The scenario in B has not implications on income since she didn't sell anything. She borrowed money which isn't income.
Correct with this one. I have the same answer, just wanted to confirm.'
The scenario C - I have a question - so the price after the boss purchased the time is not important or should not be take into consideration when she is doing her taxes. Correct. That was my answer but when I read the chapter someone confused me.
May I ask you to explain scenarion a - I don't understand this one. Thanks
I thought that the answer is $1,000.
The gain = $11,000 (FMV at the time of exchange) - $10,000(basis)= $1000
Clarification with the ticket situation. It was 2 tickets so I think we need to multiply $200 *2 = $400. Correct?
Yes, I agree with you... it is not clear if the boss paid $200 for both tickets or $200 per ticket = $400.
Regarding the bond: which one is the correct answer?
11,000 (fair market value ) - 10,000 (cost of the bond) = 1,000
or $1,300 = 1,000 + 300 accrued interest.
Ok thanks for clarifying....
Here is my last problem:
A taxpayer is considering three alternative investments of $10,000. Assume the taxpayer is in the 28% marginal tax bracket for ordinary income and 15% for qualifying capital gains in all tax years. The selected investment will be liquidated at the end of five years. The alternatives are:
•· A taxable corporate bond yielding 5% before tax and the interest can be reinvested at 5% before tax.
•· A Series EE bond that will have a maturity value of $12,200 (a 4% before-tax rate of return).
•· Land that will increase in value.
The gain on the land will be classified and taxed as long-term capital gain. The income from the bonds is taxed as ordinary income.
Oh thanks so much. Yes, I like to understand how you came with the answer as I am doing the problem myself. I am glad you like my attitude.
I believe I missed some information... but here is the whole problem
•A taxable corporate bond yielding 5% before tax and the interest can be reinvested at 5% before tax.
•A Series EE bond that will have a maturity value of $12,200 (a 4% before-tax rate of return).
•Land that will increase in value.
How much must the land increase in value to yield a greater after-tax return than either of the bonds?
Given: Compound amount of $1 and compound value of annuity payments at the end of five years.
$1 Compounded for 5 years
$1 Annuity Compounded for 5 years
Ok I understand this is a tricky one. I will take your answer to compare my final answer.
I am still working with this one.
But thanks so much for helping me understand all 3 problems.
Good night as I need to take a test very shortly.