Explain Why the Taxpayer in Each of the Following Situations

question 85

Essay

Explain why the taxpayer in each of the following situations either does or does not have taxable income and determine the amount, if any, that the taxpayer would have to recognize.
a.Cory is an employee of Simmons, Inc. Several years ago Cory purchased a used bus from Simmons. The bus had an adjusted basis of $30,000. Cory agreed to pay $20,000 (the fair market value of the bus) for the bus if Simmons would finance the purchase over four years. During the current year, when the debt on the bus was $5,000, Simmons told Cory that he didn't have to make any more payments on the bus because of his perfect safety record over the last five years.
b.Several years ago Lauren's grandfather gave her $10,000 worth of City of Eau Claire, Wisconsin bonds. After receiving $400 of interest in the current year, she sells the bonds for a gain of $800.
c.Portal Corporation employs Berry at an annual salary of $40,000. Portal provides a qualified pension plan into which all employees are permitted to contribute up to 6% of their annual salaries. Portal matches contributions dollar-for-dollar. Berry contributes 6%.
d.Carla, a student at State College, receives a $3,000 scholarship for her grades in previous years. She also earns $6,000 from a part time job. Her annual costs are $6,000 for tuition, books and supplies and $7,000 for room and board. Her parents pay the remaining $4,000 of her college costs.

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Definitions:

Right to Refuse Treatment

The legal right of patients to deny medical interventions, even those that are lifesaving, based on personal belief or autonomy.

Least Restrictive Treatment Setting

A principle in mental health care advocating for the minimal necessary constraints on personal freedom to achieve effective treatment.

Mental Institution

A facility for the treatment, care, and rehabilitation of individuals with mental health conditions, historically known as psychiatric hospitals.

Not Guilty by Reason of Insanity

A legal defense where the defendant is considered not responsible for their crime due to mental illness, rendering them incapable of understanding the nature or wrongness of their actions.