Question

In: Accounting

Freda is a cash basis taxpayer. In 2019, she negotiated her salary for 2021. Her employer...

Freda is a cash basis taxpayer. In 2019, she negotiated her salary for 2021. Her employer offered to pay her $21,000 per month in 2021 for a total of $252,000. Freda countered that she would accept $10,000 each month for the 12 months in 2021 and the remaining $132,000 in January 2022. The employer accepted Freda’s terms for 2021 and 2022.

  1. Did Freda actually or constructively receive $252,000 in 2021?

  2. What could explain Freda’s willingness to spread her salary over a longer period of time?

Solutions

Expert Solution

1.) No, Freda did not actualy or Constructively receive $ 252,000 in 2021 because as per her terms with the employer , she factually received $ 120,000 ( 10,000 x 12 ) in 2021. The constructive receipt doctrine cannot change actual events to "what might have been done."

2.)  Freda may have expected to be in a lower marginal tax bracket in 2022. She also benefited by not having to pay the tax on the income shifted into 2022 until she filed her 2022 income tax return or made payments on estimated taxes for 2022.

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

In January, Ms. NW projects that her employer will withhold $25,000 from her 2019 salary. However,...
In January, Ms. NW projects that her employer will withhold $25,000 from her 2019 salary. However, she has income from several other sources and must make quarterly estimated tax payments. Compute the quarterly payments that result in a 2019 safe-harbor estimate assuming that her 2018 AGI was $176,000, and her tax was $47,200. Compute the quarterly payments that result in a 2019 safe-harbor estimate assuming that her 2018 AGI was $139,000, and her tax was $36,800.
In December 2019, Emily, a cash basis taxpayer, received a $2,500 cash scholarship for the spring...
In December 2019, Emily, a cash basis taxpayer, received a $2,500 cash scholarship for the spring semester of 2020. However, she did not use the funds to pay the tuition until January 2020. Emily can exclude the $2,500 from her gross income in 2019. a. True b. False  
Donna Williams is a single taxpayer. She has wages of $175,000. Her employer has assessed 1.45%...
Donna Williams is a single taxpayer. She has wages of $175,000. Her employer has assessed 1.45% of medicare taxes on her wages. Further in the current year she has recognized capital gains of $75,000, earned Interest Income of $6000, and has a passive loss incurred in the current tax year of $12,000. The activity causing the passive loss was not disposed of in the current year. What amount, if any, of high wage surtax and/or Net Investment Income tax does...
In 2019, Nina contributes 12 percent of her $125,000 annual salary to her 401(k) account. She...
In 2019, Nina contributes 12 percent of her $125,000 annual salary to her 401(k) account. She expects to earn a 5 percent before-tax rate of return. Assuming she leaves this (and any employer contributions) in the account until she retires in 20 years, what is Nina’s after-tax accumulation from her 2019 contributions to her 401(k) account? (Use Table 1, Table 2.) (Round your intermediate calculations and final answer to the nearest whole dollar amount.) Problem 13-55 Part a a. Assume...
4 Bea, a cash basis taxpayer, operates a small retail store. Her books show the following...
4 Bea, a cash basis taxpayer, operates a small retail store. Her books show the following income items for the year: Sales – paid, $72,000. Sales – unpaid, $3,500. Sale of cardboard packaging to recycling company, $2,500. What does Bea report as her gross income on her Schedule C?
Robyn is a taxpayer painted her office, which she uses for her business purposes. She has...
Robyn is a taxpayer painted her office, which she uses for her business purposes. She has paid $7,000 to a professional painter to paint her office. As ‘part of the deal’ Robyn receives a free holiday package worth $1,500 from the painting business. How much deduction can Robyn claim and under which section? book taxation law
True or False. Taxpayer (“T”), a cash basis individual taxpayer, bought a bond for $8,760 on...
True or False. Taxpayer (“T”), a cash basis individual taxpayer, bought a bond for $8,760 on January 1, 2019, with a maturity value of $10,000 on January 1 2022 (meaning there are no scheduled payments other than the $10,000 received at maturity). Assume the yield to maturity is 4.5% on an annual basis. If the bond is a series EE government bond T will not be required to include any gross income in 2019, but if the bond is issued...
True or False. Taxpayer (“T”), a cash basis individual taxpayer, bought a bond for $8,760 on...
True or False. Taxpayer (“T”), a cash basis individual taxpayer, bought a bond for $8,760 on January 1, 2019, with a maturity value of $10,000 on January 1 2022 (meaning there are no scheduled payments other than the $10,000 received at maturity).  Assume the yield to maturity is 4.5% on an annual basis.  If the bond is a series EE government bond T will not be required to include any gross income in 2019, but if the bond is issued by a...
Lacy is a single taxpayer. In 2019, her taxable income is $42,100. What is her tax...
Lacy is a single taxpayer. In 2019, her taxable income is $42,100. What is her tax liability in each of the following alternative situations? Use Tax Rate Schedule, Dividends and Capital Gains Tax Rates, Estates and Trusts for reference. Can you please show me step by step? a. Tax Liability b. Her $42,100 of taxable income includes $3,600 of qualified dividends. c. Her $42,100 of taxable income includes $6,300 of qualified dividends.
June is a cash basis taxpayer, and is a fashion and makeup consultant in a high...
June is a cash basis taxpayer, and is a fashion and makeup consultant in a high fashion company, Curlylocks, Inc. She earned a salary of $60,000. She also was provided a disability income protection policy for which Curlylocks paid a $1,500 premium for June's insurance. The company also provided health insurance for her which cost the company $15,000, and long term care insurance for her which Curlylocks paid a $1,000 premium. Her salary would have been $65,000, but she was...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT