Assignment 3
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)
Answer
- 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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