difference between income realization and income recognition
Q-1- To make income taxable, income must be realized and recognized. Explain in your own words the difference between income realization and income recognition, and then provide a short numerical example to indicate the difference (Do not copy the same numerical example from other students). (1.5 mark)
Q.2- Mr. X and Mrs. Y are married and have two dependent children. P & Q They also fully support Mrs. Y’s mother who lives with them and has no income. Their 2014 tax and other related information is as follows: (2 marks)
| Particulars | Amount in $ |
| Total salaries | 320,000 |
| Bank account interest income | 7,000 |
| Municipal bond interest income | 3,000 |
| Value of employer provided medical insurance | 11,000 |
| Value of premiums for $ 100000 of group term life insurance provided by employer | 1,000 |
| Gift from X’S parents | 30,000 |
| Gain from the sale of qualified small business stock acquired in 2008 | 30,000 |
| Total itemized deductions | 32,000 |
| Dividend income—from ABC stock, | 4,000 |
| Loan from X’S parents | 10,000 |
Required: Compute Mr. X and Mrs. Taxable income. (Show all calculations in proper /good form.)
Q.3- Ahmed’s medical expenses include the following: (1.5 mark)
| Particulars | Amount in $ |
| Food for personal use (expenses) | 2,000 |
| Travel allowances | 5,000 |
| Visitors fees | 1,000 |
| Prescription drugs | 1,200 |
| Eyeglasses | 700 |
| General purpose vitamins | 200 |
| Medical premiums | 21,700 |
| Doctors’ fees | 4,000 |
| Hospital fees | 6,700 |
Ahmed’s AGI for the year is $66,000. He is single and age 59. Insurance company reimburses none of the medical costs and other related items. After considering the AGI floor,
