Exam 2: Gross Income and Exclusions

A taxpayer in the 33 percent tax bracket invests in a New York City Bond paying 5 percent interest. What taxable interest rate would provide the same after-tax return?

William, a single taxpayer, works for the men's clothing division of a large corporation. During the year, William received the following fringe benefits: As a result of receiving the above fringe benefits, what amount must William include in his current year gross income?

Bonnie receives salary income of $32,000, unemployment compensation of $4,400, and interest income of $1,200 and a gift of $7,000 in cash from her aunt. How much total income does Bonnie have?

Karina receives a scholarship of $10,000 to a college. She is also given a job which pays $5,000 a year to help with her expenses. $7,000 of the scholarship is earmarked for tuition and $3,000 is for room and board. How much of the money from the scholarship and the job are taxable to Karina?

Joey is a single taxpayer. Joey's employer pays $1,800 per year for his health insurance. During the year, Joey had medical expenses of $2,500 and the insurance company reimbursed him for the full $2,500. How much of the above amounts, if any, must be included in Joey's gross income? Why?

Payments made to a qualified retirement plan by an employer are considered part of the employee's investment in the contract for calculation of the annuity exclusion ratio.

Answer the following questions regarding the taxability of Social Security payments. a.Will a taxpayer with no income other than Social Security have to include the Social Security in taxable income? b.Will a taxpayer with a large amount of municipal bond income, but no taxable income, likely have to pay tax on part of his or her Social Security? c.What is the maximum percentage of Social Security benefits which may be subject to tax on an individual's tax return?

Kim earned $30,000 from Pfizer before she was laid off. She then collected $7,000 of unemployment benefits. Finally, Kim received a $12,500 scholarship for tuition so she could return to college to earn a microbiology degree. How much does Kim need to report as income on her tax return?

Roger is required under a 2005 divorce decree to pay $500 of alimony and $200 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?

If a divorce agreement executed in the current year specifies that a portion of the amount of an alimony payment is contingent upon the status of a child, that portion is considered to be a child support payment.

​Craig, a single taxpayer, received the following items in 2015: 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 set aside $4,000 of his wages (the $4,000 has not been deducted from the $32,000 of wages listed previously) to cover childcare for his dependent children. He also receives a reimbursement of $270 per month to pay for public transportation passes each month (also not deducted from the $32,000 of wages reported previously). Based on the above, what is Craig's gross income in 2015?

Steve worked as a tech supervisor for a computer company. In September of 2015, he was laid off. He was paid unemployment compensation for the rest of the year totaling $7,000. Which of the following is true?

Seymore named his wife, Penelope, the beneficiary of a $100,000 insurance policy on his life. The policy provided that, upon his death, the proceeds would be paid at a rate of $4,000 per year plus interest over a 25-year period. Seymore died June 25, 2014, and in 2015 Penelope received a payment of $5,200 from the insurance company. What amount should she include in her gross income for 2015?

During the tax year, Thomas and Yolanda received $24,000 in Social Security benefits. The amount of their adjusted gross income for the year was $2,000 and they received no tax-exempt interest income. ​ Calculate the amount of the Social Security benefits that Thomas and Yolanda must include in their gross income for the year.

Elmer received the following distributions from Virginiana Mutual Fund for the calendar year 2015: Elsie, Elmer's wife, did not own any of the Virginiana Mutual Fund shares, but she did receive $1,475 in interest on a savings account at the Moss National Bank and $175 in interest on California Municipal Bonds. Elmer and Elsie filed a joint income tax return for 2015. What amount is reportable as taxable interest income?

Jack is a lawyer and Jeri is a child psychologist. Jack prepares Jeri's estate planning at no charge and Jeri agrees to counsel Jack's daughter six times at no charge in return for the estate planning. The value of the estate planning is $1,000 and the value of the therapy sessions is $1,000. a.How much income does Jack have? Why? b.How much income does Jeri have? Why?

If a taxpayer holding EE bonds makes an election with respect to the taxation of the bonds, how is the interest which accrues on the bonds, but is not paid, taxed each year?

A taxpayer in the 28 percent tax bracket invests in a City of San Diego bond paying 8 percent interest. What taxable interest rate would provide the same after-tax return?

Marco and his family are covered by his company's health insurance plan. The health insurance costs his company $2,500 a year. During the year, Marco's daughter is diagnosed with a serious illness and the health insurance pays $25,000 for treatment. How much of the insurance and treatment costs are taxable to Marco?

In which of the following cases may the employee exclude the meals and/or lodging: