Required information The following information applies to the questions displaye

Question

Required information The following information applies to the questions displayed below. For the following independent cases, determine whether economic income is present and, if so, whether it must be included in gross income (i.e., is it realized and recognized for tax purposes?). Leave no answers blank. Enter zero if applicable.) b. Ben sold stock for $13,000 and paid a sales commission of $260. Ben purchased the stock several years ago for $5,200 Economic Income Amount included in Gross Income

Explanation / Answer

solution:

(b) Economic income is present here.

Economic income = Net gain on sale = $13,000 - (5200 +260) = $7,540

Amount included in gross income =$7,540 ( since, return on capital should be included in gross income limited to the net gain on sale)

(C)Economic income is also present here;

Economic income= Rental income + municiple interest =$3,600+ $1,050= $4,650

Amount included in gross income = Only rental income = $3,600 (Since, interest earned on state & municiple bonds are exempted from tax)

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