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Exam 2: Gross Income and Exclusions

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Question 51

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Marie had a good year. She received the following prizes and awards: - an iPad from The Oprah Show with a fair market value of $500 - lottery winnings of $1,000 received in cash - a plaque worth $25 plus $100 of Godiva chocolate in recognition for 100 days on the job without an accident - a $10,000 cash prize from American Idol How much of her prizes and awards should Marie report on her tax return?

A) None, they are all excluded from income
B) $11,000; only cash prizes and awards are included
C) $11,500; the award from her job is excluded
D) $11,700; the plaque may be excluded
E) $11,725; everything is included at the highest amount

F) All of the above
G) None of the above

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Question 52

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Helga receives a $300,000 life insurance payment when her boyfriend Andy dies. How much of the payment is taxable to Helga?

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None of the payment is taxable...

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Question 53

Multiple Choice

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Which of the following fringe benefits is taxable to the employee receiving the benefit?

Barry has a successful methamphetamine laboratory. Producing methamphetamine is illegal under federal law. Is Barry required by law to report the income from his lab on his tax return? Why?

In some cases, Social Security benefits may be partially taxable.

Richard, who retired on April 30, 2014, receives a monthly employee annuity benefit of $1,400 payable for life, beginning May 1, 2014. During his years of employment, Richard contributed $29,400 to the company's plan. Richard's age on May 1 is 66. Using the simplified method, how much of the annuity payment amounts received during 2014 ($11,200) may Richard exclude from gross income?

Robert works for American Motors. American Motors pays a $1,200 premium on Robert's health insurance in 2014. Robert has an operation on his big toe in 2014 that cost $7,200. The insurance company paid for $6,800 of it. Which one of the following is true for 2014?

In June of 2014, Rob's wealthy stepmother died and left him a stock portfolio worth $600,000. Before she died, she gave him a gift of $20,000 in cash. How much of these amounts, if any, are taxable to Rob? Why?

As part of the property settlement related to their divorce, Stella must give Peter the house that they have been living in, while she gets 100 percent of their savings accounts. The house was purchased in Texas 15 years ago for $100,000 and is now worth $110,000. How much gain must Stella recognize on the transfer of the house to Peter? What is Peter's tax basis in the house for calculating any future sale of the house?

Indicate whether each of the items listed below would be (a) included in gross income or (b) excluded from gross income for the 2014 tax year. ​ a.Included b.Excluded -Wages

Which of the following is correct?

Susie received unemployment benefits in the current year.

Roger is required under a 2004 divorce decree to pay $200 of alimony and $500 of child support per month for 12 years. In addition, Roger makes a voluntary payment of $100 per month. How much of the total monthly payment is deductible by Roger?

To pay for college, Henry received the following: $1,000 scholarship from the Thespian Club to pay for books $5,000 scholarship from the Elks Lodge for tuition $4,000 worth of room and board as a dorm supervisor through a work-study program ​ How much income must Henry report on his tax return?

Sam died on January 15, 2004 and left his wife, Terry, an insurance policy with a face value of $100,000. Terry elected to receive the proceeds over a 10-year period ($10,000 plus interest each year) . This year Terry receives $11,500 ($10,000 proceeds plus $1,500 interest) from the insurance company. How much income must Terry report from this payment?

For divorces after 1984, which of the following statements about alimony payments is not correct?

Andy landscaped his friend's house in return for a couch set and an HD television worth $8,000. How much income must Andy report on his tax return for his services?

Which of the following amounts must be included in the gross income of the recipient?

Indicate whether each of the items listed below would be (a) included in gross income or (b) excluded from gross income for the 2014 tax year. ​ a.Included b.Excluded -Municipal bond interest

When calculating the exclusion ratio for an annuity, the ratio should be revised when there is a significant change in the taxpayer's status or health.