Determine the Amount of Income That Must Be Recognized by the Taxpayer(s)

question 68

Essay

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.
a.Tien sells a parcel of land she held as an investment for $50,000. Tien purchased the land four years ago for $28,000. She spent $2,000 grading the land and $6,000 putting in utility lines. Tien receives $16,000 upon closing the sale. The remaining $40,000 is to be received in four annual payments of $10,000 over the next four years, with interest at 8% on the outstanding balance.
b.Randy receives a $10,000, 6%, bond from his grandfather, Kenneth, for his birthday on September 30. Annual interest is paid on December 31. Randy receives the $600 payment on December 31.
c.David is an employee of Fern Leaf Company. David is robbed and knocked unconscious while coming out of a basketball game on December 29. His $550 paycheck is available to be picked up at Fern Leaf on December 30, but David does not regain consciousness until January 3. He picks up the check and deposits it on January 8.
d.Angie was shopping at a "flea market" when she saw a painting with a frame that appeared to be quite old. Although the painting was uninteresting, she paid the $35 asking price just to get the frame. When she returned home, she took the old painting out of the frame, intending to throw it away. However, she noticed what appeared to be another painting behind the one she bought. Curious, she took the painting to a friend who is a local art expert. The friend thought the second painting was a lost "Monet" and could be worth millions. Angie sends the painting to a museum in Boston, which confirms that the painting is indeed a lost "Monet." Similar paintings have been selling for $650,000 to $800,000, although the art market is in a down cycle. Angie decides to wait until the art market picks up a bit to sell the painting.

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Definitions:

Identical Twin

Twins that develop from a single fertilized egg, making them genetically identical.

Dietary Supplements

Substances ingested through the mouth that include nutrients like vitamins, minerals, herbs, or amino acids, aimed at augmenting one's dietary intake.

Placentas

Organs in the uterus of pregnant mammals that nourish and maintain the fetus through the umbilical cord.

Dissociation

A psychological experience of disconnection from one’s thoughts, feelings, memories, or sense of identity.