Taxpayers who deduct an expense one year but recover it the next year are required to include the recovered amount in gross income.

Taxpayers who deduct an expense one year but recover it the next year are required to include the recovered amount in gross income. The tax benefit rule provides relief if the original deduction did not result in any tax savings. Does this rule provide relief to taxpayers who are in a higher tax bracket in the year they recover the previously deducted​ expense?

QI:3-28

George, a wealthy​ investor, is uncertain whether he should invest in taxable or​ tax-exempt bonds. What tax and nontax factors should he​ consider?

Other nontax factors George should consider include the following ​(Select all that​ apply.)

QI:3-29

Do you agree or disagree with the following​ statement: A taxpayer should not have to report income when debt is forgiven because the taxpayer receives nothing. Explain.

PI:3-34

Requirement

For each of the following items​ indicate, whether the individual taxpayer must include any amount in gross income.

a.	Employees of Eastside Bookstore are given their birthdays off with pay.
b.	Westside​ Hardware, Inc., gave each employee 10 shares of Westside stock worth​ $100 per share in lieu of a cash bonus.
c.	Employees of Northside Manufacturing were allowed to take home the​ company's old computers when the company purchased new ones. ​(Assume the computers have some monetary​ value.)

PI:3-35

Requirement

Which of the following constitutes constructive receipt in the current year ended December​ 31?

a.	A salary check received at​ 6:00 p.m. on December​ 31, after all the banks have closed.
b.	A rent check received on December 30 by the manager of an apartment complex. The manager normally collects the rent for the owner. The owner was out of town.
c.	A paycheck received on December 29 that was not honored by the bank because the​ employer's account did not have sufficient funds.
d.	A check received on December 30. The check was postdated January 2 of the following year.
e.	A check received on January 2. The check had been mailed on December 30.

PI:3-42

Ed owns

Oak KnollOak Knoll Apartments. During the​ year,

FrankFrank​, a​ tenant, moved to another state.

FrankFrank paid

EdEd

$ 1 comma 100$1,100

to cancel the​ two-year lease he had signed.

EdEd subsequently rented the unit to

WarrenWarren.

WarrenWarren paid the first and last​ months' rents of

$ 700$700 each and a security deposit of

$ 1 comma 200$1,200.

EdEd also owns a building that is used as a health club. The club has signed a​ fifteen-year lease at an annual rental of

$ 16 comma 000$16,000.

The owner of the club requested that

EdEd install a swimming pool on the property.

EdEd declined to do so. The owner of the club finally constructed the pool himself at a cost of

$ 17 comma 000$17,000.

Requirement

What amount must

EdEd include in gross​ income?

In addition to the regular rental income from the apartment and health club

EdEd must include the following in gross income. ​(If a box is not​ used, leave the box​ empty; do not select a label or enter a​ zero.)

PI:3-43

​Susan's salary is​ $44,000 and she received dividends of​ $600. She received a statement from SJ partnership indicating that her share of the​ partnership's income was​$4,000. The partnership distributed​ $1,000 to her during the year and​ $600 after​ year-end. She won​ $2,000 in the state lottery and spent​ $50 on lottery tickets.

Requirement

Which amounts are​ taxable? ​(Complete all answer​ boxes.)