Exam 5: Gross Income and Exclusions

Identify the rule dictating that on a sale of an asset a taxpayer need only include the incremental gain in gross income rather than the entire proceeds from the sale:

Heidi retired from GE (her employer)at age 56.At the end of the year,when she was 56 years of age,Heidi received a distribution from her GE sponsored 401(k)account.Because Heidi was not at least 59½ years of age at the time of the distribution,she must pay tax on the full amount of the distribution and a 10 percent penalty on the full amount of the distribution.

Rhett made his annual gambling trip to Uwin Casino.On this trip Rhett won $250 at the slots and $1,200 at poker.Also this year,Rhett made several trips to the race track,but he lost $700 on his various wagers.What amount must Rhett include in his gross income?

Loretta received $6,200 from disability insurance that she purchased directly this year.Loretta must include all $6,200 in her gross income.

When the wash sale rules apply,the realized loss is:

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?

Which of the following is a true statement about the first payment received from a purchased annuity?

Vincent is a writer and U.S.citizen.After being out of work for the 1ˢᵗ 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 July 4ᵗʰ - December 31ˢᵗ.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 $7,150 in itemized deductions last year (the standard deduction for a single filer was $6,350).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.)

This year Ann has the following stock transactions.What amount is included in her gross income if Ann paid a $200 selling commission for each sale?   Total Purchase Shares Firm Price Sales price Value at year end 100 IBM \ 5,000 \7 000 200 ATT 7,500 9,500 500 Dell 12,500 13,000

Shauna received a distribution from her 401(k)account this year.In which of the following situations will Shauna be subject to an early distribution penalty?

Dave is a plumber who uses the cash method of accounting.This year Dave requested that his clients make their checks payable to his son,Steve.This year Steve received checks in the amount of $62,000 for Dave's plumbing services.Which of the following is a true statement?

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?