1. Which of the following statements are true?
Mary is a cash basis attorney. In 2015, she performed services in connection with the formation of a corporation and received stock with a value of $4,000 for her services. By the end of the year, the value of the stock had decreased to $2,000. She continued to hold the stock. Mary must recognize $4,000 of gross income from the stock for 2015.
Daniel owned stock that decreased in value by $20,000 during the year, but he did not sell the stock. He earned $45,000 salary, but received only $34,000 because $11,000 in taxes were withheld. Daniel saved $10,000 of his salary and used the remainder for personal living expenses. Daniel's economic income for the year exceeded his gross income for tax purposes.
The Federal excise tax on cigarettes is an example of a proportional tax.
A sole proprietorship purchased an asset for $1,000 in 2015 and its value was $1,500 at the end of 2015. In 2016, the sole proprietorship sold the asset for $1,400. The sole proprietorship realized a taxable gain of $400 in 2016 but an economic loss of $100 in 2016.
Richard painted his house which saved him $3,000. According to the realization requirement, Richard must recognize $3,000 of income.
2. Which of the following statements are true? (There are multiple correct answers)
As a general rule, the assignee of income from property must pay tax on the income.
All of these statements are true.
As a general rule, income from services is taxed to the person who earns the income.
As a general rule, the person who receives the benefit of the income must pay the tax on the income.
As a general rule, property is taxed to the person who owns the property.