Exam 2: Gross Income and Exclusions

As a new benefit to employees, the Acme Company is providing a dining allowance every Tuesday for use in one of the twenty restaurants that they own around town. Should this benefit be included in the wages of the employees?

Under a divorce agreement executed in 2013, Bob is required to pay his ex-wife, Carol, $3,000 a month until their youngest daughter is 21 years of age. At that time, the required payments are reduced to $2,000 per month. a.How much of each $3,000 payment may be deducted as alimony by Bob? b.How much of each $3,000 payment must be included in Carol's taxable income?

In June of the current year, 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?

Group term life insurance premiums paid by an employer for insurance amounts less than $50,000 must be included in the employee's income.

For 2015, the maximum percentage of Social Security benefits which must be included in a taxpayer's gross income is?

Elmore receives a rental property as an inheritance from his grandmother. The rental is worth $500,000 and Elmore collected rental income of $24,000 during the year. For the year, how much is Elmore's gross income as a result of the inheritance?

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 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.

Sam died on January 15, 2005 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?

Peter is required by his divorce agreement to pay alimony of $4,000 a month and child support of $6,000 a month to his ex-wife Stella. What is the tax treatment of these two payments? To Peter? To Stella?

Qualified dividends are given special tax treatment. Describe how they are taxed.

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

Martin retired in May 2015. His pension is $1,000 per month from a qualified retirement plan to which he contributed $42,000, and to which his employer contributed $12,000. Martin was 67 when the plan payments started. During 2015, he received 8 months of payment for a total of $8,000 from the plan. a.Using the simplified method, calculate Martin's taxable income for 2015 from the retirement plan distributions. b.​ If Martin's contributions to the plan had been $25,200, instead of $42,000, using the simplified method, how much taxable income would he have to report in 2015 from the plan distributions?

Amounts received by an employee as reimbursement for medical expenses under a policy provided by the taxpayer's employer are excluded from gross income.

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

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.

Tracy transfers to Glen a life insurance policy with a face value of $40,000 and a cash value of $8,000 in payment of a personal debt. Glen continues to make premium payments on the policy until Tracy's death. At that time, Glen had paid $3,500 in premiums. a.How much income must Glen report when he receives the $40,000 in proceeds? b.Would your answer be different if Tracy were a shareholder and CEO of a corporation to which the policy was transferred? Why?

Amounts received as scholarships for books and tuition may be excluded from the recipient's taxable income.

Under a divorce agreement executed in the current year, periodic payments of either cash or property must be made at regular intervals to be deductible as alimony.

Interest earned on bonds issued by a state government is fully taxable.