Jack and June are retired and receive? $10,000 of social security benefits and taxable pensions totaling? $25,000. They have been offered? $20,000 for an automobile that they restored after they retired. They did most of the restoration work themselves and the sale will result in a gain of? $12,000. What tax issues should Jack and June? consider? Choose all that apply.
A.
The gain from the sale of the automobile will be? tax-exempt because it is considered hobby income.
B.
If they accept the offer for the automobile their social security benefits will not be taxable because social security benefits are always excluded from taxable income.
C.
Jack and June do not have any taxable income since they are retired.
D.
The gain from the sale of the automobile will be taxable. Because Jack and June are? retired, they will not be eligible to treat this gain as a capital gain.
E.
If they accept the offer for the automobile then a portion of their social security benefits will be taxable because their provisional income would be greater than the base amount of? $32,000 (married filing? jointly).
F.
The gain from the sale of the automobile will be taxable.? Ordinarily, gains on the sale of investment and personal use assets are capital gains. The fact that the gain is attributable to the work they did themselves could cause the gain to be treated as ordinary income subject to? self-employment tax.? However, if this is the only automobile they have restored they probably are not considered to be in the automobile restoration business.
Jack and June are retired and receive? $10,000 of social security benefits and taxable pensions totaling? $25,000. They have been offered? $20,000 for an automobile that they restored after they retired. They did most of the restoration work themselves and the sale will result in a gain of? $12,000. What tax issues should Jack and June? consider? Choose all that apply.
A.
The gain from the sale of the automobile will be? tax-exempt because it is considered hobby income.
B.
If they accept the offer for the automobile their social security benefits will not be taxable because social security benefits are always excluded from taxable income.
C.
Jack and June do not have any taxable income since they are retired.
D.
The gain from the sale of the automobile will be taxable. Because Jack and June are? retired, they will not be eligible to treat this gain as a capital gain.
E.
If they accept the offer for the automobile then a portion of their social security benefits will be taxable because their provisional income would be greater than the base amount of? $32,000 (married filing? jointly).
F.
The gain from the sale of the automobile will be taxable.? Ordinarily, gains on the sale of investment and personal use assets are capital gains. The fact that the gain is attributable to the work they did themselves could cause the gain to be treated as ordinary income subject to? self-employment tax.? However, if this is the only automobile they have restored they probably are not considered to be in the automobile restoration business.
Related questions
Steve and Stephanie Pratt purchased a home in Spokane,Washington, for $424,500. They moved into the home on February 1 ofyear 1. They lived in the home as their primary residence untilJune 30 of year 5, when they sold the home for $712,500. |
a. | What amount of gain on the sale of the home are the Prattsrequired to include in taxable income? |
Recognized gain
b. | Assume the original facts, except that Steve and Stephanie livedin the home until January 1 of year 3 when they purchased a newhome and rented out the original home. They finally sell theoriginal home on June 30 of year 5 for $712,500. Ignoring anyissues relating to depreciation taken on the home while it wasbeing rented, what amount of realized gain on the sale of the homeare the Pratts required to include in taxable income? |
Recognized gain
c. | Assume the same facts as in part (b), except that the Prattslived in the home until January of year 4 when they purchased a newhome and rented out the first home. What amount of realized gain onthe sale of the home will the Pratts include in taxable income ifthey sell the first home on June 30 of year 5 for $712,500? |
Recognized gain
d. | Assume the original facts, except that Stephanie moved in withSteve on March 1 of year 3 and the couple was married on March 1 ofyear 4. Under state law, the couple jointly owned Steveâs homebeginning on the date they were married. On December 1 of year 3,Stephanie sold her home that she lived in before she moved in withSteve. She excluded the entire $38,000 gain on the sale on herindividual year 3 tax return. What amount of gain must the couplerecognize on the sale in June of year 5? |
Recognized gain
6. George and Weezy received $30,100 of Social Security benefits this year ($11,500 for George; $18,600 for Weezy). They also received $5,050 of interest from jointly owned City of Ranburne Bonds and dividend income.
What amount of the Social Security benefits must George and Weezy include in their gross income under the following independent situations? (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount. Leave no answer blank. Enter zero if applicable.)
a. George and Weezy file married joint and receive $9,250 of dividend income from stocks owned by George.
Amount to be included?
7. Terry was ill for three months and missed work during this period. During his illness, Terry received $7,250 in sick pay from a disability insurance policy.
What amounts are included in Terryâs gross income under the following independent circumstances? (Leave no answer blank. Enter zero if applicable.)
a. Terry has disability insurance provided by his employer as a nontaxable fringe benefit. Terryâs employer paid $5,350 in disability premiums for Terry this year.
Amount included?
8. This year, Janelle received $190,000 in life insurance proceeds. Under the following scenarios, how much of the $190,000 is taxable? (Leave no answer blank. Enter zero if applicable.)
a. Janelle received the proceeds upon the death of her father, Julio.
Taxable amount?
9. This year, Leron and Sheena sold their home for $1,150,000 after all selling costs. Under the following scenarios, how much taxable gain does the home sale generate for Leron and Sheena? (Leave no answer blank. Enter zero if applicable.)
a. Leron and Sheena bought the home three years ago for $200,000 and lived in the home until it sold.
Taxable gain: ?
10. Dontaeâs employer has offered him the following employment package.
| Salary | $ | 315,000 |
| Health insurance | 11,000 | |
| Dental insurance | 825 | |
| Membership to Heflin Country Club | 15,200 | |
| Season tickets to Atlanta Braves games | 4,100 | |
| Tuition reimbursement for graduate courses | 3,650 | |
| Housing allowance (for a McMansion in his neighborhood of choice) | 32,500 | |
What is Dontaeâs gross income from his employment?
Gross income?
5. Anne purchased an annuity from an insurance company that promised to pay her $13,000 per year for the next ten years. Anne paid $102,050 for the annuity, and in exchange she will receive $130,000 over the term of the annuity.
a. How much of the first $13,000 payment should Anne include in gross income? (Do not round intermediate calculations.)
Amount to be included?
6. George and Weezy received $30,100 of Social Security benefits this year ($11,500 for George; $18,600 for Weezy). They also received $5,050 of interest from jointly owned City of Ranburne Bonds and dividend income.
What amount of the Social Security benefits must George and Weezy include in their gross income under the following independent situations? (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount. Leave no answer blank. Enter zero if applicable.)
a. George and Weezy file married joint and receive $9,250 of dividend income from stocks owned by George.
Amount to be included?
7. Terry was ill for three months and missed work during this period. During his illness, Terry received $7,250 in sick pay from a disability insurance policy.
What amounts are included in Terryâs gross income under the following independent circumstances? (Leave no answer blank. Enter zero if applicable.)
a. Terry has disability insurance provided by his employer as a nontaxable fringe benefit. Terryâs employer paid $5,350 in disability premiums for Terry this year.
Amount included?
8. This year, Janelle received $190,000 in life insurance proceeds. Under the following scenarios, how much of the $190,000 is taxable? (Leave no answer blank. Enter zero if applicable.)
a. Janelle received the proceeds upon the death of her father, Julio.
Taxable amount?
9. This year, Leron and Sheena sold their home for $1,150,000 after all selling costs. Under the following scenarios, how much taxable gain does the home sale generate for Leron and Sheena? (Leave no answer blank. Enter zero if applicable.)
a. Leron and Sheena bought the home three years ago for $200,000 and lived in the home until it sold.
Taxable gain: ?
10. Dontaeâs employer has offered him the following employment package.
| Salary | $ | 315,000 |
| Health insurance | 11,000 | |
| Dental insurance | 825 | |
| Membership to Heflin Country Club | 15,200 | |
| Season tickets to Atlanta Braves games | 4,100 | |
| Tuition reimbursement for graduate courses | 3,650 | |
| Housing allowance (for a McMansion in his neighborhood of choice) | 32,500 | |
What is Dontaeâs gross income from his employment?
Gross income?
