Q-1- To make income taxable, income must be realized and recognized. Explain in your own words the difference between income realization and income recognition, and then provide a short numerical example to indicate the difference (Do not copy the same numerical example from other students). (1.5 mark)
Q.2- Mr. X and Mrs. Y are married and have two dependent children. P & Q They also fully support Mrs. Y’s mother who lives with them and has no income. Their 2014 tax and other related information is as follows: (2 marks)
|
Particulars |
Amount in $ |
|
Total salaries |
320,000 |
|
Bank account interest income |
7,000 |
|
Municipal bond interest income |
3,000 |
|
Value of employer provided medical insurance |
11,000 |
|
Value of premiums for $ 100000 of group term life insurance provided by employer |
1,000 |
|
Gift from X’S parents |
30,000 |
|
Gain from the sale of qualified small business stock acquired in 2008 |
30,000 |
|
Total itemized deductions |
32,000 |
|
Dividend income—from ABC stock, |
4,000 |
|
Loan from X’S parents |
10,000 |
Required: Compute Mr. X and Mrs. Taxable income. (Show all calculations in proper /good form.)
Q.3- Ahmed’s medical expenses include the following: (1.5 mark)
|
Particulars |
Amount in $ |
|
Food for personal use (expenses) |
2,000 |
|
Travel allowances |
5,000 |
|
Visitors fees |
1,000 |
|
Prescription drugs |
1,200 |
|
Eyeglasses |
700 |
|
General purpose vitamins |
200 |
|
Medical premiums |
21,700 |
|
Doctors’ fees |
4,000 |
|
Hospital fees |
6,700 |
Ahmed’s AGI for the year is $66,000. He is single and age 59. Insurance company reimburses none of the medical costs and other related items. After considering the AGI floor,
Required – What will be Ahmed’s medical expense deduction?
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