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tax- What is the purpose of the constructive receipt doctrine?




Question;7. LO.2 What is the purpose of the constructive receipt doctrine?8. LO.2 How does the hybrid method of accounting differ from the cash method and the accrual method?9. LO.2 Sandra, a cash basis taxpayer, purchased a certificate of deposit for $970 on July 1, 2013, that matures on June 30, 2014, with the maturity value being $1,000. Also on July 1, 2013, she purchased a certificate of deposit for $940 that matures on June 30, 2015, with the maturity value being $1,000. Is Sandra required to recognize any income from the certificates in 2013, 2014, or 2015? Explain.10. LO.2 A Series EE U.S. government savings bond accrues 3.5% interest each year. The bond matures in three years, at which time the principal and interest will be paid. The bank will pay the taxpayer at a 3.5% interest rate each year if he agrees to leave money on deposit for three years. What tax advantage does the Series EE bond offer that is not available with the bank deposit?11. LO.2 The taxpayer performs services with payment due from the customer within 30 days. All customers pay within the time limit. What would be the benefit to the taxpayer using the cash method of accounting rather than the accrual method?12. LO.3, 5 Wade paid $7,000 for an automobile that needed substantial repairs. He worked nights and weekends to restore the car and spent $2,400 on parts for it. He knows he can sell the car for $13,000. His daughter?s college tuition is due in a few days. Would it matter, after taxes, whether Wade sells the car and pays the tuition or whether he gives the car to his daughter and she sells it for $13,000 and pays her tuition? Explain.13. LO.3 Anita, a cash basis taxpayer, sued her former employer for wage discrimination.Her attorney agreed to pursue the case on a contingent fee basis?the attorney would receive one-third of any settlement or court award. The parties reached a settlement, and the attorney for Anita?s former employer wrote a check payable to Anita for $320,000 and a check payable to her attorney for $160,000. Anita reasons that she and the attorney were partners in the lawsuit who shared profits two-thirds and one-third, respectively. Therefore, she includes $320,000 in her gross income. Is Anita?s analysis correct? Explain.14. LO.3 Rex became a partner with a 30% interest in the partnership profits when he invested $200,000. In 2013, the partnership generated $400,000 of taxable income, andRex withdrew $100,000. In 2014, the partnership had $600,000 of taxable income, and Rex withdrew $200,000. What is Rex?s gross income from the partnership in 2013 and 2014?


Paper#41280 | Written in 18-Jul-2015

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