32. List the five types of filing status and briefly explain the requirements for the use of each one.
33. In which of the following cases may the taxpayer claim head of household filing status?
a. The taxpayer is single and maintains a household that is the principal place of abode of her infant son.
b. The taxpayer is single, maintains a household for herself, and maintains a separate household that is the principal place of abode of her dependent widowed mother.
c. The taxpayer was married from January to October and lived with his spouse from January to May. From June 1 to December 31, the taxpayer maintained a household that was the principal place of abode of his married son and daughter-in-law, whom the taxpayer can claim as dependents.
d. Same as (c) except the taxpayer lived with his ex-spouse until August and maintained the household from September 1 to the end of the year.
38. Julio and Martina are engaged and are planning to travel to Las Vegas during the 2014 Christmas season and get married around the end of the year. In 2014 Julio expects to earn $45,000 and Martina expects to earn $15,000. Their employers have deducted the appropriate amount of withholding from their paychecks throughout the year. Neither Julio nor Martina has any itemized deductions. They are trying to decide whether they should get married on December 31, 2014, or on January 1, 2015. What do you recommend? Explain your answer.
35. Determine the amount of taxable income that should be reported by a cash-basis taxpayer in 2014 in each of the following independent cases:
a. A taxpayer completes $500 of accounting services in December 2014 for a client who pays for the accounting work in January 2015.
b. A taxpayer is in the business of renting computers on a short-term basis. On December 1, 2014, she rents a computer for a $200 rental fee and receives a $500 deposit. The customer returns the computer and is refunded the deposit on December 20, 2014.
c. Same facts as (b) except that the computer is returned on January 5, 2015.
d. On December 18, 2014, a landlord rents an apartment for $700 per month and collects the first and last months’ rent up front. It is customary that tenants apply the security deposit to their last month’s rent upon moving out.
e. An accountant agrees to perform $500 of tax services for an auto mechanic who has agreed to perform repairs on the car of the accountant’s wife. The mechanic repairs the car in December 2014 and the accountant starts and completes the tax work in March 2015.
36. A taxpayer who purchases a Series EE U.S. savings bond must report the interest income (i.e., increase in value) on the bond on the date the bond is redeemed, or the taxpayer can elect to report the interest currently in income. Under what circumstances should a taxpayer report income at maturity? Under what circumstances is it more advantageous to report income currently?
42. Sean, who is single, received social security benefits of $8,000, dividend income of $13,000, and interest income of $2,000. Except as noted, those income items are reasonably consistent from year to year. At the end of 2014, Sean is considering selling stock that would result in an immediate gain of $10,000, a reduction in future dividends of $1,000, and an increase in future interest income of $1,500. He has asked you for advice. What course of action do you recommend?
48. Under the terms of a divorce decree executed May 1, 2014, Ahmed transferred a house worth $650,000 to his ex-wife, Farah, and was to make alimony payments of $3,000 per month. The property has a tax basis to Ahmed of $300,000.
a. How much of this must be reported on Farah’s tax return?
b. Of that amount, how much is taxable gain or loss that Farah must recognize related to the transfer of the house?
50. Indicate whether each of the following items is considered aforAGI (above-the-line) deduction for the 2014 tax year:
a. Student loan interest.
b. Gambling losses.
c. Early withdrawal penalty.
d. Child support payments.
e. Charitable contributions.
f. One-half of self-employment taxes.
h. Scholarships for tuition and books.
i. Moving expenses.
j. Property taxes.
k. Self-employed health insurance premiums.
52. Steve purchased a personal residence from Adam. To sell the residence, Adam agreed to pay $4,500 in points related to Steve’s mortgage. Discuss the tax consequences from the perspectives of both Steve and Adam.
59. Reynaldo and Sonya, a married couple, had flood damage in their home due to a faulty water heater during 2014, which ruined the furniture that was stored in their garage. The following items were completely destroyed and not salvageable:
Their homeowner’s insurance policy had a $10,000 deductible for the personal property, which was deducted from their insurance reimbursement of $12,700, resulting in a net payment of $2,700. Their AGI for 2014 was $40,000. What is the amount of casualty loss that Reynaldo and Sonya can claim on their joint return for 2014?
60. During the year 2014, Ricki, who is not self-employed and does not receive employer reimbursement for business expenses, drove her car 5,000 miles to visit clients, 10,000 miles to get to her office, and 500 miles to attend business-related seminars. All of this mileage was incurred ratably throughout the year. She spent $300 for airfare to another business seminar and $200 for parking at her office. Using the automobile expense rates in effect for 2014, what is her deductible transportation expense?