Determine the amount of income that must be recognized by the taxpayer(s) in the current year...

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Determine the amount of income that must be recognized by the taxpayer(s) in the current year for each of the following situations. Explain how you determined the amount that was taxable.

Pa 010,000 HUULUU WIL b. Randy receives a $10,000, 6%, bond from his grandfather, Kenneth, for his birthday on September 30.

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Answer 1

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Randy has received bonds from his grandfather on september 30 so it means he becomes owner of the bond on September 30.

The receipt of the bond is excluded from gross income because it is a gift.

However, Kenneth must recognize the interest income earned on the bond prior to the gift, $450 [$10,000 × 6% × (9 ÷ 12)].

Randy recognizes $150 of interest (September 30 to December 31).

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Answer 2

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