Explore BrainMass

Tax Transactions

Alex is a calendar year sole proprietor. He began business on December 1, this year. He uses the accrual method of accounting. Alex had the following collections in December. Collected $7,000 in December, from clients who paid cash for services to be performed next year. Collected $5,000 in December, for services performed during December; deposited in an operating account on December 31, this year.
Collected $9,000 in December; on accounts receivable for services performed in December; deposited in operating account on January 2, next year.
What is the amount Alex must include in his income for December?
a. $7,000
b. $12,000
c. $14,000
d. $21,000

Kathleen received land as a gift from her grandfather. At the time of the gift, the land had a FMV of $85,000 and an adjusted basis of $110,000 to Kathleen's grandfather. One year later, Kathleen sold the land for $105,000. What was her gain or (loss) on this transaction?
a. No gain or loss
b. ($ 5,000)
c. $20,000
d. $25,000

Dale gave property with a basis of $1,600 to Sarah when it had a FMV of $1,200. Sarah later sold the property for $2,200 resulting in a recognized gain of
a. $-0-.
b. $400.
c. $600.
d. $1,200.

Mr. Moore inherited 1,000 shares of Corporation Zero stock from his father who died on March 4, of the current year. His father paid $30 per share for the stock on September 2, 1975. The FMV of the stock on the date of death was $50 per share. On September 4 this year, the FMV of the stock was $55 per share. Mr. Moore sold the stock for $65 per share on December 3. What is the amount and nature of any gain or loss?
a. $ 10,000 LTCG
b. $ 10,000 STCG
c. $ 15,000 LTCG
d. $ 15,000 STCG

Solution Preview

1. Alex
Using the U.S. Master Tax Guide copyrighted in 2005 by CCH Incorporated
The advanced receipt of income is income for the current year so add the $7,000 plus $5,000 plus the $9,000 for late deposit gives an amount of $21,000 and that gives answer D, you are correct.

2. Kathleen, yes at ...

Solution Summary

This solution contains various questions and answers regarding gifted peoperty, accruals, and inherited property.