Homework Answers
Answer is (a)
Martha is not required to include the $2, 000 in her gross income when the funds are used to pay the tution
Because the funds are entirely used to pay for tution which are earned in earned in section 529 qualified tution program are not subject to federal income tax and hence no need to include in gross income.
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2. Martha participated in a Section 529 qualified tuition program for the benefit of her son....
Holly entered into a 529 qualified tuition program for the benefit of her daughter, Rebecca. Holly...
Holly entered into a 529 qualified tuition program for the benefit of her daughter, Rebecca. Holly contributed $15,000 to the fund. The fund balance had accumulated to $25,000 by the time Rebecca was ready to enter college. However, Rebecca received a scholarship that paid for her tuiton, fees, books, supplies, and room and board. So Holly withdrew the funds from the 529 plan and bought Rebecca a new car. A. What are the tax consequences to Holly for withdrawing the...
CHAPTER 5 Gross Income: Ex 17. LO.2 Andrea entered into a $ 529 qualified tuition program...
CHAPTER 5 Gross Income: Ex 17. LO.2 Andrea entered into a $ 529 qualified tuition program for the benefit of her daughter, Joanna. Andrea contributed $15,000 to the fund. The fund balance had accumulated to $25,000 by the time Joanna was ready to enter college. How- ever, Joanna received a scholarship that paid for her tuition, fees, books, supplies, and room and board. Therefore, Andrea withdrew the funds from the § 529 plan and bought Joanna a new car a....
Margaret is trying to decide whether to place funds in a qualified tuition program. Her son...
Margaret is trying to decide whether to place funds in a qualified tuition program. Her son will be attending college in four years. She is in the 35% marginal tax bracket and she believes she can earn an 7% before tax return on alternative investments. Thus, $10,000 will accumulate to $11,948 (after-tax) in four years. Margaret expects tuition to increase at the rate of 5% each year to $12,155 in four years. Her son will be in the 12% marginal...
25. Michelle works for a company that contributed $3,000 to her health savings account (HSA). The...
25. Michelle works for a company that contributed $3,000 to her health savings account (HSA). The account earned $100 in interest during the year. Michelle withdrew only $1,800 to reimburse her for medical expenses not covered by her medical insurance plan. Michelle is not required to recognize any gross income from the HSA for the year. a. True b. False 26. Samantha was the beneficiary of a life insurance policy on the life of her deceased husband. She elected to...
On January 1 Patti made a $90,000 interest-free loan to her son, Alex, who used the...
On January 1 Patti made a $90,000 interest-free loan to her son, Alex, who used the money to pay off the $40,000 mortgage on his personal residence and also to buy a $50,000 certificate of deposit. Alex's only income for the year is his salary of $45,000 and $2,000 interest income on the certificate of deposit. The relevant Federal interest rate is 3% compounded semiannually. The loan is outstanding for the entire year. 5. Based on the above information, what...
Lynn Swartz's husband died 3 years ago. Her parents, who have income of over $200,000 per...
Lynn Swartz's husband died 3 years ago. Her parents, who have income of over $200,000 per year, want to ensure that funds will be available for the education of Lynn's 8-year-old son, Eric. Lynn is currently earning $45,000 a year. Lynn's parents have suggested that they start a savings account for Eric. They have calculated that if they invest $4,000 per year for the next 8 years, sufficient funds will be available at the end of 10 years for Eric's...
Part B. Gross Income Inclusions & Exclusions For each Q-6 through Q-19 below, determine whether the...
Part B. Gross Income Inclusions & Exclusions For each Q-6 through Q-19 below, determine whether the item described should be INCLUDED IN or EXCLUDED FROM the Gross Income of the taxpayer who receives the item. • Darken Box A on the Scantron sheet if the item should be INCLUDED IN gross income • Darken Box B on the Scantron sheet if the item should be EXCLUDED FROM gross income 6. $25,000 scholarship for tuition and books received by a full-time...
This year Noah paid $4,100 of interest on a loan that paid his undergraduate student loan used to pay tuition. How much...
This year Noah paid $4,100 of interest on a loan that paid his undergraduate student loan used to pay tuition. How much of this payment can he deduct as interest expense on an educational loan if he files single and reports modified AGI of $76,000? A. $1,500. B. $4,100. C. $2,000. D. $0. E. $2,500. Dan is a former executive who is retired. This year he received $260,000 in pension payments and $10,000 of social security payments. What amount must...
Problem 5-55 (LO. 3) How does the tax benefit rule apply in the following cases? a....
Problem 5-55 (LO. 3) How does the tax benefit rule apply in the following cases? a. In 2018, the Orange Furniture Store, an accrual method sole proprietorship, sold furniture on credit for $1,000 to Sammy. The cost of the furniture was $600. In 2019, Orange took a bad debt deduction for the $1,000. In 2020, Sammy inherited some money and paid Orange the $1,000 he owed. Orange's owner was in the 35% marginal tax bracket in 2018, the 12% marginal...
Problem 5-55 (LO. 3) How does the tax benefit rule apply in the following cases? a....
Problem 5-55 (LO. 3) How does the tax benefit rule apply in the following cases? a. In 2018, the Orange Furniture Store, an accrual method sole proprietorship, sold furniture on credit for $1,00 to Sammy. The cost of the furniture was $600. In 2019, Orange took a bad debt deduction for the $1,000. In 2020, Sammy inherited some money and paid Orange the $1,000 he owed. Orange's owner was in the 35% marginal tax bracket in 2018, the 12% marginal...
CHAPTER 5 Gross Income: Ex 17. LO.2 Andrea entered into a $ 529 qualified tuition program for the benefit of her daughter, Joanna. Andrea contributed $15,000 to the fund. The fund balance had accumulated to $25,000 by the time Joanna was ready to enter college. How- ever, Joanna received a scholarship that paid for her tuition, fees, books, supplies, and room and board. Therefore, Andrea withdrew the funds from the § 529 plan and bought Joanna a new car a....
25. Michelle works for a company that contributed $3,000 to her health savings account (HSA). The account earned $100 in interest during the year. Michelle withdrew only $1,800 to reimburse her for medical expenses not covered by her medical insurance plan. Michelle is not required to recognize any gross income from the HSA for the year. a. True b. False 26. Samantha was the beneficiary of a life insurance policy on the life of her deceased husband. She elected to...
On January 1 Patti made a $90,000 interest-free loan to her son, Alex, who used the money to pay off the $40,000 mortgage on his personal residence and also to buy a $50,000 certificate of deposit. Alex's only income for the year is his salary of $45,000 and $2,000 interest income on the certificate of deposit. The relevant Federal interest rate is 3% compounded semiannually. The loan is outstanding for the entire year. 5. Based on the above information, what...
Lynn Swartz's husband died 3 years ago. Her parents, who have income of over $200,000 per year, want to ensure that funds will be available for the education of Lynn's 8-year-old son, Eric. Lynn is currently earning $45,000 a year. Lynn's parents have suggested that they start a savings account for Eric. They have calculated that if they invest $4,000 per year for the next 8 years, sufficient funds will be available at the end of 10 years for Eric's...
Part B. Gross Income Inclusions & Exclusions For each Q-6 through Q-19 below, determine whether the item described should be INCLUDED IN or EXCLUDED FROM the Gross Income of the taxpayer who receives the item. • Darken Box A on the Scantron sheet if the item should be INCLUDED IN gross income • Darken Box B on the Scantron sheet if the item should be EXCLUDED FROM gross income 6. $25,000 scholarship for tuition and books received by a full-time...
Problem 5-55 (LO. 3) How does the tax benefit rule apply in the following cases? a. In 2018, the Orange Furniture Store, an accrual method sole proprietorship, sold furniture on credit for $1,000 to Sammy. The cost of the furniture was $600. In 2019, Orange took a bad debt deduction for the $1,000. In 2020, Sammy inherited some money and paid Orange the $1,000 he owed. Orange's owner was in the 35% marginal tax bracket in 2018, the 12% marginal...
Problem 5-55 (LO. 3) How does the tax benefit rule apply in the following cases? a. In 2018, the Orange Furniture Store, an accrual method sole proprietorship, sold furniture on credit for $1,00 to Sammy. The cost of the furniture was $600. In 2019, Orange took a bad debt deduction for the $1,000. In 2020, Sammy inherited some money and paid Orange the $1,000 he owed. Orange's owner was in the 35% marginal tax bracket in 2018, the 12% marginal...
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