b

For each tax treatment described, determine the applicable income tax concept(s), and explain how it forms the basis for the treatment: a. Jackson owned bonds that paid regular monthly interest. He contacted the bank and requested that the next $5,000 worth of interest payment checks be made out to and directly mailed to his son. Jackson is taxed on the $5,000 of interest, even though he never actually received the interest.

b. Joan's barn on her ranch was destroyed by a tornado. The barn had an adjusted basis of $24,000. Joan received insurance proceeds of $35,000 and built a new barn costing $40,000. Joan does not have to recognize the gain realized on the barn in the current period.

c. Elvis borrowed $30,000 from University Credit Union to purchase a new car. He is not taxed on the receipt of the $30,000.