Individual Income Taxes
43rd Edition
ISBN: 9780357109731
Author: Hoffman
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 4, Problem 25CE
LO.4 Elizabeth made the following interest-free loans during the year. Assume that tax avoidance is not a principal purpose of any of the loans. Assume that the relevant Federal rate is 5% and that the loans were outstanding for the last six months of the year.
What are the effects of the imputed interest rules on these transactions? Compute Elizabeth’s gross income from each loan:
- a. Richard
- b. Woody
- c. Irene
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Elizabeth makes the following interest-free loans during the year. Assume that tax avoidance is not a principal purpose of any of the loans.
The relevant Federal rate is 5% and that the loans were outstanding for the last six months of the year.
Borrower's Net
Borrower Amount
Investment Income Purpose of Loan
Richard
$5,000
$800
Gift
Woody
$8,000
$600
Stock purchase
Irene
$105,000
$0
Purchase principal residence
By how much do each of these loans increase Elizabeth's gross income?
If an amount is zero, enter "0".
a. Richard is not
subject to the imputed interest rules because the $10,000 gift loan exception does
apply. Elizabeth's
gross income from the loan is $
0
b. The $10,000 exception does not
income producing
apply to the loan to Woody because the proceeds were used to purchase
assets. Although the $100,000 exception applies
to this loan, the amount of imputed interest is
1,000 X.Incorrect
is $
0 ✓.
c. None of the exceptions apply
gross income from the loan is $
to the loan to…
1. The imputed interest rules apply to which of the following type of loan?
a.Coercion-related loans
b.Loans from one employee to another
c.Shareholder-corporation loans made from a shareholder to a corporation
d.Gift loans made out of love or affection
e.Loans made between two objective parties at the market rate of interest
2. In December 2022, Bellamy collected the December 2022 and January 2023 rent from a tenant. Bellamy is a cash basis taxpayer. The amount collected in December 2022 for the 2023 rent should be included in the 2023 gross income.
True
False
Jerry and Ann paid the following amounts during the current year:
Interest on automobile loan
$1,500
Interest on bank loan (proceeds were used to purchase municipal bonds)
$5,000
Qualified home mortgage interest
$3,150
What is the maximum amount they can use as interest expense in calculating itemized deductions for the current year?
a.$6,500
b.$3,150
c.$8,150
d.$4,650
e.None of these choices are correct.
Chapter 4 Solutions
Individual Income Taxes
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Ch. 4 - Prob. 11DQCh. 4 - Prob. 12DQCh. 4 - A divorce agreement entered into in 2017 requires...Ch. 4 - Prob. 14DQCh. 4 - Patrick and Eva are planning to divorce in 2019....Ch. 4 - Prob. 16DQCh. 4 - Prob. 17DQCh. 4 - Prob. 18DQCh. 4 - Prob. 19DQCh. 4 - Prob. 20DQCh. 4 - On January 1, 2019, Kunto, a cash basis taxpayer,...Ch. 4 - Bigham Corporation, an accrual basis calendar year...Ch. 4 - LO.3 Simba and Zola are married but file separate...Ch. 4 - Casper and Cecile divorced in 2018. As part of the...Ch. 4 - LO.4 Elizabeth made the following interest-free...Ch. 4 - Prob. 26CECh. 4 - Prob. 27CECh. 4 - Prob. 28PCh. 4 - Prob. 29PCh. 4 - Determine the taxpayers gross income for tax...Ch. 4 - Prob. 31PCh. 4 - Prob. 32PCh. 4 - Prob. 33PCh. 4 - Your client is a partnership, ARP Associates,...Ch. 4 - Trip Garage, Inc. (459 Ellis Avenue, Harrisburg,...Ch. 4 - Prob. 36PCh. 4 - Marlene, a cash basis taxpayer, invests in Series...Ch. 4 - Drake Appliance Company, an accrual basis...Ch. 4 - Freda is a cash basis taxpayer. In 2019, she...Ch. 4 - Prob. 40PCh. 4 - Prob. 41PCh. 4 - Troy, a cash basis taxpayer, is employed by Eagle...Ch. 4 - Prob. 43PCh. 4 - Prob. 44PCh. 4 - Prob. 45PCh. 4 - Nell and Kirby are in the process of negotiating...Ch. 4 - Alicia and Rafel are in the process of negotiating...Ch. 4 - Prob. 48PCh. 4 - Prob. 49PCh. 4 - Prob. 50PCh. 4 - Prob. 51PCh. 4 - Prob. 52PCh. 4 - For each of the following, determine the amount...Ch. 4 - Prob. 54PCh. 4 - Prob. 55PCh. 4 - Linda and Don are married and file a joint return....Ch. 4 - Charles E. Bennett, age 64, will retire next year...Ch. 4 - Donna does not think she has an income tax problem...Ch. 4 - Prob. 1RPCh. 4 - Prob. 2RPCh. 4 - Prob. 3RPCh. 4 - Prob. 1CPACh. 4 - Fred and Wilma were divorced in year 1 (before...Ch. 4 - Bill and Jane Jones were divorced on January 1,...Ch. 4 - Jake pays the following amounts to his former...Ch. 4 - Mary purchased an annuity that pays her 500 per...
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