IRS Adapte stock or stock rights is generally a taxable dividend unless it is wh

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IRS Adapte stock or stock rights is generally a taxable dividend unless it is which of the following a. A distribution in lieu of b. A Besides the divorce, David has had a big year inancially. He owns an apartment house and he requires each new tenant to place a S750 security deposit with him before moving into the apartment. When the tenant ultimately vacates the apartment, David will refund the deposit. In 2018, David collected $3,750 in security deposits and rental income of $15,000. distributiorn A distribution with respect to pre stock David entered a local raffle in 2018. David won first prize, which was a new automobile with a window price of $20,000. He checked with several local car dealers and was positive that if he had purchased a similar car on his own, the price would have been $18,200. 53. Comprehensive Problem(Tax Return Problem). David and Doris Kelley were divorced on February 3, 2018. They lived apart during 2018. The divorce decree required David to make the following payments: a. Transfer full title to their jointly owned family home to Doris. Fair market value of the home is $180,000, basis 150,000. $1,000 per month mortgage payments on the house, above. The mortgage has David loaned his sister Lois $5,000. Lois was repaying the loan at $100 per month plus interest of $40. Since Lois was about to depart on an extended vacation on December 2 2018, she gave David $200 plus interest of $80 to cover the months of December and January b. paid off, but the payments would end on her death. $2,000 per month for 10 years' support payments to Doris, of which $600 per month is child support. Doris insisted that the children attend private schools. In 2018, David paid $1,500 in tuition for the children's private high school. David has a good job that pays an annual salary of $50,000. In 2018, business was very good and in December 2018 bonuses were announced for the employees. David earned a $4,000 bonus for 2018. Bonuses would be mailed to the employees during the first week of January 2019. David has itemized deductions of $20,000 c. d. Determine David's 2018 taxable income. David paid his lawyer $5,000 to represent him in the divorce proceedings. David and Doris agreed that Doris would maintain a home for the children. Further, Doris agreed to allow David to claim one child as a dependency exemption. This agreement was put in writing and signed by Doris.

Explanation / Answer

The taxable income of Mr. David for 2018 will be as follows:

Rental Income received

(Note: Security Deposit is not taxable since the landlord is under an obligation to return it to the tenant once he vacates)

Hence the total taxable income of Mr. David for 2018 will be $ 84,220.

Note: Amount paid for child's support is not allowed as a deduction.

Particulars Amount (in $) Income from Capital Gains:- Transfer of family home to Ms Doris (Fair Value $180,000- Basis $150,000) 30,000 (I)Total Income from Capital Gains 30,000 Income from House Property:

Rental Income received

(Note: Security Deposit is not taxable since the landlord is under an obligation to return it to the tenant once he vacates)

15,000 (II) Total income from House Property 15,000 Income from Other Sources: Prize Received (Taxable at market value) 18,200 Interest earned on loan ($40*11+80) 520 (III) Total income from Other Sources 18,720 Income from Salary:- Annual Salary 50,000 Bonus (taxable on accrual basis) 4,000 (IV) Total Income from Salary 54,000 Total Income of Mr. David (I+II+III+IV) 117,720 Less: Deductions:- b) Mortgage payaments of $1,000 per month (1000*12) (12,000) d) Tuition fees paid for child's school ( 1,500) Itemized deductions (20,000) Total Deductions (33,500) Total taxable income of Mr. David(Total Income - Deductions) 84,220

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