Exam 5: Gross Income and Exclusions

U.S. citizens generally are subject to tax on all income whether it is generated in theUnited States or in foreign countries.

Which of the following is a description of how the annuity exclusion ratio is calculated for an annuity paid over a fixed period?

In January of the current year, Dora made a gift of stock to her granddaughter. At thetime of the gift, the stock was worth $15,000. Several months later in the same year after the gift, a $500 dividend was declared on the stock and paid to Dora's granddaughter. What amount must Dora's granddaughter include in her gross income for the current year?

Deb has found it very difficult to repay her loans. Because of these difficulties, the bank decided to forgive one of her most recent loans, an amount of $45,000. After the loan was discharged, Deb had total assets of $232,000 and her remaining loans total$217,000. What amount must Deb include in her gross income?

Graham has accepted an offer to do graduate work in the chemistry department at StateUniversity. The chemistry department offered Graham a $5,000 tuition reduction and$3,500 toward the cost of room and meals. Under the terms of the scholarship Graham must work in the chemistry labs during the summer as a research assistant. What amount must Graham include in his gross income?

Which of the following is not a necessary condition for income to be included in gross income?

Jack and Jill are married. This year Jack earned $72,000 and Jill earned $80,000 and they received $4,000 of interest income from a joint savings account. How much grossincome would Jack report if he files married-filing-separate from Jill?

Interest earned on a Federal Treasury bond is excluded from gross income (for federal tax purposes).

Excluded income will never be subject to the federal income tax.

Opal deducted $2,400 of state income taxes on her tax return last year. This year she received a state income tax refund of $170. What amount of the refund, if any, should Opal include in her gross income if last year her total itemized deductions exceeded the standard deduction by $350?

Aubrey and Justin divorced on June 30 of this year. Through June 30 Aubrey earned $62,000 of salary and Justin earned $45,000. For the year Aubrey reported a total salary of $130,000 and Justin earned a total salary of $88,000. Aubrey and Justin live in a community property state. How much of the income will Aubrey report on her tax return for this year?

Irene's husband passed away this year. After his death, Irene received $250,000 of proceeds from life insurance on her husband, and she inherited her husband's stock portfolio worth $750,000. What amount must Irene include in her gross income?

Ophra is a cash basis taxpayer who is employed in the publishing industry. This year her employer informed her that because of her outstanding performance she is entitled to a free world cruise. Ophra asked her employer to issue the cruise tickets to her parents, and he complied with this request. Identify the principle that will determine whether Ophra or her parents are taxed on the value of the cruise tickets:

Trevor received a gift of $25,000 in cash from his rich uncle. Trevor must include$15,000 of this gift in his gross income this year.

Earnings from Internal Revenue Code Section 529 plans and Coverdell educationsavings accounts are excluded from gross income as long as the earnings are used to pay for qualifying educational expenditures.

Claim of right states that income has been realized if a taxpayer receives income and there are substantial restrictions on the taxpayer's use of the income.

Charles purchased an annuity from an insurance company that promised to pay him $20,000 per year for the next 12 years. Charles paid $180,000 for the annuity. How much of the first $20,000 payment should Charles include in gross income?

butter), and punitive damages ($44,000). What amount must Pam include in her gross income?

This fall Angelina, age 35, plans to attend college. To fund her tuition she cashed in Series EEsavings bonds with a redemption value of $24,000 and an original cost of $16,800. Angelina plans on spending $7,200 of the proceeds to pay tuition. The redemption proceeds are Angelina's only source of income. What amount of interest must Angelina include in gross income this year?

Taxpayers meeting certain home ownership and use requirements can permanently exclude up to $1,000,000 of realized gain on the sale of their principal residence.