Exam 2: Gross Income and Exclusions

Which one of the following conditions must be satisfied in order for a married taxpayer to be taxed on only his income if he resides in a community property state?

If an employer claims a business deduction for group health insurance premiums paid on behalf of his employees, the amount must be included in the employees' gross income.

Payments made by an employer for health insurance on behalf of an employee are considered income to the employee at the time the payments are made.

If a life insurance policy is transferred to the insured's partnership for valuable consideration, the insurance proceeds are taxable when received by the partnership.

Taxpayers must report interest income on Series EE savings bonds as the interest accrues.

An investor is comparing the following two bonds: a bond from ABC Corp which pays an interest rate of 9 percent per year and a municipal bond which pays an interest rate of 7.9 percent per year. The investor is in the 22 percent tax bracket. Which bond will give the investor a higher after-tax interest rate and for which reason?

Jim, a single individual, was unemployed for a few months during the current year. During the year, he received $3,600 in unemployment compensation payments. How much of his unemployment compensation payments must be included in gross income?

Indicate whether each of the items listed below would be (a) included in gross income or (b) excluded from gross income for the 2019 tax year. -Municipal bond interest

Mable is a wealthy widow who has come to you for tax advice. She is in the 35 percent tax bracket. She has a choice between investing in a high-quality municipal bond paying 3.5 percent or a high-quality corporate bond paying 7 percent. From a tax standpoint, which investment would you advise her to make and why?

Geoffrey receives $20,000 from a qualified tuition program created by his grandmother. The program had accumulated $6,000 in earnings. He used the full $20,000 to pay for qualified higher education expenses. Calculate the amount of earnings subject to taxation.

Sam died on January 15, 2011 and left his wife, Terry, an insurance policy with a face value of $100,000. Terry elected to receive the proceeds over a 10-year period ($10,000 plus interest each year). This year Terry receives $11,500 ($10,000 proceeds plus $1,500 interest) from the insurance company. How much income must Terry report from this payment?

Which of the following is true with respect to an education incentive?

Disability benefits are generally taxable to the individual receiving the amounts.

Which of the following is generally excluded from gross income?

Under a divorce agreement executed in 2017, periodic payments of either cash or property must be made at regular intervals to be deductible as alimony.

Mary Lou took an $8,000 distribution from her educational savings account and used $6,000 to pay for qualified higher education expenses. The remaining balance of $2,000 was used to purchase clothes. On the date of the distribution, her educational savings account had a $25,000 balance including the $20,000 she had contributed. How much of the $8,000 distribution is tax-free?

Karina receives a scholarship of $10,000 to a college. She is also given a job which pays $5,000 a year to help with her expenses. $7,000 of the scholarship is earmarked for tuition and $3,000 is for room and board. How much of the money from the scholarship and the job are taxable to Karina?

Which of the following may be excluded from income?

New York is a community property state.

Indicate whether each of the items listed below would be (a) included in gross income or (b) excluded from gross income for the 2019 tax year. -Scholarships for tuition and books