Answer each of the following questions relating to income items for taxpayers. Be sure to provide appropriate support from the tax law for your position. instead of repayment on the debt. The Old Line Insurance Company, which had a $400,000 mortgage on the building, agreed to reduce the principal to $350,000. A trade creditor with a receivable of $150,000 from the company agreed to accept $125,000 in full payment for the debt incurred to purchase goods that were still on hand. Finally, the company transferred some equipment with an adjusted basis of $50,000 in satisfaction of a liability for $60,000. Compute the corporation's gross income and other adjustments necessary as a result of the above transactions. (4) Sungho is married, files a joint return, and expects to be in the 35% marginal tax bracket for the foreseeable future. All of his income is from salary and all of it is used to maintain the household. He has a paid up life insurance policy with a cash surrender value of $50,000. He paid $20,000 of premiums on the policy. If he retains the policy, the insurance company will pay him $3,000(6%) interest each year. Sungho thinks he can earn a higher return if he cashes in the policy and invests the proceeds. (a) What before tax rate of return would Sungho be required to earn on the proceeds from cashing in the policy to equal the return earned with the insurance company? (b) Assume Sungho estimates he can earn an 8% before tax rate of return on the proceeds from cashing in the policy. Assume he can earn an 8% return for the remainder of his life and that he will reinvest all earnings at the same 8% before tax rate of return. If Sungho expects to live 10 more years, which alternative will yield the greater amount to his beneficiaries upon Sungho's death