Exam 2: Gross Income and Exclusions

If an annuitant, whose annuity starting date was January 1, 2008, dies before recovering his or her investment in the annuity, any unrecovered investment is recognized as a miscellaneous itemized deduction on the annuitant's tax return for the year of death.

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?

Tim receives a $25,000 gift from his parents for a down payment on a house.They know he cannot buy a house without their help.They write "gift" in the memo line of the check.How much of the gift is taxable to Tim?

Rachel and Rob are married and living together in California.Their income is: Rob's salary \ 120,000 Rachel's net income from her business 130,000 Interest (Rob's separate property investments) 4,000 Interest (Rachel's separate property investments) 2,000 Dividends (community property) 5,000 Total income is \ 261,000 a.If Rachel files a separate return, how much income should she report? b.If Rob and Rachel live in Texas, what should Rachel report as income?

Which of the following may be excluded from income?

Which of the following is classified as nontaxable income?

Rob is 8 years old and won a sports car valued at $30,000 in a drawing at Disneyland this year.How much income, if any, must Rob report on his tax return for this year? Why?

Sam died on January 15, 2010 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?

As a Christmas thank you for being a good employee, Ed's TV Repair gave 62-year-old Edwina three shares of its stock worth $20 per share.Edwina then received dividends of $1 per share related to the stock.How much should be included in Edwina's gross income?

Which of the following is correct for Qualified Tuition Programs?

Cynthia, age 64, retired in June.Starting in July, Cynthia received $2,000 per month from an annuity.She has contributed $260,000 to the annuity.Her life expectancy is 20 years.How much is excluded from income using the simplified method? Use 260 as the factor to divide by. 1.Enter total amount received this year 2.Enter cost in plan at the annuity starting date 3.Factor at annuity starting date 260 4.Divide line 2 by line 3 5.Multiply line 4 by the number of monthly payments this year 6.Amount, if any, recovered tax free in prior years 7.Subtract line 6 from line 2 8.Enter the smaller of line 5 or 7 9.Taxable amount this year.Subtract line 8 from line 1

A scholarship for room and board granted in 2018 is fully taxable to the recipient.

Arthur, age 19, is a full-time student at Gordon College and is a candidate for a bachelor's degree.During 2018, 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 2018?

Amounts received as scholarships for books and tuition may be excluded from the recipient's taxable income.

Interest income received by a cash basis taxpayer is generally reported in the tax year it is received.

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.

Under a divorce agreement executed in 2014, Bob is required to pay his ex-wife, Carol, $3,000 a month until their youngest daughter is 21 years of age.At that time, the required payments are reduced to $2,000 per month. a.How much of each $3,000 payment may be deducted as alimony by Bob? b.How much of each $3,000 payment must be included in Carol's taxable income?

Indicate whether each of the items listed below would be (a) included in gross income or (b) excluded from gross income for the 2018 tax year. a.Included b.Excluded -Wages

Indicate whether each of the items listed below would be (a) included in gross income or (b) excluded from gross income for the 2018 tax year. a.Included b.Excluded -Scholarships for tuition and books

All of the following amounts must be included in gross income, except: