Exam 19: Gross Income: Inclusions

A married couple separates in late 2018,but the related legal documents are not drafted and finalized until 2019.The alimony payments will be taxable to the recipient and deductible by the payor,but the property settlement and child support will have no tax impact.

Under the cash method of accounting,income is reported in the year the taxpayer actually or constructively receives the income.

Mike won $700 in a football pool.This amount is not taxable.

Alex is a calendar-year sole proprietor.He began business on December 1,this year.He uses the accrual method of accounting.Alex had the following collections in December: • Collected $7,000 in December,from clients who paid cash for services to be performed next year. • Collected $5,000 in December,for services performed during December; deposited in an operating account on December 31,this year. • Collected $12,000 in December; on accounts receivable for services performed in December; deposited in operating account on January 2,next year. What is the amount Alex must include in his income for December?

If a taxpayer's method of accounting does not clearly reflect income,the IRS may specify a different accounting method which must be used by the taxpayer.

Norah,who gives music lessons,is a calendar-year taxpayer using the cash-basis method of accounting.On October 1 of this year,she received $1,200 for a one-year contract beginning on that date to provide 10 lessons.She gave 6 lessons this year.How much should Norah include in income this year?

Lori had the following income and losses during the current year: Wages \ 22,000 Share of partnership income 18,000 Unemployment compensation 12,000 Gambling winnings 2,000 Gambling losses (5,000) Prize won from a charity raffle 30,000 What is Lori's adjusted gross income?

A small corporation selling goods would prefer to use the cash method to simplify its accounting records.It will be able to continue using the cash method as long as average gross receipts for its three prior years do not exceed

Examples of income which are constructively received include all of the following except

"Gross income" is a key term in the tax law and is defined in IRC Sec.61.However,gross income is not reported on Form 1040.

While using a metal detector at the beach during spring break,Toni uncovered some rare coins with a current fair market value of $9,000.What are her tax consequences regarding this find?

The requirements for a payment to be considered as alimony include all of the following except

A key factor in determining tax treatment of distributions from qualified retirement plans is whether the employee made pre-tax or after-tax contributions.

Eva and Lisa each retired this year and started receiving distributions from their respective retirement plans.Eva's plan was funded with all pre-tax contributions,whereas Lisa's plan was funded with only after-tax contributions (Roth plan).With respect to the tax treatment of their retirement plan distributions

Gross income may be realized when a taxpayer receives economic benefit even if no cash is received.

Thomas purchased an annuity for $20,000 that will pay him $500 per month for ten years.What amount should Thomas include in his income each year?

Gwen's marginal tax bracket is 24%.Under the terms of a divorce decree settled in 2018,Gwen pays alimony of $24,000 per year.Gwen's after tax cost for the $24,000 payment is

In community property states,income from separate property owned before marriage is always considered separate income after marriage.

Tyler has rented a house from Camarah since last year.The rent is usually $1,200 per month,but Camarah reduced the monthly rent down to $200 for all twelve months this year in exchange for Tyler putting in an inground pool in the backyard.The improvement has a fair market value of $20,000.How much total rental income must Camarah report this year?

Homer Corporation's office building was destroyed by fire.Homer collected insurance of $250,000,which equaled the building's basis,and $150,000 for profits lost during the time the company was rebuilding the office building.What is the amount taxable this year?