Exam 5: Gross Income and Exclusions

Barter clubs are an effective means of avoiding realization for tax purposes.

This year Barney purchased 500 shares of Bell common stock for $20 per share. At year-end the Bell shares were only worth $2 per share. What amount can Barney deduct as a loss this year?

In April of this year Victoria received a $1,920 refund of state income taxes that she paid last year. Last year Victoria claimed itemized deductions of $16,050. Victoria's itemized deductions included state income taxes paid of $5,700. How much of the refund, if any, must Victoria include in gross income if the standard deduction last year was $12,200?

Teresa was married on November 1 of this year and on that day received numerous gifts from her extended family. Her grandfather presented Teresa with a check for $15,000; her uncle gave Teresa 1,000 shares of Ford stock worth $10 per share (the uncle purchased the shares for $25 each); and her aunt presented Teresa with $50,000 of corporate bonds. (Teresa received $1,500 of semiannual interest from the bonds on December 31 of this year.)Finally, Teresa's parents paid off $50,000 of her student loan debt, including $2,000 of accrued interest. What amount, if any, must Teresa include in gross income this year?

Andres has received the following benefits this year. Besides these benefits Andres missed work for two months due to an illness. During his illness Andres received $6,500 in sick pay from a disability insurance policy. Assume Andres has disability insurance provided by his employer as a nontaxable fringe benefit. What amount, if any, must Andres include in gross income this year?

Ben received the following benefits from his employer this year. What amount must Ben include in his gross income?

Vincent is a writer and a U.S. citizen. After being out of work for the first half of the year, Vincent moved permanently to Ireland on July 4. He worked for an Irish magazine and earned $110,000 in salary from July4^th to December 31^st. Earlier in April of this year Vincent received a $1,500 refund of the $3,600 in state income taxes his previous employer withheld from his pay last year. Vincent claimed $13,000 in itemized deductions last year (the standard deduction for a single filer was 12,200). Vincent wants to elect to use the foreign-earned income exclusion to the extent he is eligible. Calculate Vincent's gross income for this year. (Round your final answer to the nearest whole dollar amount and assume there are 365 days in the year.)

Identify the item below that helps determine which taxpayer must recognize earned income.

When a carpenter provides $100 of services in exchange for $100 of groceries, the carpenter has realized $100 of income.

This year Barney purchased 300 shares of Bell common stock for $24.00 per share. At year-end the Bell shares were only worth $4.00 per share. What amount can Barney deduct as a loss this year?

Shaun is a student who has received an academic scholarship to State University. The scholarship paid $22,800 for tuition, $5,200 for fees, and $1,770 for books. In addition, Shaun's dormitory fees of $13,400 were paid by the university when he agreed to counsel freshman on campus living. What amount must Shaun include in his gross income?

Charles and Camillagot divorced in 2018. Under the terms of the decree Charles pays Camilla $50,000 in cash in each of the next five years (or until Camilla's death or remarriage). In addition, Charles transferred a castle worth $2,000,000 to Camillain 2018 and will pay $12,000 per year to support their son, Clyde, until he turns 19 years old. What amount (if any)is included in Camilla's gross income in 2020?

Blake is a limited partner in Kling-On Partners. This year Kling-On reported that Blake's share of dividend income was $3,700 and his share of municipal interest was $2,750. Early this year Blake found a bundle of $100 bills in the alley outside his apartment. When no one claimed the money, the cash (a total of $2,400)was returned to Blake. Finally, Blake earned salary of $42,000 but almost $6,500 was withheld for income taxes and FICA tax. Compute Blake's realized income and gross income.

Caroline is retired and receives income from a number of sources. The interest payments are from bonds that Caroline purchased over past years and a disability insurance policy that Caroline purchased. Calculate Caroline's gross income.

Jake sold his car for $2,400 in cash this year. He will realize a taxable gain of $1,000 if he purchased the car for $1,400.

Rental income generated by a partnership is reported by the partners as dividend income on their own individual tax returns.

Barney and Betty got divorced in 2018. In the divorce decree Betty agreed to pay Barney $24,000 per year for five years (or until Barney's death or remarriage)and $10,000 per year until their daughter, Pebbles, turns 19 years old. What amount (if any)is included in Barney's gross incomein 2020?

This year Kevin provided services to several clients, each of whom paid with different types of property. Which of the following payments is not included in Kevin's gross income?

Constructive receipt represents the principle that cash-basis taxpayers will be taxed on income when it is made available to them without substantial restrictions.

Desai and Lucy divorced in 2018. Lucy has custody of their child, Andrea, and under the divorce decree Desai pays Lucy $120,000 per year. The payments must be made in cash and will cease if Lucy dies or remarries. The payments drop to $100,000 per year once Andrea reaches the age of 18. How much of the payments should Lucy include in gross income this year?