# Income tax | Accounting homework help

[removed]e.None of these choices are correct.

Albert had a terminal illness which required almost constant nursing care for the remaining two years of his estimated life, according to his doctor. Albert had a life insurance policy with a face amount of \$100,000. Albert had paid \$25,000 of premiums on the policy. The insurance company has offered to pay him \$80,000 to cancel the policy, although its cash surrender value was only \$55,000. Albert accepted the \$80,000. Albert used \$15,000 to pay his medical expenses. Albert made a miraculous recovery and lived another 20 years. As a result of cashing in the policy:

[removed]a.Albert must recognize \$65,000 (\$80,000 – \$15,000) of gross income.

[removed]b.Albert must recognize \$55,000 of gross income, but he has \$15,000 of deductible medical expenses.

[removed]c.Albert is not required to recognize any gross income because of his terminal illness.

[removed]d.Albert must recognize \$40,000 (\$80,000 – \$25,000 – \$15,000) of gross income.

[removed]e.None of these choices are correct.

Tonya is a cash basis taxpayer. In 2016, she paid state income taxes of \$8,000. In early 2017, she filed her 2016 state income tax return and received a \$900 refund.

[removed]a.If Tonya itemized her deductions in 2016 on her Federal income tax return, she must amend her 2016 Federal income tax return and use the standard deduction.

[removed]b.If Tonya itemized her deductions in 2016 on her Federal income tax return and her itemized deductions exceeded the standard deduction by at least \$900, the refund will not affect her 2017 tax return.

[removed]c.If Tonya itemized her deductions in 2016 on her Federal income tax return and her itemized deductions exceeded the standard deduction by more than \$900, she must recognize \$900 income in 2017 under the tax benefit rule.

[removed]d.If Tonya itemized her deductions in 2016 on her Federal income tax return, she should amend her 2016 return and reduce her itemized deductions by \$900.

[removed]e.None of these choices are correct.

Marsha is single, had gross income of \$50,000, and incurred the following expenses:

 Charitable contribution \$2,000 Taxes and interest on home 7,000 Legal fees incurred in a tax dispute 1,000 Medical expenses 3,000 Penalty on early withdrawal of savings 250

Her AGI is:

[removed]a.\$49,750

[removed]b.\$39,700

[removed]c.\$39,750

[removed]d.\$40,000

[removed]e.None of these choices are correct.

During 2015, the first year of operations, Silver, Inc., pays salaries of \$175,000. At the end of the year, employees have earned salaries of \$20,000, which are not paid by Silver until early in 2016. What is the amount of the deduction for salary expense?

[removed]a.If Silver uses the cash method, \$0 in 2015 and \$195,000 in 2016.

[removed]b.If Silver uses the accrual method, \$175,000 in 2015 and \$20,000 in 2016.

[removed]c.If Silver uses the accrual method, \$195,000 in 2015 and \$0 in 2016.

[removed]d.If Silver uses the cash method, \$175,000 in 2015 and \$0 in 2016.

[removed]e.None of these choices are correct.

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