20. Sheila, a single taxpayer, is a retired computer executive with a taxable in- come of $100,000 in the current year. She receives $30,000 per year in tax-exempt municipal bond interest. Adam and Tanya are married and have no children. Adam and Tanyas $100,000 taxable income is comprised solely of wages they earn from their jobs. Calculate and compare the amount of tax Sheila pays with Adam and Tanyas tax. How well does the ability-to-pay concept work in this situation?

22. Which of the following are related parties? a. Harvey and his sister Janice. b. Harvey and the Madison Partnership. Harvey owns a 60 percent interest in the

partnership. Three of Harveys friends own the remaining partnership interest.

c. Harvey and his grandfather Maurice. d. Harvey and Noti Corporation. Harvey owns 40 percent of Noti Corporation.Three unrelated parties own 20 percent each.

e. Harvey and his uncle Elmer.

23. In each of the following cases, determine whether Inez is a related party:

A. Inez owns 500 shares of XYZ Corporations common stock. XYZ has 50,000

shares of common stock outstanding.

b. Inez owns a 40 percent interest in the Tetra Partnership. The other 60 percent

interest is owned by 3 of Inezs friends.

c. Inez owns 40 percent of the stock in Alabaster Company. Her husband, Bruce,

owns 30 percent and her brother-in-law, Michael, owns the remaining 30 percent.

d. Inez is a 100 percent owner of Nancy Corporation.

25.

Ed runs an auto repair business out of the garage attached to his personal residence. How should he account for each of the following items? a. Cash received from repair services, $28,000. b. Interest paid on his home mortgage, $7,300.

c. Power jack hoist purchased at a cost of $12,000. d. Electricity bills, $3,600. (Ed does not have separate electricity service to the

garage.) e. Checks received from customers that were returned by his bank, $1,600. The

bank charged Eds account $35 for processing the bad checks. f. Telephone bill for phone in the garage, $420. (Ed has a separately listed phone

in his house.) g. Advertising in the local newspaper, $800. h. Interest paid on home furniture loan, $600.

27.

Aiko, Lani, and Charlie own the 3-Star Partnership, sharing profits and loss- es 20:50:30. During the current year, 3-Star has total gross income of $500,000 and total allowable deductions of $300,000. How should each of the following taxpayers account for 3-Stars results? Explain.

a. 3-Star Partnership b. Aiko

c. Lani

d. Charlie