Exam 2: Gross Income and Exclusions

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. -Inheritances

Molly and Steve are married and live in Texas. Molly earns a salary of $50,000 and Steve owns a rental property that gives him $35,000 of income. If they filed separate tax returns, what amount of income would Steve report?

Arthur, age 19, is a full-time student at Gordon College and is a candidate for a bachelor's degree. During 2019, he received the following amounts: Tuition scholarship \ 2,400 Loan from college financial aid office \ 1,000 Cash support from parents \ 2,000 Ordinary cash dividend \ 200 Cash prize awarded in contest \ 300 What is his adjusted gross income for 2019?

Noncash items received as income must be included in income at their fair market value.

Seymore named his wife, Penelope, the beneficiary of a $100,000 insurance policy on his life. The policy provided that, upon his death, the proceeds would be paid at a rate of $4,000 per year plus interest over a 25-year period. Seymore died June 25 of last year, and in the current year Penelope received a payment of $5,200 from the insurance company. What amount should she include in her gross income for the current year?

Curt's tax client, Terry, is employed at a large company that offers health care flexible spending accounts to its employees. Terry must decide at the beginning of the year whether he wants to put as much as $2,700 of his salary into the medical flexible spending account. Terry has excellent insurance through the company and is very healthy. He does not expect to have any medical expenses during the year. Terry does not itemize deductions. Should Curt recommend that Terry put the maximum in his health care flexible spending account? Why or why not?

Basketball superstar Steph Curry's outstanding player award is not includible in income, since the award is in recognition of his outstanding performance.

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. -Reimbursement of hospital expenses from a health insurance plan

Steve and Laura were divorced in 2012. Laura pays Steve alimony of $1,200 a month. The payment amount was agreed upon in the decree of divorce. To save money, Steve and Laura still live together. Are the alimony payments that Steve receives in 2019 included in his income?

Under the terms of a property settlement executed during the current year, Cindy transferred a house worth $350,000 to her ex-husband, Carl. The property has a tax basis to Cindy of $300,000. a.How much taxable gain or loss must be recognized by Cindy at the time of the transfer? b.What is Carl's tax basis in the property he received from Cindy?

Cash allowances for meals or lodging generally must be included in the employee's income.

Bob is a machinist in a remote Alaskan crab-freezing plant. The plant is accessible only by boat or airplane and has no available lodging for rent. Bob's employer provides him with lodging at the plant and pays for all of his electricity, gas, and other utilities, valued at $700 per month. Is the value of the lodging taxable to Bob? Explain.

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. -Child support payments

Geoff is a company president who has had a very good year at work. The owner of the company is pleased and gives him a gift of $50,000 at the end of the year. The owner writes "gift" in the memo section of the check. How much of the gift is taxable to Geoff?

Charlie is a single taxpayer with income of $107,000 which includes $22,500 of interest income. Contributions to Coverdell educational savings accounts are phased out between $95,000 and $110,000. What is the maximum contribution Charlie can make to an educational savings account?

Toni and Beyonze are married and file jointly. During 2018, they paid tuition for their daughter's college in the amount of $23,000. If their AGI was $142,000, what is the amount of tuition deduction they are eligible for?

For divorces after 1984 but before 2019, which of the following statements about alimony payments is not correct?

Craig, a single taxpayer, received the following items in 2019: dividends of $450, wages of $32,000, child support from his ex-spouse of $400 per month, a new television worth $1,200 from a door prize at a conference he attended, a gift of $3,000 from Craig's parents, and $200 of interest on bonds issued by the State of Arizona. Craig put $4,000 of his wages into his employer's dependent care flexible spending account (the $4,000 has not been deducted from the $32,000 of wages listed previously). He also receives a reimbursement of $270 per month to pay for public transportation passes each month (the monthly reimbursement of $270 has not been deducted from the $32,000 of wages). Based on the above, what is Craig's gross income in 2019?

Robert works for American Motors. American Motors pays a $1,200 premium on Robert's health insurance in 2019. Robert has an operation on his big toe in 2019 that cost $7,200. The insurance company paid for $6,800 of it. Which one of the following is true for 2019?

Interest on US Treasury Bonds is not taxable.