VARIOUS TAXPAYER SITUATIONS RELATING TO AMOUNT OF INCOME TO BE REPORTED BY TAXPAYER FOR CURRENT TAX YEAR (1) Mala gives hula lessons at a local bar. During the current year, she receives $9.000 in salary and $8,000 in tips. In addition, she engages in illegal behavior, for which she receives $10,000. How much income must Mala report for the year? (2) On January 1, Fernando owns 8 bonds with a $10,000 face value. The bonds pay interest annually on December 31. On September 30, Frank makes a bona fide gift of the bonds to Linda. How much income, if any, must Frank report on these bonds for the year? (3) Paris owns a qualified annuity that cost 552,000. Under the contract, when she reaches age 65, she will receive $500 per month until she dies. Paris turns 65 on June 1, 2021 and receives her first payment on June 3, 2021. At the time she begins to receive payments, het remaining life expectancy based on IRS tables is 260 months. How much gross income will Paris report from the annuity payments in 2021? (4) For S400, Larry purchases an old car that is badly in need of repair. He works on the car for 3 months and spends $600 on parts to restore it. Larry's son Jeremiah needs $2,500 to pay his college tuition. Larry gives the car to Jeremiah, who sells it for $2,500 and uses the money to pay his tuition. How much income or loss would Larry report for tax purposes in this situation? (5) Petty Corporation owns a gourmet restaurant. The restaurant needs to remodel its kitchen but is short of cash. Dennis owns Terry's Restaurant Supply which provides supplies to restaurants. The manager of Petty makes a deal with Dennis to have Terry's do the kitchen remodeling, in exchange for which Petty will cater Terry's company picnic, Terry's does the remodeling and Petty caters the picnic. It costs Petty $800 to cater the picnic, a job for which it would have charged $1.500. How much income should be reported by Petty for this arrangement? (6) John is unemployed. During the current year he receives $4.000 in unemployment benefits Because the unemployment he receives is not enough to live on, John sells drugs to support himself. His total revenue for the year is $120.000. The cost of the drugs is 560,000. (7) Elroy is retired. During the current year, he receives $10.000 in Social Security benefits. He also receives $6,000 in cash dividends on stocks that he owned and $8,000 in interest on qualified state and local government bonds. Assuming that Elroy is single, what is his gross income? (8) Herman and Rose are a retired couple who receive $10,000 in Social Security benefits during the current year. They also receive 83.000 in interest on their savings account and taxable pension payments of $28,000. What amount of gross income should they report for the year? REQUIRED: For each of the attached situations, indicate the amount of income the indicated taxpayer must report with an appropriate explanation and calculation to show how you determined the amount to be reported
