Ned is an independent contractor working with Joe remodeling a home, and Joe pays him using cryptocurrency. Ned then took the cryptocurrency and purchased tools for work. How should he report the income and what would be the basis of the amount he received?
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Ned is an independent contractor working with Joe remodeling a home, and Joe pays him using cryptocurrency. Ned then took the cryptocurrency and purchased tools for work. How should he report the income and what would be the basis of the amount he received?
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- Serena operates a gift shop. To reduce costs of credit card transactions, she offers customers a discount if they pay in cash. For the holiday rush, she hires some short-term workers but pays them cash and does not add them to the payroll. a. What are some of the tax problems Serena might have? b. Assess Serenas chances of audit by the IRS.Bernice is a sole proprietor who provides dog walking services to a number of neighborhood dog owners. Ralph hired Bernice to walk his husky while he was out of town on December 16, 2019. Bernice walks Ralph’s husky on December 16, 2019 and bills Ralph on the same day. Bernice received payment from Ralph in the form of a check on January 2, 2020. Which of the following is TRUE? Group of answer choices a)If Bernice is a cash basis taxpayer, she must claim the income on her 2019 tax return. b)If Bernice is a cash basis taxpayer, she must claim the income when it was earned. c)If Bernice is an accrual basis taxpayer, she must claim the income on her 2019 tax return. d) Bernice is an accrual basis taxpayer and must claim the income when she received it (on her 2020 tax return).Alison receives a notice of property taxes that are due from the County tax collector. The taxes are for the property next door to Alison and were incorrectly sent to her address. Alison believed the tax bill was for her property and paid it before realizing the error. Can Alison recover the amount she paid in taxes from her neighbor? Why or why not.
- Jeremy received a tax refund check and needs to have it deposited into his account. He decided to ask his friend JT to do that for him. What does Jeremy need to write on the back of the check to make sure that JT doesn't cash the check for himself?Bonnie and Clyde jointly own their own home when Clyde defaults on credit card debt. To determine if Clyde is insolvent, how will the home play into the calculation?Mick was a flood victim and had to spend a good amount to restore his home after the flood. His church held a special collection and gave him $1,500. Also, his employer gave him $1,000 to help him in "his time of need." How much gross income must Mick recognize from the receipt of the $2,500? How likely would Mick be audited?
- Which of the following describes a taxpayer with a hobby? Sara, an independent seller for a cosmetics company, who sells products to friends and neighbors because she enjoys learning about the new products available. She maintains separate business and personal accounts and keeps meticulous business records. Craig, a taxpayer who builds model trains. He occasionally wins cash prizes in local train modeling contests. He deposits his winnings into his personal checking account. Everett, a university research associate, who had made profits on his research activities in the past and fully expects to do so in the future. Gail, a taxpayer who writes travel articles. She visits each location only after she has a valid contract with a publisher and keeps her business and personal accounts separate. Her travel expenses and earnings are in line with the earnings and expenses of other travel writers.Linda operates an illegal gambling operation. Which of the following expenses that she incurs can reduce taxable income? a. Bribes paid to city employees. b. Salaries to employees. c. Security cameras. d. Kickbacks to police. e. Rent on an office. f. Depreciation on office furniture and equipment. g. Tenants casualty insurance. h. Utilities.
