INSTRUCTIONS: Which of the following are True and why (please give a brief explenation)? All sources must be noted. SHOW ALL WORK.

____ A. Alix is a cash basis taxpayer. He is a partner in the Sl&Sl partnership, and his share of the partnerships profits for 2016 is $60,000. Only $8,000 was distributed to him in March 2016, and this was his share of the 2015 partnership profits. None of the 2016 profits were distributed although Alixs share of the 2016 profits was $60,000. Alexs gross income from the partnership for 2016 is $8,000.

____ B. Gorge and Erin are divorced, and Gorge is required to pay Erin $10,000 of alimony each year. Gorge earns $95,000 a year. Erin is required to include the alimony payments in her gross income even though Gorge earned the income.

____ C. John made an interest-free loan of $50,000 to James, his son, who used the money to buy an SUV. The Federal interet rate if 3 percent. James had $1,700 interest income from a certificate of deposit for the year. John is required to impute interest income of $1,500.

____ D. Plam works part-time as a waitress in a restaurant. For groups of 8 or more customers, the customer is charged 15% of the bill for Plams services. For parties of less than 8, the tips are voluntary. Plam received $12,000 from the groups of 7 or more and $7,000 in voluntary tips from all other customers. Using the customary 15% rate, her voluntary tips would have been only $6,000. Plam must include $18,000 in gross income.

____ E. When Bletty was diagnosed as having a terminal illness, she sold her life insurance policy to Insurance , Inc., a company that is licensed to invest in these types of contracts. Bletty sold the policy for $34,000 and Insurance, Inc., became the beneficiary. She had paid total premiums of $25,000. Bletty died 9 months after the sale. Insurance, Inc., collected $50,000 on the policy. The company had paid additional premiums of $4,000 on the policy. Bletty is required to recognize a $9,000 gain from the sale of her life insurance policy and Insurance, Inc., is required to recognize a $12,000 gain from the insurance policy.

____ F. In 2015, Teresa was in an automobile accident and suffered physical injuries. The accident was caused by Ragmons negligence. In 2016, Teresa collected from his insurance company. She received $14,000 for loss of income, $12,000 for pain and suffering, $50,000 for punitive damages, and $6,000 for medical expenses which she had deducted on her 2015 tax return (the amount in excess of 10% of adjusted gross income). As a result of the above, Theresas 2016 gross income is increased by $56,000.

____ G. Calin miscalculated his income in 2015 and overpaid his state income tax by $12,000. In 2016, he amended his 2015 state income tax return and received a $12,000 refund and $800 interest. Calin itemized his deductions in 2015, deducting $14,000 in state income tax and $30,000 total itemized deductions. As a result of the amended return in 2016, Calin must recognize $12,000 of gross income.