Exam 2: Gross Income and Exclusions

Toby transfers to Jim a life insurance policy with a face value of $25,000 and a cash value of $5,000 in payment of a personal debt.Jim continues to make premium payments on the policy until Toby's death.At that time, Jim had paid $1,500 in premiums. a.How much income must Jim report when he receives the $25,000 in proceeds? b.Would your answer be different if Toby and Jim were partners in a partnership? Why?

In June of the current year, a wealthy aunt gave Janie a stock portfolio worth $150,000.During the year, she collects $4,000 in dividends.How much of these amounts, if any, should Janie include in gross income for the current year? Why?

Which taxpayer would benefit the most from a tax-free municipal bond compared to a taxable bond?

An auto that is received as a prize should be included in the taxpayer's income at its list price rather than its fair market value.

If a divorce agreement executed in the 2017 specifies that a portion of the amount of an alimony payment is contingent upon the status of a child, that portion is considered to be a child support payment.

Kim earned $30,000 from Pfizer before she was laid off.She then collected $7,000 of unemployment benefits.Finally, Kim received a $12,500 scholarship for tuition so she could return to college to earn a microbiology degree.How much does Kim need to report as income on her tax return?

Peter is required by his 2018 divorce agreement to pay alimony of $4,000 a month and child support of $6,000 a month to his ex-wife Stella.What is the tax treatment of these two payments?To Peter?To Stella?

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?

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?

Payments made by an employer for health insurance on behalf of an employee are considered income to the employee at the time the payments are made.

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?

Elmer received the following distributions from Virginiana Mutual Fund for the calendar year 2018: Ordinary dividends \ 250 Capital gain distributions \ 170 Nontaxable distributions \ 80 Elsie, Elmer's wife, did not own any of the Virginiana Mutual Fund shares, but she did receive $1,475 in interest on a savings account at the Moss National Bank and $175 in interest on California Municipal Bonds.Elmer and Elsie filed a joint income tax return for 2018.What amount is reportable as taxable interest income?

Jennie receives $12,000 (of which $2,000 is earnings)from a Qualified Tuition Program.She uses the funds to pay for new furniture for her apartment.What amount is taxable to Jennie?

Which of the following is true with respect to an education incentive?

New York is a community property state.

Ordinarily life insurance proceeds are excluded from gross income.Why would they be taxable if the policy had been transferred for valuable consideration, prior to the death of the insured?

The amount of excludable employee reimbursement in 2018 for parking and mass transit costs are each $260 per month.

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 -Life insurance proceeds received upon the death of a family member

If an employer claims a business deduction for group health insurance premiums paid on behalf of his employees, the amount must be included in the employees' gross income.

Which of the following is not taxable income?