Exam 4: Gross Income: Exclusions

Sharisma 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 $63,000.Under Sharisma's long-term care insurance contract,she received reimbursements of $56,000.How much of the $56,000 reimbursement must be included in Sharisma's gross income in 2017?

Sam received a scholarship for room and board.This scholarship is excludible from income.

In 2015 Betty loaned her son,Juan,$10,000 to help him buy a car.In 2017,before he repaid the $10,000,Betty told Juan that she was "tearing up" the $10,000 note as a graduation present.How should Juan treat the amount forgiven?

Which of the following statements regarding the qualified tuition plans (QTP) is incorrect?

Loan proceeds are taxable in the year received in cash.

Miranda is not a key employee of AB Corporation.AB provides Miranda with group term life insurance coverage of $140,000.The premiums attributable to the excess coverage are $1,300.The uniform one-month group-term premium is one dollar per $1,000 of coverage.How much must Miranda include in income?

The value of health,accident,and disability insurance premiums paid by an employer are generally not included in an employee's gross income.

Mattie has group term life insurance coverage of $120,000 provided by her employer on a nondiscriminatory basis.She must include premiums for $120,000 of coverage in gross income,determined by using IRS tables.

Kelly was sent by her employer to work on a special assignment in Paris for six months.Kelly will be able to exclude some of her income earned in Paris.

Over the years Rianna paid $65,000 in premiums on a life insurance policy with a face value of $100,000.Upon reaching 65,while still in good health,Rianna surrendered the policy and collected $95,000.In the year of collection,Rianna will report

Faye is a marketing manager for Healthy Corp.She earns a salary of $100,000 and has received the following benefits: • Healthy pays 75% of all employees' health and accident insurance coverage.Healthy paid $6,000 towards the cost of Faye's health insurance during the year. • Faye participates in the cafeteria plan and had elected to have $2,000 withheld from her pay to cover the remaining cost of the health insurance premiums and an additional $1,500 to cover dental and other health care costs not paid by insurance (i.e.funding a flexible spending account).The full $1,500 was used to pay for various qualifying medical costs. • Healthy pays the cost of disability insurance coverage for all employees.The insurance will pay 75% of salary if employees are out of work for a significant period.The cost of Faye's premiums was $600. • Healthy pays for the cost of veterinary insurance for all employees.The cost of coverage for Faye's dog was $400. • Healthy pays for the cost of daycare for its employees' children.The cost for Faye's two children was $8,000. • All employees receive a 20% discount on Healthy's products.The typical markup on their products is 25%.Faye enjoyed $1,200 of savings through the discount program. • Faye won the manager of the year award earlier in the year and received an all-expense paid week at a desert spa valued at $3,500. • Healthy pays Faye's annual membership dues of $500 to the American Marketing Association. • Healthy paid for the full $2,500 cost of Faye's attendance at the American Marketing Association's annual conference in Orlando. How much income must Faye recognize from her employment?

Taylor begins a new job as a logistics manager.His company advises him that he may need to travel internationally on occasion,so he should obtain a passport.The company reimburses Taylor for the cost of the passport.Taylor uses the passport when he vacations in Europe later in the year.What tax issues should Taylor consider?

Employers must report the value of nontaxable meals and lodging provided to employees on the employees' W-2s at year-end.

Healthwise Ambulance requires its employees to be on 24-hour call and consequently gives them $800 per month housing allowance and a $200 per month food allowance.Ron,an employee of Healthwise,receives a salary of $40,000 per year (this does not include the allowances).Ron will be taxed each year on

Benefits covered by Section 132 which may be excluded from an employee's gross income do not include

David has been diagnosed with cancer and is expected to live less than 18 months.David is covered by a life insurance policy with a $400,000 face amount.David cashes in the policy early under a special option and receives 80% of the face amount or $320,000.In the year of collection,David will report

In September of 2017,Michelle sold shares of qualified small business stock for $1,000,000 that had a basis of $200,000.She had held the stock for 17 months.Forty-five days after the sale she purchased other qualified small business stock for $1,100,000.How much of the gain will she recognize?

Jeremy,an American citizen,earned $200,000 during 2017 while employed in Switzerland.Jeremy is entitled to the maximum foreign-earned income exclusion.Jeremy also incurred $40,000 of deductible expenses attributable to the foreign-earned income.Jeremy may deduct how much in expenses?

Felice is in the hotel management field.She rents an apartment near the hotel so she can walk to work.She pays $1,000 per month for rent.Felice has just been offered a similar position at a different hotel.The salary will be $14,000 lower,but they do require she live in the hotel to be on call and provide her with suite to live in.Felice has a marginal tax rate of 33%.She will be financially ahead by accepting the new position.

Except in the case of qualifying accelerated death benefits,if a life insurance policy is sold or surrendered for a lump sum before the death of the insured,the amount received is taxable to the extent it exceeds the premiums paid.