Exam 5: Gross Income and Exclusions

Hank is a U.S. citizen and is doing a three to six year assignment as a sales executive in Paris for a French company, which began this year. Hank earned $109,500 working for the French company this year but only lived in France for 340 days (out of 365 days). What amount of Hank's $109,500 salary this year will he be allowed to exclude from gross income in the U.S. (rounded to the nearest one-hundred dollars)?

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

George purchased a life annuity for $3,200 that will provide him $80 monthly payments for as long as he lives. Based on IRS tables, George's life expectancy is 100 months. How much of the first $80 payment will George include in his 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 partners as dividend income.

Ben's employer offers employees the following benefits. What amount must Ben include in his gross income? Health insurance coverage \5 ,800 Group term life insurance (\ 50,000) 4,270 Disability insurance coverage (considered purchased by Ben) 3,600 Whole life insurance coverage (\ 100,000) 7,000

An employee may exclude up to a 40 percent employer-provided discount on services.

Dora made a gift of stock to her granddaughter. At the time of the gift, the stock was worth $15,000. Several months 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?

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

Interest earned on a city of Denver bond is excluded from gross income (for federal tax purposes).

This year Larry received the first payment from an annuity that promises to pay him $3,000 per month for the rest of his life. The IRS tables indicate that given Larry's age, he should expect to receive 310 monthly payments. The cost of the annuity to Larry was $620,000. How much of the first $3,000 payment should Larry include in gross income?

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.

Charles and Camilla are getting divorced. Under the terms of the decree Charles will pay Camilla $50,000 in cash in each of the next five years (or until Camilla's death or remarriage). In addition, Charles will transfer a castle worth $2,000,000 to Camilla and 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 this year?

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.

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

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? 100 200 500 IBM ATT Dell \ Total \ 5,000 7,500 12,500 9,500 13,000 Value \ 7,000

Gross income includes

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

Wherewithal to pay represents the principle that a realized transaction should require a taxpayer to sell other assets in order to pay income taxes.

A portion of each payment from a purchased annuity represents income.