Paul is a college student and works as a server in a restaurant.Usually he gets a 20% tip,A customer spent $50 on a meal.Paul was expecting a $10 tip but to his surprise the customer left a $100 tip.He did feel the customer was flirting with him but he also felt that the customer might have mistaken a $100 bill for a $10 bill.Paul was so gratified that he gave $15 to the cashier.Which of the following is true?

Select one or more:

a.If the customer had already made lifetime gifts of over $11,580,000, he would owe gift tax on the $90 as a gift.

b.If Paul ran after the customer and gave him back $90, Paul would report $10 as income even though he was in actual and constructive receipt of $100.

c.$10 is taxable to Paul and $90 is a gift which is not taxable to Paul

d.If the customer was in business he could deduct $100 as a business expense (see meals and entertainment page 9-8 to 9-9 in textbook)

e.$85 is taxable to Paul because he shared the tip with the cashier.

f.Paul would report $100 as income even if the customer made a mistake and even if he shared the tip with the cashier.

Vera receives the following income.Which items are taxable as income?

Description

• Interest income from Hong Kong bonds$1000
• Interest income from Philadelphia Bonds$2000
• Interest income on US Treasury Bonds$3000
• Sale of State of California Bonds at a gain of $4000
• Redemption of series EE savings bonds with a face amount $25,000.$4000 was accrued interest and $12,500 was used to pay for the tuition of taxpayer's dependent child.
• Interest income on Intel Corporation Bonds$5000

Select one or more:

a.$2000 from series EE Savings Bonds

b.$5000 on Intel Corp bonds.

c.$2000 from Philadelphia Bonds

d.$1000 from Hong Kong Bonds

e.$3000 from US Treasury Bonds

f.$4000 from State of California Bonds

g.$4000 from Series EE Bonds

Ted works for Suburu Motors, an auto dealership.Ted purchased a car from the dealership for $25,000.The car cost the dealership$23,000,The price to a non-employee would have been $29,000.Furthermore, the dealer would have charged a non-employee customer a $500 servicing fee for the time spent preparing the car for pick-up but Ted does not pay the "dealer prep fee".Which of the following is true?

Select one or more:

a.The dealership recognizes ordinary income of $2000.

b.Ted recognizes income of $400($500 - $100)

c.The dealership recognizes a capital gain of $2000

d.The dealership recognizes ordinary incomeof $6000

e.Ted recognizes gain of $4000 =$29,000 - $25,000

Alfred owned a term life insurance policy at the time he was diagnosed with a "terminal illness" and expected to live 6 months.After paying $20,000 in premiums, he sold the policy to a company that is authorized by the state of California to purchase such policies.The company paid Alfred $125,000 for the policy.The company paid an additional $10,000 of premiums.When Alfred died 28 months later, the company collected the face value of the policy of $150,000.Which is true?

Select one or more:

a.The Company has income of $15,000 on the collection of the proceeds.

b.If Alfred had not sold the policy, but instead had named his niece as beneficiary and she collected the $150,000 face value of the policy, the niece would not have been taxable.

c.The Company has $150,000 income upon collection of the proceeds,

d.Since Alfred lived more than 24 months he would be taxable on the sale of the policy.

e.Alfred has taxable income of $105,000 upon the sale of the policy.

Henrietta worked in Vietnam from May 1, 2020 to March 31, 2021.Her salary in Vietnam for that period was $10,000 per month.She was a US citizen.She also received income from a rental house in Vietnam of $30,000 for 2020.Which of the following is true?

Select one or more:

a.Henrietta's foreign earned income exclusion in 2020 is $107,600

b.Instead of claiming the foreign earned income exclusion, the taxpayer can claim a foreign tax credit based on the taxes she pays in Vietnam

c.The rental income is not taxable because it is located in Vietnam and not in the US.

d.If she elects the Foreign earned income exclusion her AGI will be $128,756

e.If the taxpayer switches from the foreign earned income exclusion to the foreign tax credit, she cannot use the foreign earned income exclusion for 5 years.

Carla's car was destroyed by fire while she was in the hospital with Covid.The car cost her $3000 and was worth $2000 when it was destroyed.She had no insurance.Her employer and employee decided to help her buy a new car that cost her $3500.Her employer contributed $2500 and her fellow employees raised $1500.She recovered from Covid and donated $500 of the $4000 to the American Red Cross.Which of the following is true?

Select one or more:

a.Carla's employer receives a deduction of $2500.

b.Carla has recognized income of $2000 ($2500 less $500)

c.Carla's receives a casualty loss deduction of $3000,

d.Carla has recognized income of $2500 and an itemized deduction of $500

e.Carla receives a casualty loss deduction of $2000.

f.Carla has recognized income of $3500 ($4000 less $500)