Chapter 5 Question 1 a. Your friend told you that as they were walking into Albertson’s...

Chapter 5 Question 1

a. Your friend told you that as they were walking into Albertson’s last week that balloons were dropped on them and they won a shopping spree for $2,000 for being the one-millionth customer. Your friend asks you if this is taxable, yes or no?

b. Tomas filed his taxes last year and itemized his deduction. His itemized deductions were $1,030 more than the standard deduction last year. Included in his itemized deductions was $1,250 of NM state income taxes. In the current year, he received a refund of New Mexico state income taxes of $750 he paid last year. How much, if any of this refund is taxable?

c. All of the following are included in taxable income except:

Wages, unemployment income, prizes, gambling income, workman’s compensation.

d. Bart provided electrical services to several clients this year as a side business. Bart believes that if he does not receive cash, he will not have to claim the income. He asked his clients to pay him in the following methods: Gift cards, exchange of services, concert tickets, or trade for tools or other items. Are all of these methods taxable or none?

Solutions

Expert Solution

A.Any winnings are taxable under IRS hence the winning from shopping spree is taxable.

B.Tax refund of $ 750 received from New Mexico is part of the NM state income tax which was claimed as deduction last year is taxable in current year.

C.Unemployment income is not treated as taxable because IRS defines "earned income" as the compensation you receive from employement / self employement.It specifically excludes unemployment compensation.

Workmen compensation might or might not be taxable.It might be taxable if you are receiving Social Security Disability insurance or Supplemental security income concurrenty with workers compensation benefits.Otherwise the Workmen compensation is not taxable at the state or federal level.

D.Only receipt of concert tickets are not taxable under IRS rest everything is taxable. Where barter exchange is involved income is determined on basis the fair market value

ekkarill92 answered 1 year ago

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