Exam 2: Gross Income and Exclusions

Elmer received the following distributions from Virginiana Mutual Fund for the calendar year 2013: Ordinary dividends $\quad\quad\quad \$ 250$ Capital gain distributions $\quad\$ 170$ Nontaxable distributions $\quad\$ 80$ Elsie,Elmer's wife,did not own any of the Virginiana Mutual Fund shares,but she did receive $175 in interest on a savings account at the Moss National Bank and $1,475 in interest on California Municipal Bonds.Elmer and Elsie filed a joint income tax return for 2013.What amount is reportable as taxable interest income?

A gift received from a financial institution for opening a bank account is not taxable income to the recipient.

Laura and Leon were granted a divorce in 2004.In accordance with the decree,Leon made the following payments to Laura in 2013: Child support payments contingent on the age of the child $\quad$$\$ 4,000$ Annual cash payments, other than child support, specified as alimony in the divor ce agreement $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ $\$ 6,000$ How much should Laura include in her 2013 taxable income as alimony?

Sam,a calendar year taxpayer,purchased an annuity contract for $3,600 that would pay him $120 a month beginning on January 1,2013.His expected return under the contract based on his life expectancy is $10,800.Assuming Sam received a total of $1,440 in payments during 2013,how much of this annuity income is included in Sam's gross income for 2013,using the general rule?

Which of the following is correct?

Elmer received the following distributions from Virginiana Mutual Fund for the calendar year 2013: Ordinary dividends (nonqualifying) \ 250 Capital gain distributions \ 170 Nontaxable distributions \ 80 Elsie,Elmer's wife,did not own any of the Virginiana Mutual Fund shares,but she 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 2013.What portion of the distributions from Virginiana Mutual Fund is taxable as ordinary income on their 2013 individual income tax return?

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?

Dividend income arising from stock received as a gift is excluded from gross income since the dividends are considered part of the gift.

Jerry and Sally were divorced under an agreement executed July 1,2013.The terms of the agreement provide that Jerry will transfer to Sally his interest in a rental house worth $250,000 with a tax basis to Jerry of $80,000.What is the amount of the gain that must be recognized by Jerry on the transfer of the property and what is Sally's tax basis in the property after the transfer,respectively?

Roger is required under a 2003 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?

Laura and Leon were granted a divorce in 2004.In accordance with the decree,Leon made the following payments to Laura in 2013: Child support payments contin gent on the age of the child $\quad\$ 4,000$ Indefinite periodic payments terminating on Laura's death $\quad\$ 6,000$ How much of the payments can he deduct as alimony in 2013?

Geoff is a company president who has had a very good year at work.The owner of the company is pleased and gives him a gift of $50,000 at the end of the year.The owner writes "gift" in the memo section of the check.How much of the gift is taxable to Geoff?

Tim receives a $25,000 gift from his parents for a down payment on a house.They know he can not buy a house without their help.They write "gift" in the memo line of the check.How much of the gift is taxable to Tim?

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 employees' wages?

All of the following amounts are excluded from gross income,except:

Indicate which of the following statements is true.

Under the terms of a property settlement executed during 2013,Cindy transferred a house worth $350,000 to her ex-husband,Carl.The property has a tax basis to Cindy of $300,000. a.How much taxable gain or loss must be recognized by Cindy at the time of the transfer? b.What is Carl's tax basis in the property he received from Cindy?

Which of the following may be excluded from income?

Sam died on January 15,2003 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?

Richard,who retired on April 30,2013,receives a monthly employee annuity benefit of $1,400 payable for life,beginning May 1,2013.During his years of employment,Richard contributed $29,400 to the company's plan.Richard's life expectancy from the IRS tables is 10 years.Using the general rule,how much of the annuity payment amounts received during 2013 $11,200)may Richard exclude from gross income?