January–December 2014 services (annual contracts) | $600,000 |
| January 2014 services (monthly contracts) | $620,000 |
What is the income from the above that must be reported as gross income for 2013?
James has a 20% interest in the XY partnership. In the current year, the partnership has sales of $3,400,000, cost of goods sold of $2,300,000, and $300,000 in operating expenses. James withdrew $100,000 from the partnership during the year, but his partner did not withdraw anything. What is James's share of the income from the partnership?
Michael, age 19, is a full-time student at Ace College and a candidate for a bachelor's degree. During 2013, he received the following payments:
| Wages | $7,000 |
| Ace scholarship for ten months - tuition and books | 5,500 |
| - room and board | 4,000 |
| Loan from college financial aid office | 4,500 |
| Cash support from parents | 3,000 |
| Cash dividends | 3,000 |
| Cash prize awarded in a contest | 250 |
|
| $27,250 |
What is Michael's adjusted gross income for 2013?
During the current year, Andy sustained a serious injury in the course of his employment. As a result of the injury sustained, he received the following payments during the year:
| Compensation for loss of income | $7,000 |
| Worker's compensation | $4,500 |
| Reimbursement from his employer's accident and health plan for medical expenses paid by Andrew | $2,000 |
| Damages for physical personal injuries | $5,000 |
What is the amount to be included in Andy's gross income for the current year?
Richard is a 64-year-old widower. He had income for 2013 as follows:
| Pension from former employer | $39,850 |
| Interest income from Bank | 5,500 |
| Interest income on City of Alto bonds | 4,500 |
| Dividends received from IBM | 2,000 |
| Collections on annuity contract he purchased from Great Life Insurance | 5,400 |
| Social Security benefits | 14,000 |
| Rent income on townhouse | 9,000 |
The cost of the annuity was $46,800, and Richard was expected to receive a total of 260 monthly payments of $450. Richard has received 22 payments through 2013.
Richard's 40-year-old daughter, Pamela, borrowed $60,000 from Richard on January 2, 2013. She used the money to start a new business. Richard does not charge her interest because she could not afford to pay it, but he does expect to eventually collect the principal. Pamela is living with Richard until the business becomes profitable. Except for housing, Pamela provides her own support from her business and $1,600 in dividends on stocks that she inherited from her mother.
Other relevant information is presented below:
Expenses on rental townhouse:
| Utilities | $2,800 |
| Maintenance | 1,000 |
| Depreciation | 2,000 |
| Real estate taxes | 750 |
| Insurance | 700 |
| State income taxes paid | $3,500 |
| County personal property taxes paid | $2,100 |
| Payments on estimated 2013 Federal income tax | $5,900 |
| Charitable contributions of cash to Alto Baptist Church | $6,400 |
| Federal interest rate | 6% |
| Sales taxes paid | $912 |
Compute Richard's 2013 Federal income tax payable (or refund due) and fill in the Federal Tax Form 1040 and supporting forms.
Submit your answers in a 4- to 5-page Microsoft Word document or Excel spreadsheet.
