Taxation: for each problem, calculate the taxable amount.

1. Mr. Z, a nondealer, sold assets on an installment plan. Determine Mr. Z's gross income for 2008. Relevant data include:

Year Installment sales Gross profit 2008 collections
2008 $200,000 50,000 25,000
2007 300,000 81,000 80,000
2008 400,000 96,000 125,000

2. Tom is a cash-basis, calendar year taxpayer. Which of the following December items result in gross income or deductions for the current year?

A. Check received for December rent, $700 not deposited until January 4.

B. Check for $1,100 to pay Tom's state income taxes mailed Dec 28, cashed Jan 7.

C. Cash received in the amount of $500 for services to be rendered the following year.

D. Interest of $800 credited to his savings account, added to Tom's account balance.

E. Check received for Jan rent, $700 deposited on Jan 9.

F. Charitable contribution of $300, charged to mastercard.

G. Tom's totaling $2,000 sent for services rendered during the year, uncollected as of year-end.

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2007 = 80,000 x 27% = 21,600
2008 = 125,000 x 24% = 30,000

2. Which should be included in cash basis current income or deductions?

a. If the check was received in December, it is income whether it got to the bank or not. Common practice is to call it next year's income, but the theory says it is ...