Determine the proper tax year for gross income inclusion in each of the following cases.

a. An automobile dealer has several new cars in inventory, but often does not have the right combination of body style, color, and accessories. In some cases the dealer makes an offer to sell a car at a certain price, accepts a deposit, and then orders the car from the manufacturer. When the car is received from the manufacturer, the sale is closed, and the dealer receives the balance of the sales price. At the end of the current year, the dealer has deposits totaling $8,200 for cars that have not been received from the manufacturer. When is the $8,200 subject to tax?

b. Purple Corporation, an exterminating company, is a calendar year taxpayer. It contracts to provide service to homeowners once a month under a one-, two-, or three-year contract. On April 1 of the current year, the company sold a customer a one-year contract for $120. How much of the $120 is taxable in the current year if the company is an accrual basis taxpayer. If the $120 is payment on a two-year contract, how much is taxed in the year the contract is sold and in the following year? If the $120 is payment on a three-year contract, how much is taxed in the year the contract is sold and in the following year?

c. Pink, Inc., an accrual basis taxpayer, owns an amusement park whose fiscal year ends September 30. To increase business during the fall and winter months, Pink sold passes that would allow the holder to ride free during the months of October through March. During the month of September, $6,000 was collected from the sale of passes for the upcoming fall and winter. When will the $6,000 be taxable to Pink?

d. The taxpayer is in the office equipment rental business and uses the accrual basis of accounting. In December he collected $5,000 in rents for the following January. When is the $5,000 taxable?

1. Beverly died during the current year. At the time of her death, her accrued salary and commissions totaled $3,000 and were paid to her husband. The employer also paid the husband $35,000 which represented an amount equal to Beverlys salary for the year prior to her death. The employer had a policy of making the salary payments to help out the family in the time of its greatest need. Beverlys spouse collected her interest in the employers qualified profit sharing plan amounting to $30,000. As beneficiary of his wifes life insurance policy, Beverlys spouse elected to collect the proceeds in installments. In the year of death, he collected $8,000 which included $1,500 interest income. Which of these items are subject to income tax for Beverlys spouse?

2. Barbara was injured in an automobile accident. She has threatened to file a suit against the other party involved in the accident and has proposed the following settlement:

Damages for 25% loss of the use of her right arm $200,000

Medical expenses 30,000

Loss of wages 10,000

Punitive damages 100,000 $340,000

The defendants insurance company is reluctant to pay punitive damages. Also, the company disputes the amount of her loss of wages amount. Instead, the company offers to pay her $300,000 for damages to her arm and $30,000 medical expenses. Assuming Barbara is in the 35% marginal tax bracket, will her after-tax proceeds from accepting the offer be equal to what she considers to be her actual damages (listed above)?

1. Austin, a single individual with a salary of $100,000, incurred and paid the following expenses during the year:

Medical expenses $ 5,000

Alimony 24,000

Charitable contributions 2,000

Casualty loss (after $100 floor) 1,000

Mortgage interest on personal residence 4,500

Property taxes on personal residence 4,200

Moving expenses 2,500

Contribution to a traditional IRA 4,000

Sales taxes (no state or local income tax is imposed) 1,300

Calculate Austins deductions for AGI.

2. Arnold and Beth file a joint return. Use the following data to calculate their deduction for AGI.

Mortgage interest on personal residence $ 6,000

Property taxes on personal residence 2,500

Alimony payments 12,000

Moving expenses 7,000

Charitable contributions 1,500

State income taxes 5,000

Investment interest ($8,000 of expenses limited to net investment income of $7,500) 7,500

Unreimbursed employee expenses 2,500

Sales taxes 2,600

3. Sandra owns an insurance agency. The following selected data are taken from the agency balance sheet and income statement prepared using the accrual method.

Revenue $250,000

Salaries and commissions 100,000

Rent 10,000

Insurance 5,000

Utilities 6,000

Accounts receivable, 1/1/2015 40,000

Accounts receivable, 12/31/2015 38,000

Accounts payable, 1/1/2015 12,000

Accounts payable, 12/31/2015 11,000

Calculate Sandras net profit using the cash method for 2015.