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Exam 2: Gross Income and Exclusions

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Question 41

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Taxpayers must report interest income on Series EE savings bonds as the interest accrues.

A) True
B) False

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Question 42

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If an employer claims a business deduction for group health insurance premiums paid on behalf of his employees, the amount must be included in the employees' gross income.

A) True
B) False

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Question 43

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The value of lodging provided to a professor to enable him to live near the campus is excluded from gross income.

Indicate whether each of the items listed below would be (a) included in gross income or (b) excluded from gross income for the 2016 tax year. -Scholarships for tuition and books

During the current year, Margaret and John received $24,000 in Social Security benefits. The amount of their adjusted gross income for the year before any Social Security income was $140,000 and they received $19,000 in tax-exempt income. ​ Explain the treatment of their Social Security income for tax purposes and the likely percentage of the Social Security income that will be taxable to Margaret and John.

If a life insurance policy is transferred to the insured's partnership for valuable consideration, the insurance proceeds are taxable when received by the partnership.

If an annuitant, whose annuity starting date was January 1, 2007, dies before recovering his or her investment in the annuity, any unrecovered investment is recognized as a loss on the annuitant's tax return for the year of death.

State whether each of the following is taxable or nontaxable. a.Susan won a jackpot of $50,000 gambling at a casino. b.Sarah received a Christmas ham from her employer. c.Jonathan won a car in a supermarket raffle valued at $25,000. d.Gary received a scholarship for tuition of $5,000 a year. e.Eric is given lodging valued at $1,000 a month on the oil rig where he is employed since it is impossible for Eric to go home during the period of time he is assigned to work on the rig.

Awards, bonuses, and gifts are all included in gross income.

Which of the following is not taxable income?

Robert works for American Motors. American Motors pays a $1,200 premium on Robert's health insurance in 2016. Robert has an operation on his big toe in 2016 that cost $7,200. The insurance company paid for $6,800 of it. Which one of the following is true for 2016?

Indicate whether each item below would be included in or excluded from the income of the recipient. ​ a.Payment for laboratory assistant position at University of California State b.A $1,000 scholarship for tuition c.College books paid for by grandma and grandpa d.A $1,000 college loan e.A scholarship for room and board f.A new car given to recruit a basketball player g.A scholarship used for supplies and equipment that are required for courses

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

Elsie received the following distributions from Virginiana Mutual Fund for the calendar year 2016: Elmer, Elsie's husband, did not own any of the Virginiana Mutual Fund shares, but he did receive $1,600 in interest on a savings account at the Moss National Bank. Elmer and Elsie filed a joint income tax return for 2016. What portion of the distributions from Virginiana Mutual Fund is taxable as ordinary income on their 2016 individual income tax return?

Which of the following may be excluded from income?

Which of the following gifts or prizes would be considered taxable income to the person receiving the gift?

​Craig, a single taxpayer, received the following items in 2016: dividends of $450, wages of $32,000, child support from his ex-spouse of $400 per month, a new television worth $1,200 from a door prize at a conference he attended, a gift of $3,000 from Craig's parents, and $200 of interest on bonds issued by the State of Arizona. Craig put $4,000 of his wages into hid employer's dependent care flexible spending account (the $4,000 has not been deducted from the $32,000 of wages listed previously). He also receives a reimbursement of $270 per month to pay for public transportation passes each month (the monthly reimbursement of $270 has not been deducted from the $32,000 of wages). Based on the above, what is Craig's gross income in 2016?

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

Rob is 8 years old and won a sports car valued at $30,000 in a drawing at Disneyland. How much income, if any, must Rob report on his 2016 tax return? Why?

Van is sick and tired of his job. His doctor certifies that his health may be compromised if he continues to work at his current job. He sells his life insurance policy to Life Settlements, Inc. for $50,000 so he can take a break from work. He has paid $10,000 so far for the policy. How much of the $50,000 must Van include in his taxable income?