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.

1-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?

2-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?

3-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.

4-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

1 The increase of $15000 in the value of land will not be taxed as since the same is not the revenue and it will only be taxed when Mr Clevin will sale the asset 2 Savings are not subject to tax as the same is not considered to be income. Hence Whole of $7200 is tax free. 3 The taxable amount is $20000, the profit made over and above the cost of Rs. 100000. 4 $850000 shall only be taxable, since the actual receipts is only $850000 and not $1500000

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