Exam 20: Gross Income: Exclusions

While payments received because a person has been physically injured are excluded from gross income,payments on account of non-physical injury must be included in gross income.

Upon the sale of property,a portion of the selling price equal to the basis in the property is considered a return of capital to the seller and is,therefore,not taxable.

Employers must report the value of nontaxable meals and lodging provided to employees on the employees' W-2s at year-end.

Brad suffers from congestive heart failure and has been admitted to a nursing home where he is expected to spend the remainder of his life.His doctor has certified him as chronically ill.In 2019,Brad receives $320 per day from his life insurance policy for 100 days ($32,000)as accelerated death benefits.Brad's nursing home care costs $300 per day ($30,000 for the 100 days of care).Brad will be allowed to exclude

Tonya's employer pays the full premium on a disability income policy from an insurance company on behalf of all employees.After a skiing accident,Tonya was out of work for three months and collected $2,000 per month ($6,000 total)of disability benefits from this policy.In addition,Tonya received another $1,000 per month ($3,000 total)from a disability policy she had purchased herself.Tonya had paid a total of $1,300 in premiums on her policy.How much of the $9,000 total received is taxable?

Connor owes $4 million and has assets of only $1 million.He declares and files personal and business bankruptcy and his creditors approve a payment plan of $.25 per dollar.Connor has a net operating loss carryover of $2 million.The remaining 75 percent of his debt will be canceled.Connor must recognize income of

Which of the following benefits provided by an employer is subject to withholding and must be reported on the employee's W-2?

Sharisma suffered a serious stroke and was admitted to a nursing home for 140 days.Nursing home charges,including physician fees and other related expenses were $63,000.Under Sharisma's long-term care insurance contract,she received reimbursements of $56,000.How much of the $56,000 reimbursement must be included in Sharisma's gross income in 2019?

Trisha is married and has young children.The couple is in the 37% tax bracket.In order for Trisha and her husband to work,they pay $5,000 for daycare which earns them a $1,000 dependent care credit.Trisha has been offered a new job.The new job will pay a $5,000 lower salary,but the new employer will offer $5,000 of paid child care.Trisha cannot claim the dependent care credit if she receives employer-paid child care.Which of the following statements is correct? (Ignore payroll taxes.)

Chad and Jaqueline are married and have AGI of $150,000.In 2019 they adopted a child,while taking advantage of their employer's written adoption assistance program.The adoption cost $9,500,all of which was paid by the employer in accordance with the adoption plan.How much of the employer-paid adoption costs may be excluded from their income?

Payments received from a workers' compensation plan funded by employer contributions are taxable.

Sarah receives a $15,000 scholarship from City University.The university specifies that $8,000 is for tuition,books,supplies,and equipment for classes.The other $7,000 is for room and board.Sarah works ten hours per week as a grader,for which she is paid $7,500 for the year.Of the total amount received,Sarah must include the following amount in gross income

Bret carries a $200,000 insurance policy on his life and has paid premiums of $10,000 over the years.Dividends on the policy have totaled $8,500.Each year Bret has left the dividends with the insurance company.In the current year,the insurance company credited $800 of interest on the accumulated dividends to Bret's account.In addition,$600 of dividends was added by the insurance company.In the current year,Bret must report income of

Which of the following statements regarding qualified tuition programs is incorrect?

All payments made by an employer to the family of a deceased employee are excluded from the recipient's gross income regardless of the reason for payment.

Matt's employer provides $4,000 of assistance for childcare for all employees under its dependent care assistance program.Matt uses this assistance for his daycare for his baby.Matt can exclude the value of this benefit.

Amounts collected under accident and health insurance policies purchased by the taxpayer are excludible from income.

Roma Company pays for group term life insurance on a non-discriminatory basis for all 100 of its workers.Which of the following individuals,all of whom work in the business,will be allowed to exclude the value of the coverage from her gross income?

Jan has been assigned to the Rome office of ABC Corporation.She arrives in Rome on November 1,2018 and does not return to the United States until March 5,2020.During her stay in Rome,Jan earned $112,000 in 2019.Jan may exclude

Nelda suffered a serious stroke and was admitted to a nursing home for 140 days.Nursing home charges,including physician fees and other related expenses were $33,000.Under Nelda's long-term care insurance contract,she received reimbursements of $36,000.How much of the $36,000 reimbursement must be included in Nelda's gross income in 2019?