As per the U.S Tax Laws, answer the following questions. Explain your answer by

Question

As per the U.S Tax Laws, answer the following questions. Explain your answer by giving the reasons.

a)Mr. Calvin has a land valued at $ 45,000 in the beginning of the year and the value of the land appreciated to $ 60,000 at the end of the year. Will the increase in the value of land be taxed? If not, why?

b)Mr. Peter has saved an amount of $ 600 per month by washing his own car. In this way he has saved an amount of $ 7200 during the taxable year. What amount of his saving in this way is taxable? If not, why?

c)Mr. Anderson sold his property for 120,000 to Mr. David. The cost price of the property sold was $ 100,000. What amount of the property sold is taxable and what amount is not taxable. Explain by giving reason.

d)Mr. Paul has a life insurance policy of the sum assured of $ 1,500,000 for a period of 20 years. He paid annual premium of $ 50,000 for 12 years and then surrendered the policy for $ 850,000. What amount of the Life Insurance Proceeds is taxable? Explain why?

Explanation / Answer

a) No because capital gain can only be taxed when calvin sells his land but here there is only increase in market value and he hasn't gotten any thing money for this therefore there will be no tax applied here.

b) Saving money through not doing any certain expense is not taxable. Here he is not getting any interest or any new value due to his saving.

c) $1000,000 is not taxable as here Anderson just recovered the amount of his land which he sold. Taxable portion willl be $20000 i.e. the profit portion which he has gained.

d) Only the interest portion that Mr. Paul has gotten will be taxable. Means He has paid a total premium of $600000 and the surrender value is $850000, hence the taxable portion will be the interest i.e. $250000.

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