Question 1

Premiums paid by an employer for employee disability coverage are excluded from the employee's gross income.

Accepted Answer

A) True 
 B)False

Question 2

John,an employee of a manufacturing company,suffered a heart attack and was unable to work for six months.He received $1,500 per month of disability benefits as a result of an employer-provided group policy.The benefits are includible in John's gross income.

Accepted Answer

A) True 
 B)False

Question 3

For a taxpayer who is not insolvent nor under bankruptcy proceedings,the discharge of debt is generally

Accepted Answer

A) taxable. 
B) nontaxable. 
C) partially taxable. 
D) None of the above. 
A) taxable. 
B) nontaxable. 
C) partially taxable. 
D) None of the above.

Question 4

An electronics store sold a home theater system to an employee for $300,even though the retail price was $500.The gross profit percentage is 40%.Such discounts are available to all employees.How much income should be recognized by the employee from these transactions?

Accepted Answer

A) $0 
B) $100 
C) $120 
D) $200 
A) $0 
B) $100 
C) $120 
D) $200

Question 5

Mae Li is beneficiary of a $70,000 insurance policy on her father's life.Upon his death,she elects to receive the proceeds in installments from the insurance company that carries the policy.She will receive $16,000 per year for five years.What are the tax consequences each year?

Accepted Answer

A) All $16,000 each year is taxable. 
B) $10,000 interest is taxable in the first year. 
C) There is no taxable income. 
D) $2,000 of the $16,000 payment is taxable each year. 
A) All $16,000 each year is taxable. 
B) $10,000 interest is taxable in the first year. 
C) There is no taxable income. 
D) $2,000 of the $16,000 payment is taxable each year.

Question 6

Katie,a self-employed CPA,purchased an accident and disability insurance policy.As the result of an auto accident,Katie was unable to work and received $3,000 of disability benefits per month for seven months.The benefits were based on her estimated monthly income and should be reported as gross income.

Accepted Answer

A) True 
 B)False

Question 7

Amy withdrew $3,000 from her qualified tuition plan to pay for a spring break trip to Cancun.The full $3,000 withdrawal is both included in income and subject to a 10% penalty.

Accepted Answer

A) True 
 B)False

Question 8

Benefits covered by Section 132 which may be excluded from an employee's gross income do not include

Accepted Answer

A) employee's use of an employer-owned exercise equipment. 
B) membership fees in professional organizations. 
C) employer-provided vehicle for personal use. 
D) hotel employee's use of a vacant hotel room. 
A) employee's use of an employer-owned exercise equipment. 
B) membership fees in professional organizations. 
C) employer-provided vehicle for personal use. 
D) hotel employee's use of a vacant hotel room.

Question 9

Except in the case of qualifying accelerated death benefits,if a life insurance policy is sold or surrendered for a lump sum before the death of the insured,the amount received is taxable to the extent it exceeds the premiums paid.

Accepted Answer

A) True 
 B)False

Exam 20: Gross Income: Exclusions

Premiums paid by an employer for employee disability coverage are excluded from the employee's gross income.

John,an employee of a manufacturing company,suffered a heart attack and was unable to work for six months.He received $1,500 per month of disability benefits as a result of an employer-provided group policy.The benefits are includible in John's gross income.

For a taxpayer who is not insolvent nor under bankruptcy proceedings,the discharge of debt is generally

An electronics store sold a home theater system to an employee for $300,even though the retail price was $500.The gross profit percentage is 40%.Such discounts are available to all employees.How much income should be recognized by the employee from these transactions?

Mae Li is beneficiary of a $70,000 insurance policy on her father's life.Upon his death,she elects to receive the proceeds in installments from the insurance company that carries the policy.She will receive $16,000 per year for five years.What are the tax consequences each year?

Amy withdrew $3,000 from her qualified tuition plan to pay for a spring break trip to Cancun.The full $3,000 withdrawal is both included in income and subject to a 10% penalty.

Benefits covered by Section 132 which may be excluded from an employee's gross income do not include

Except in the case of qualifying accelerated death benefits,if a life insurance policy is sold or surrendered for a lump sum before the death of the insured,the amount received is taxable to the extent it exceeds the premiums paid.

Tax Research

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