Exam 5: Gross Income Exclusions

Jena is a full-time undergraduate student at State University and is claimed by her parents as a dependent.Her only source of income is a $10,000 athletic scholarship ($1,000 for books,$5,500 tuition,$500 student activity fee,and $3,000 room and board).Jena's gross income for the year is:

Emily is in the 35% marginal tax bracket.She can purchase a York County school bond yielding 3.5% Interest and the interest is not subject to a 5% state tax.But she is interested in earning a higher return For comparable risk.Which of the following is correct:

Mel was the beneficiary of a $45,000 group term life insurance policy on his wife.His wife's employer paid all of the premiums on the policy.Mel used the life insurance proceeds to purchase a United States Government bond,which paid him $2,500 interest during the current year.Mel's Federal gross income from the above is $2,500.

Turquoise Company purchased a life insurance policy on the company's chief executive officer,Joe.After the company had paid $400,000 in premiums,Joe died and the company collected the $1.5 million face amount of the policy.The company also purchased group term life insurance on all its employees.Joe had included $16,000 in gross income for the group term life insurance premiums.Joe's widow,Rebecca,received the $100,000 proceeds from the group term life insurance policy.

Carmen had worked for Sparrow Corporation for thirty years when she died of a heart attack at age 60.She was practically penniless at the time of her death,owed a $12,000 hospital bill,and had a disabled spouse.The company was very concerned about its public image,and rather than run the risk of embarrassment from one of its long-term employees dying and leaving her spouse with insufficient means,the Board of Directors agreed to pay Carmen's hospital bill and to give her spouse $6,000 per year for the rest of his life.Discuss both sides of the question whether Carmen (or her estate)and her spouse realize any taxable income from the above.

The taxpayer was in the 35% marginal tax bracket in 2015 and deducted $15,000 in state income taxes as an itemized deduction that year.In 2016,he filed his 2015 state income tax return and received a $5,000 refund of state income taxes paid in 2015.His marginal tax rate in 2016 was 15%.What was the taxpayer's Federal tax benefit from the overpayment of his 2015 state income tax?

Julie was suffering from a viral infection that caused her to miss work for 90 days.During the first 30 days of her absence,she received her regular salary of $8,000 from her employer.For the next 60 days,she received $12,000 under an accident and health insurance policy purchased by her employer.The premiums on the health insurance policy were excluded from her gross income.During the last 30 days,Julie received $6,000 on an income replacement policy she had purchased.Of the $26,000 she received,Julie must include in gross income:

A U.S.citizen worked in a foreign country for the period July 1,2015 through August 1,2016.Her salary was $10,000 per month.Also,in 2015 she received $5,000 in dividends from foreign corporations (not qualified dividends).No dividends were received in 2016.Which of the following is correct?

Olaf was injured in an automobile accident and received $25,000 for his physical injury,$50,000 for his loss of income,and $10,000 punitive damages.As a result of the award,the amount Olaf must include in gross income is:

Louise works in a foreign branch of her employer's business.She earned $5,000 per month throughout the relevant period.Which of the following is correct:

Employees of the Valley Country Club are allowed to use the golf course without charge before and after working hours on Mondays,when the number of players on the course is at its lowest.Tom,an employee of the country club played 40 rounds of golf during the year at no charge when the non-employee charge was $20 per round.

Ridge is the manager of a motel.As a condition of his employment,Ridge is required to live in a room on the premises so that he would be there in case of emergencies.Ridge considered this a fringe benefit,since he would otherwise be required to pay $800 per month rent.The room that Ridge occupied normally rented for $70 per night,or $2,100 per month.On the average,90% of the motel rooms were occupied.As a result of this rent-free use of a room,Ridge is required to include in gross income.

In December 2016,Todd,a cash basis taxpayer,paid $1,200 of fire insurance premiums for the calendar year 2017 on a building he held for rental income.Todd deducted the $1,200 of insurance premiums on his 2016 tax return.He had $150,000 of taxable income that year.On June 30,2017,he sold the building and,as a result,received a $500 refund on his fire insurance premiums.As a result of the above:

Tonya is a cash basis taxpayer.In 2016,she paid state income taxes of $8,000.In early 2017,she filed her 2016 state income tax return and received a $900 refund.

A U.S.citizen who works in France from February 1,2016 until January 31,2017 is eligible for the foreign earned income exclusion in 2016 and 2017.

What Federal income tax benefits are provided for college students?

Employees of a CPA firm located in Maryland may exclude from gross income the meals and lodging provided by the employer while they were on an audit in Delaware.

Martha participated in a qualified tuition program for the benefit of her son.She invested $6,000 in the fund.Four years later her son withdrew $8,000,the entire balance in the program,to pay his college tuition.

Nicole's employer pays her $150 per month towards the cost of parking near a railway station where Nicole catches the train to work.The employer also pays the cost of the rail pass,$75 per month.Nicole can exclude both of these payments from her gross income.

Christie sued her former employer for a back injury she suffered on the job in 2016.As a result of the injury,she was partially disabled.In 2017,she received $240,000 for her loss of future income,$160,000 in punitive damages because of the employer's flagrant disregard for the employee's safety,and $15,000 for medical expenses.The medical expenses were deducted on her 2016 return,reducing her taxable income by $12,000.Christie's 2017 gross income from the above is: