Question 3. 3. (TCOs 4 and 5) While she was a college student, Juliet worked in a bookstore located

I. opens the business in July 2011 or

II. decides not to open the bookstore. (Points : 20) 2.  (TCOs 1, 2, 3, and 5) If a tax-exempt bond will yield approximately .65 (1 – .35) times the yield on a taxable bond of equal risk, who benefits from the tax exemption: the federal government, the state and local governments who issue the bonds, or the investors? Why? Explain. (Points : 20) 4. (TCOs 4 and 5) Tonya had the following items for last year:

For the current year, Tonya had the following items:
 

Determine Tonya’s adjusted gross income for the current year. (Points : 20) 5.  (TCO 7)  Rustin bought used, 7-year class property on May 15, 2012, for $500,000. Rustin elects § 179 cost recovery. Rustin’s taxable income would not create a limitation for purposes of the § 179 deduction. Rustin elects not to take additional first-year depreciation. Determine the write-off Rustin can take in 2012. (Points : 20) 6.  (TCOs 6 and 7) Albert is considering two options for selling land for which he has an adjusted basis of $70,000 and on which there is a mortgage of $100,000. Under the first option, Albert will sell the land for $150,000 with a stipulation in the sales contract that he liquidate the mortgage before the sale is complete. Under the second option, Albert will sell the land for $50,000 and the buyer will assume the mortgage. Calculate Albert’s recognized gain under both options. (Points : 20) 7.  (TCOs 3, 4, and 6) Gene is single and for 2011 has AGI of $40,000. He is age 65 and has no dependents. For 2011, he has itemized deductions from AGI of $7,000. Determine Gene’s taxable income for 2011. (Points : 20) 8. (TCOs 3, 4, and 6) George is employed by the Quality Appliance Company. All the full-time employees are allowed to purchase appliances at the company’s cost plus 5%. The employee also is given, at no cost, a 1-year service contract on all the goods purchased from the company. George purchased a refrigerator for $420. The company’s normal selling price for the refrigerator is $800. George also received a service contract, at no charge, that had a value of $120. During the year, George was required to have his refrigerator serviced once. The cost of the call would have been $50 if he had not had the service contract. Is George required to recognize any income from the purchase of the refrigerator and the receipt of the service contract? (Points : 20)