Exam 2: Gross Income and Exclusions

Bonnie receives salary income of $32,000, unemployment compensation of $4,400, and interest income of $1,200 and a gift of $7,000 in cash from her aunt.How much gross income does Bonnie have?

Dividend income arising from stock received as a gift is excluded from gross income since the dividends are considered part of the gift.

William, a single taxpayer, works for the men's clothing division of a large corporation.During the year, William received the following fringe benefits: 20 percent discount on men's dothing (the usual markup is 40 percent) 15 percent discount on toys from the toy division of the company (the usual markup is 25 percent) Personal copies on the company's copier A subscription to Men's Clothing Weekly Use of the company's athletic facilities As a result of receiving the above fringe benefits, what amount must William include in his current year gross income?

Mable is a wealthy widow who has come to you for tax advice.She is in the 35 percent tax bracket.She has a choice between investing in a high-quality municipal bond paying 3.5 percent or a high-quality corporate bond paying 7 percent.From a tax standpoint, which investment would you advise her to make and why?

To promote business activity, the tax rules generally are very liberal in treating business gifts as tax-free income to the recipient.

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 -Municipal bond interest

Answer the following questions regarding the taxability of Social Security payments. a.Will a taxpayer with no income other than Social Security have to include the Social Security in taxable income? b.Will a taxpayer with a large amount of municipal bond income, but no taxable income, likely have to pay tax on part of his or her Social Security? c.What is the maximum percentage of Social Security benefits which may be subject to tax on an individual's tax return?

Elsie received the following distributions from Virginiana Mutual Fund for the calendar year 2018: Ordinary dividends (nonqualifying) \ 250 Capital gain distributions \ 170 Nontaxable distributions \ 80 Elmer, Elsie's husband, did not own any of the Virginiana Mutual Fund shares, but he did receive $1,600 in interest on a savings account at the Moss National Bank.Elmer and Elsie filed a joint income tax return for 2018.What portion of the distributions from Virginiana Mutual Fund is taxable as ordinary income on their 2018 individual income tax return?

Toni and Beyonze are married and file jointly.During 2018, they paid tuition for their daughter's college in the amount of $23,000.If their AGI was $142,000, what is the amount of tuition deduction they are eligible for?

Mary Lou took an $8,000 distribution from her educational savings account and used $6,000 to pay for qualified higher education expenses.The remaining balance of $2,000 was used to purchase clothes.On the date of the distribution, her educational savings account had a $25,000 balance including the $20,000 she had contributed.How much of the $8,000 distribution is tax-free?

Phillip, a single parent, would like to contribute $1,800 to a Coverdell educational savings account for his 10-year-old son.His AGI is $98,000.Calculate the amount of the contribution he can make.