Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Required information [ The following information applies to the questions displayed below. ] Consider the following letter and answer Shady's question. To my friendly student

image text in transcribed
Required information
[The following information applies to the questions displayed below.]
Consider the following letter and answer Shady's question.
To my friendly student tax preparer:
Hello, my name is Shady Slim. I understand you are going to help me figure out my gross income for the year ... whatever
that means. It's been a busy year and l'm a busy man, so let me give you the lowdown on my life and you can do your
thing.
I was unemployed at the beginning of the year and got $2,000 in unemployment compensation. I later got a job as a
manager for Roca Cola. I earned $61,250 in base salary this year. My boss gave me a $7,500 Christmas bonus check on
December 22. I decided to hold on to that check and not cash it until next year, so I won't have to pay taxes on it this year.
Pretty smart, huh? My job's pretty cool. I get a lot of fringe benefits like a membership to the gym that costs $525 a year
and all the Roca Cola I can drink, although I can't really drink a whole lot-l figure $40 worth this year.
As part of my manager duties, I get to decide on certain things like contracts for the company. My good buddy, Eddie, runs
a bottling company. I made sure that he won the bottling contract for Roca Cola for this year (even though his contract
wasn't quite the best). Eddie bought me a Corvette this year for being such a good friend. The Corvette cost $75,000, and
I'm sure he bought it for me out of the goodness of his heart. What a great guy!
Here's a bit of good luck for the year. Upon leaving my office one day, I found $9,250 lying in the street! Well, one person's
bad luck is my good luck, right?
I like to gamble a lot. I won a $30,750 poker tournament in Las Vegas this year. I also won about $5,500 over the year
playing the guys at our Friday night poker game. Can you believe that I didn't lose anything this year?
Speaking of the guys, one of them hit me with his car as we were leaving the game one night. He must have been pretty
ticked that he lost! I broke my right leg and my left arm. I sued the guy and got $16,000 for my medical expenses and
$4,250 to pay my psychotherapist for the emotional problems I had relating to the injuries (I got really depressed!), and I
won $14,500 in punitive damages. That'll teach him that he's not so tough without his car!
Another bit of bad luck. My uncle Monty died this year. I really liked the guy, but the $325,000 inheritance I received from
him made me feel a little better about the loss. I did the smart thing with the money and invested it in stocks and bonds
and socked a little into my savings account. As a result, I received $725 in dividends from the stock, $325 in interest from
the municipal bonds, and $425 in interest from my savings account.
My ex-wife, Alice, is still paying me alimony. She's a lawyer who divorced me in 2015 because I was "unethical" or
something like that. Because she was making so much money and I was unemployed at the time, the judge ruled that she
had to pay ME alimony. Isn't that something? She sent me $5,500 in alimony payments this year. She still kind of likes me,
though. She sent me a check for $625 as a Christmas gift this year. I didn't get her anything, though.
So there you go. That's this year in a nutshell. Can you figure out my gross income and complete page 1 of Form 1040
(through line 7b) and Schedule 1 for me? And because you're a student, this is free, right? Thanks, I owe you one! Let me
know if I can get you a six-pack of Roca Cola or something.
a. Calculate the gross income. a. Calculate the gross income.
Answer is complete and correct.
Could you please tell me where the amounts with green checkmarks belong on the 1040 page 1 and schedule 1?
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting

Authors: Walter Jr. Harrison, Charles T. Horngren, C. William Thomas, Greg Berberich, Catherine Seguin

6th Canadian edition

134564146, 978-0134141091, 134141091, 978-0134564142

More Books

Students also viewed these Accounting questions