Tax Concept of "Gross Income" "What 1. Sue prepares her All rights reserved C - Kalfayan when she benefits by doing something for herself when others would probably have to pay for i? ho own tax return rather than paying a tax preparer. Does she have gross income 2. Doctor A does dental work on Doctor "B's" kids and doesn't charge him. Doctor"B" performs physical exams on Doctor "A's" kids and doesn't charge him. Do either of them have gross income? How is this different than Sue in #1. What if the two doctors say it is a gift" to each other? 3. Farmer grows com on his own land. Does he have gross income when he harvest it Eats ief Trades it for $100 worth of farmer Matt's wheat? yes No 4. Wilber's house cost him $40,000 and is worth $50,000 at year end. Why does he not have gross income? Assume he sells the house for $50,000. Is his gross income $50,000 or some other amount? 5. When you work using your accounting degree and get paid for your services, why can't you argue t some of your pay is non-taxable return of your cost of going to school? (non-taxable returm capital - i.e. you have a basis, cost in yourself just like an asset.) II. Whose income is it? ("Who: 1. Before coach starts work for the employer, they sign a legally binding employment contract where coach agrees to work for employer and employer will issue pay checks directly to and in the name coach's child. When the child gets paid, who is taxable on the income? te Conch 2. Why would a family business hire their children or other family members and pay them a high salary? Is this different than the coach and the employer? 15ct 3. Jessie owns land that cost him $150,000 and now has a value of $350,000. The land is rented as grazing land. (a) Suppose he gives the land to his child, his child receives $6,000 for rent taxed on the $6,000? Should it matter when the property was given? (b) Suppose c how much is the gross income and who is taxed on hi s Who hild sells the land, (Extra thinking: why would it matter if the child was under age 18? Also, this gain will probably be "special" income (long term capital gain) taxed at 096/15% maximum rates.) married, he had $500 in his bank account. For this year, while married, Harry's wife eaned $40,000 nd Harry received $25 interest income on the bank account. 4. Assume California residency at all times, there is no prenuptial agreement. At the time Harry go If they file a joint tax return, how much income do they report? Do you need to know California community property law to prepare their tax return