Exam 2: Gross Income and Exclusions

Joey is a single taxpayer.Joey's employer pays $1,800 per year for his health insurance.During the year, Joey had medical expenses of $2,500 and the insurance company reimbursed him for the full $2,500.How much of the above amounts, if any, must be included in Joey's gross income? Why?

A "no-additional-cost" service includes only those services in the major line of business in which the employee is employed.

Indicate whether each item below would be included in or excluded from the income of the recipient. a.Payment for laboratory assistant position at University of California State b.A $1,000 scholarship for tuition c.College books paid for by grandma and grandpa d.A $1,000 college loan e.A scholarship for room and boardf.A new car given to recruit a professional basketball playerg.A scholarship used for supplies and equipment that are required for courses

During the current year, Margaret and John received $24,000 in Social Security benefits.The amount of their adjusted gross income for the year before any Social Security income was $140,000 and they received $19,000 in tax-exempt income.Explain the treatment of their Social Security income for tax purposes and the likely percentage of the Social Security income that will be taxable to Margaret and John.

Marco and his family are covered by his company's health insurance plan.The health insurance costs his company $8,500 a year.During the year, Marco's daughter is diagnosed with a serious illness and the health insurance pays $25,000 for treatment.How much of the insurance and treatment costs are taxable to Marco?

Basketball superstar Steph Curry's outstanding player award is not includible in income, since the award is in recognition of his outstanding performance.

For divorces after 1984 but before 2019, which of the following statements about alimony payments is not correct?

Melissa took a $1,500 distribution from her educational savings account and used $1,200 to pay for qualified education expenses.Before the distribution, Melissa's account balance was $4,000, of which $1,000 was earnings.Calculate the following: a.The tax-free return of capital b.Her new adjusted basis for her savings account c.Distribution of earnings potentially subject to tax d.The excludable portion of the earnings e.The taxable portion of her earnings

Jack is a lawyer and Jeri is a child psychologist.Jack prepares Jeri's estate planning at no charge and Jeri agrees to counsel Jack's daughter six times at no charge in return for the estate planning.The value of the estate planning is $1,000 and the value of the therapy sessions is $1,000. a.How much income does Jack have? Why? b.How much income does Jeri have? Why?

For married taxpayers filing a joint return in 2018, at what AGI level does the phase-out limit for contributions to Qualified Tuition Programs (Section 529 plans)start?

An investor is comparing the following two bonds: a bond from ABC Corp which pays an interest rate of 9 percent per year and a municipal bond which pays an interest rate of 7.9 percent per year.The investor is in the 22 percent tax bracket.Which bond will give the investor a higher after-tax interest rate and for which reason?

Which one of the following conditions must be satisfied in order for a married taxpayer to be taxed on only his income if he resides in a community property state?

Under the terms of a property settlement executed during the current year, Cindy transferred a house worth $350,000 to her ex-husband, Carl.The property has a tax basis to Cindy of $300,000. a.How much taxable gain or loss must be recognized by Cindy at the time of the transfer? b.What is Carl's tax basis in the property he received from Cindy?

Elmore receives a rental property as an inheritance from his grandmother.The rental property is worth $500,000 and Elmore collected rental income of $24,000 during the year.For the year, how much is Elmore's gross income as a result of the inheritance?

When calculating the exclusion ratio for an annuity, the ratio should be revised when there is a significant change in the taxpayer's status or health.

Noncash items received as income must be included in income at their fair market value.

Most states are community property states.

Which of the following is excluded from gross income?

Under a divorce agreement executed in 2017, periodic payments of either cash or property must be made at regular intervals to be deductible as alimony.

If a life insurance policy is transferred to the insured's partnership for valuable consideration, the insurance proceeds are taxable when received by the partnership.