Acc 307 Federal Taxation Chp 6- 7 homework- Erla Reyes 2- Aaron has AGI of $85,000 and deductions of $9,500. Does it matter to Aaron whether the deductions are for or from AGI? Why or why not? 4- Classify each of the following expenditures as a deduction for AGI, a deduction from AGI, or not deductible: a- Pete gives $1,000 to his mother for her birthday. b- Janet gives $1,000 to the First Baptist Church. c- Alex pays Dr. Dafashy $1,000 for medical services rendered. d- Susan pays alimony of $1,000 to Herman e- Rex who is self-employed, contributes $1,000 to his pension plan. f- April pays expenses of $500 associated with her rental property. 8- Must an expense be both ordinary and necessary to be deducted as a trade of business expense under S162? Explain. 11- Mary Kate owns a building that she leases to an individual who operates a grocery store. Rent income is $10,000 and rental expenses are $6,000. On what form 1040 schedule or schedules are the income and expenses reported? Schedule C 15- Why is the reserve method now allowed to be used for Federal income tax purposes? 18- Stuart, an insurance salesperson, is arrested for allegedly robbing a convenience store. He hires an attorney who is successful in getting the charges dropped. Is the attorneys fee deductible? Explain. 26- Under what circumstances may a taxpayer deduct a rental loss associated with vacation home? 34- Daniel is single and has the following income and expenses in 2012. Salary income $60,000 Net rent income $6,000 Dividend income $3,500 Payment of alimony $12,000 Mortgage interest on residence $4,900 Property tax on residence $1,200 Contribution to traditional IRA $5,000 Contribution to United Church $2,100 Loss on the sale of real estate (held for investment) $2,000 Medical expenses $3,200 Estate income tax $300 Federal income tax $7,000 a- Calculate Daniels AGI. b- Should Daniel itemize his deductions from AGI or take the standard deductions? 54- Elisa and Clyde pay $8,000 in wages to Boyd, a part-time employee. Because this amount is $1,000 below the minimum wage, Boyd threatens to file a complaint with the appropriate Federal agency, although Elisa and Clyde pay no attention to Boyds threat, Chelsie (Elisas mother) gives Boyd a check for $1,000 for the disputed wages. Both Elisa and Clyde ridicule Chelsie for wasting money when they learn what she has done. The retail shop is the only source of income for Elisa and Clyde. a- Calculate Elisa and Clydes AGI. b- Can Chelsie deduct the $1,000 payment on her tax return? c- How could the tax position of the parties be improved? 55- Max is purchasing a sole proprietorship business from Trish. The amount being paid exceeds the fair market value of the identifiable assets of the business by $900,000. Advise Max on the tax consequences of the $900,000 being allocated to goodwill versus it being allocated to a six-year covenant no to complete