1. A owns a house. The house is worth $100,000 and there is a $95,000 mortgage outstanding. A pays off the mortgage for only $85,000. Does A have any taxable income to realize?
2. A is an accrual basis taxpayer. A sells services that are delivered on a monthly basis. On May 1, 2016 A enters into the following agreements. Agreement that runs until January 31, 2017 for $18,000 and another that runs until December 31, 2017 for $35,000. The fees are earned evenly each month. A receives $53,000 in 2016. How much income does A have to recognize in 2016? Would the answer be different if A was renting apartments in a building?
3. A buys an annuity for $50,000. Over the life of the annuity, A expects to earn $10,000. In the first year a receives $6,000 from the annuity. How much is taxable.
4. A and B are married and file a joint return. They have $15,000 of adjusted gross income but were able to exclude foreign earned income of $50,000. They received $23,000 of social security benefits during the year. How much of the social security is subject to tax?