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Determine the effect on gross income in each of the following cases: a. Eloise received $150,000 in settlement of a sex discrimination case against her former employer. b. Nell received $10,000 for damages to her personal reputation. She also received $40,000 in...

Rex, age 55, is an officer of Blue Company, which provides him with the following nondiscriminatory fringe benefits in 2012: • Hospitalization insurance premiums for Rex and his dependents. The cost of the coverage for Rex is $2,900 per year, and the additional cost...

The UVW Union and HON Corporation are negotiating contract terms. Assume that the union members are in the 28% marginal tax bracket and that all benefits are provided on a nondiscriminatory basis. Write a letter to the UVW Union members explaining the tax consequences...

Does the taxpayer recognize gross income in the following situations? a. Ava is a filing clerk at a large insurance company. She is permitted to leave the premises for her lunch, but she always eats in the company’s cafeteria because doing so is much less expensive...

Bertha is considering taking an early retirement offered by her employer. She would receive $3,000 per month, indexed for inflation. However, she would no longer be able to use the company’s health facilities, and she would be required to pay her hospitalization...

Bluebird, Inc., does not provide its employees with any tax exempt fringe benefits. The company is considering adopting a hospital and medical benefits insurance plan that will cost approximately $9,000 per employee. To adopt this plan, the company may have to reduce...

Selma operates a contractor’s supply store. She maintains her books using the cash method. At the end of the year, her accountant computes her accrual basis income that is used on her tax return. For 2012, Selma had cash receipts of $1.5 million, which included...

Your client is a new partnership, ARP Associates, which is an engineering consulting firm. Generally, ARP bills clients for services at the end of each month. Client billings are about $50,000 each month. On average, it takes 45 days to collect the receivables. ARP’s...

Trip Garage, Inc. (459 Ellis Avenue, Harrisburg, PA 17111), is an accrual basis taxpayer that repairs automobiles. In late December 2012, the company repaired Samuel Mosley’s car and charged him $1,000. Samuel did not think the problem had been fixed and refused to...