Category: Writing

Discharge of Debt. During bankruptcy, USA Corporation debt
was reduced from $780,000 to $400,000. USA Corporation’s assets are valued at
$500,000. USA’s NOL carryover was $400,000.
a. ls USA Corporation required to report any income from the
discharge of its debts?
b. Which tax attributes are reduced and by how much? Assume
USA does not make any special elections when reducing its attributes.

Both high-income and low-income employees are covered by
cafeteria plans. Under such plans, all employees may select from a list of
nontaxable fringe benefits or they may elect to receive cash in lieu of these
benefits.
a. Which group of employees is more likely to choose
nontaxable fringe benefits in lieu of cash? Explain.
b. Is this result desirable from a social or economic point
of view? Explain.

a. Under what conditions is the discharge of indebtedness
not taxable?
b. If a father forgives a daughter’s debt to him, is she
required to include such amount in her gross income?

1.
a. What are the seven major types of fringe benefits covered
by Sec. 132?
b. What tax advantage is offered relative ro such benefits?
c. Are such benefits available to employees only or may the
benefits also be offered ro spouses, dependents, and retirees? d. ls
discrimination prohibited relative to Sec. 132 benefits?
e. What is the tax impact on the employer and employees if
an employer’s plan is discriminatory?
2. What conditions must be met if an employee is to exclude
meals and lodging furnished by an employer?

Life Insurance Proceeds. Joe is the beneficiary of a life
insurance policy taken out by his father several years ago. Joe’s father dies,
and Joe has the option of receiving the $100,000 face value of the policy in
cash or receiving annual payments of $1,000 per month for the rest of his life.
Joe is now 65. Joe’s father paid $32,000 in premiums over the years.
a. How much must Joe include in gross income this year if he
accepts the $100,000 face amount?
b. Assume Joe elects to receive the annual payments. What is
his life expectancy?
c. What is his annual exclusion?
d. How much must he report as income each year?