Exam 4: Gross Income: Exclusions

Cafeteria plans are valuable to employers because

Punitive damages are taxable unless they are awarded for physical injuries.

John is injured and receives $16,000 of income from a disability policy.John's employer paid 75% of the disability policy premiums and John paid the remainder.In addition,John's employer has paid all the $3,000 of premiums on a health policy that paid John's doctor bills of $10,000.How much of the benefits must John include in income?

Nelda suffered a serious stroke and was admitted to a nursing home for 140 days.Nursing home charges,including physician fees and other related expenses were $33,000.Under Nelda's long-term care insurance contract,she received reimbursements of $36,000.How much of the $36,000 reimbursement must be included in Nelda's gross income in 2017?

Richard is a key employee of Winn Corporation.The corporation provides Richard with $120,000 of group-term life insurance coverage.Only company executives receive life insurance coverage.The premium attributable to the coverage is $1,600.The uniform one-month group-term premium is one dollar per $1,000 of coverage.How much must Richard include in income due to the policy?

An electronics store sold a home theater system to an employee for $300,even though the retail price was $500.The gross profit percentage is 40%.Such discounts are available to all employees.How much income should be recognized by the employee from these transactions?

Trisha is married and has young children.The couple is in the 39.6% tax bracket.In order for Trisha and her husband to work,they pay $5,000 for daycare which earns them a $1,000 dependent care credit.Trisha has been offered a new job.The new job will pay a $5,000 lower salary,but the new employer will offer $5,000 of paid child care.Trisha cannot claim the dependent care credit if she receives employer-paid child care.Which of the following statements is correct? (Ignore payroll taxes.)

Connor owes $4 million and has assets of only $1 million.He declares and files personal and business bankruptcy and his creditors approve a payment plan of $.25 per dollar.Connor has a net operating loss carryover of $2 million.The remaining 75 percent of his debt will be canceled.Connor must recognize income of

Amounts withdrawn from qualified tuition plans are tax-free if the amounts are used for qualified higher education expenses including tuition,fees,books,and room and board for students attending on at least a half-time basis.

Amanda,who lost her modeling job,sued her employer for age discrimination.She was awarded $75,000 in lost wages,$25,000 for emotional distress,and $150,000 punitive damages.The amount taxable is

Julia suffered a severe stroke and has been admitted to a private hospital where she is expected to remain for the rest of her life.She is certified by a licensed health care practitioner as being a "chronically ill individual." Her hospital expenses amount to $350 per day.She will receive $340 per day from a $500,000 life insurance policy as an accelerated death benefit.In 2017,she was in the hospital for 10 days and received $3,400.How much of this amount is taxable?

The exclusion for employee discounts on services is limited to 30% of the price charged regular customers.

Any distribution from a qualified tuition plan not used for qualified higher education expenses is both included in income and subject to a 10% penalty.

Ming,who has been employed by the Frostine Corporation for five years,receives a $400 Amazon.com gift card for his years of hard work.The employee service award is taxable.

Mae Li is beneficiary of a $70,000 insurance policy on her father's life.Upon his death,she elects to receive the proceeds in installments from the insurance company that carries the policy.She will receive $16,000 per year for five years.What are the tax consequences each year?

Benedict serves in the U.S.Congress.In the current year,a lobbyist paid for Benedict to take a one-week vacation to Bermuda.Benedict did not incur any expense for the trip.What income tax issues should Benedict consider?

This year,Jason sold some qualified small business stock that he acquired in 2008.His basis in the stock was $100,000 and he sold it for a $300,000 gain.How much of Jason's gain is taxable?

While payments received because a person has been physically injured are excluded from gross income,payments on account of non-physical injury must be included in gross income.

Payments received from a workers' compensation plan funded by employer contributions are taxable.

Which one of the following fringe benefits allows for discrimination between highly compensated employees and other employees to be present?