Exam 20: Gross Income: Exclusions

This year,Jonathan sold some qualified small business stock that he acquired in December 2010.His basis in the stock was $100,000 and he sold it for $400,000,resulting in a $300,000 gain.How much of Jason's gain is taxable?

In 2017 Betty loaned her son,Juan,$10,000 to help him buy a car.In 2019,before he repaid the $10,000,Betty told Juan that she was "tearing up" the $10,000 note as a graduation present.How should Juan treat the amount forgiven?

In 2017 Bonnie,a sole proprietor,loaned her employee,John,$10,000 to help him buy a car.In 2019,before he repaid the $10,000,Bonnie told John that she was "tearing up" the $10,000 note in recognition of his strong job performance.How should John treat the amount forgiven?

Richard is a key employee of Winn Corporation.The corporation provides Richard with $120,000 of group-term life insurance coverage.Only company executives receive life insurance coverage.The premium attributable to the coverage is $1,600.The uniform one-month group-term premium is one dollar per $1,000 of coverage.How much must Richard include in income due to the policy?

Discuss briefly the options available for avoiding double taxation for the U.S.citizen earning income from sources outside the United States.

Martina,who has been employed by the Smythe Corporation for ten years,receives a $400 watch as a length of service award in a meaningful presentation.The fair value of the watch is taxable.

Lindsay Corporation made the following payments to the family of Luke Marshall,an employee who died during the year. $5,000 for Luke's final paycheck that he failed to collect $10,000 for accrued vacation days as required by the employment contract $25,000 in admiration of Luke's outstanding service to the community What is the total amount that Luke's family must include in income?

Which of the following items will result in an inclusion in gross income?

The tax law encourages certain forms of fringe benefits by allowing employees to deduct the value of the benefit from gross income and allowing employers to exclude the cost.

Randy and Sharon are married and have two dependent children.Their 2019 tax and other related information is as follows: Total salaries \ 160,000 Bank account interest income 3,5000 Municipal bond interest income 1,500 Value of emplover provided medical insurance 12,500 Employerpaid premiums for \ 50,000 of group term life insurance 5,500 Dividend income from ABC stock 2,000 Loan from Randy's parents 5,000 Gift from Randy's parents 15,000 Gain from the sale of qualified small business stock acquired in 2008 18,000 Total itemized deductions 27,000 Compute Randy and Sharon's taxable income.(Show all calculations in good form.)

Rick chose the following fringe benefits under his employer's cafeteria plan.Which of his chosen benefits will be taxable?

The fair value of lodging cannot be excluded from gross income unless the employee is required to accept the lodging as a condition of employment.

Meals may be excluded from an employee's gross income provided they are furnished on the employer's business premises and are for the convenience of the employee.

This year,Jason sold some qualified small business stock that he acquired in 2008.His basis in the stock was $100,000 and he sold it for $400,000,resulting in a $300,000 gain.How much of Jason's gain is taxable?

In the case of foreign-earned income,U.S.citizens may avoid double taxation of income by both the United States and the host country by utilizing a foreign tax credit or by electing the foreign earned income exclusion.

Sumedha is the beneficiary of her mother's $500,000 life insurance policy.She receives $54,000 per year over ten years in settlement of her mother's policy.Sumedha will exclude the $54,000 proceeds received each year from the life insurance company.

Mattie has group term life insurance coverage of $120,000 provided by her employer on a nondiscriminatory basis.She must include premiums for $120,000 of coverage in gross income,determined by using IRS tables.

Greg is the owner and beneficiary of a $100,000 policy on the life of his mother.Greg gives the policy to his brother,Don.Don subsequently pays premiums of $40,000.Upon his mother's death,how much of the insurance proceeds must Don include in income?

Many exclusions exist due to the benevolence of Congress or as a result of the government's attempts to encourage particular social behavior.

Tim earns a salary of $40,000.This year,Tim's employer establishes a cafeteria plan under which Tim signed a salary reduction of $2,500 for which $1,500 is to cover his health insurance premiums and $1,000 is transferred to a flexible spending account to reimburse medical expenses.During the year,he is reimbursed $900 for medical expenses.What is the total taxable to Tim this year?