Exam 5: Gross Income and Exclusions

Nate is a partner in a partnership that received $5,000 of interest income this year.Nate's share of the interest is $1,000,and he should report this income on his individual return as:

This year Zach was injured in an auto accident.As a result he received the following payments.Zach received $18,000 of disability pay.Zach has disability insurance provided by his employer as a nontaxable fringe benefit.Zach's employer paid $4,300 in disability premiums for Zach this year.Zach's hospital bills totaled $4,500 and were paid by his health insurance.Zach has health insurance provided by his employer as a nontaxable fringe benefit.Zach's employer paid $6,250 in health insurance premiums for Zach this year.What amount must Zach include in his gross income?

Identify which of the items below help determine which taxpayer must recognize earned income:

Scholarships are excluded from gross income for degree candidates even if the scholarship pays for required fees and books in addition to tuition.

Graham has accepted an offer to do graduate work in the chemistry department at State University.The chemistry department offered Graham a $5,000 tuition reduction and $3,500 toward the cost of room and meals.Under the terms of the scholarship Graham must work in the chemistry labs during the summer as a research assistant.What amount must Graham include in his gross income?

Jack and Jill are married.This year Jack earned $72,000 and Jill earned $80,000 and they received $4,000 of interest income from a joint savings account.How much gross income would Jack report if he files married-separate from Jill?

Anna received $15,000 from life insurance paid upon the death of her grandmother.Anna can exclude the entire amount of the life insurance from her gross income.

Shaun is a student who has received an athletic scholarship to State University.The scholarship paid $14,000 for tuition,$2,500 for fees,and $1,000 for books.In addition,Shaun's dormitory fees of $8,500 were paid by the University when he agreed to counsel freshman on campus living.What amount must Shaun include in his gross income?

The cash method of accounting requires taxpayers to recognize income only when that income is received as cash.

Brenda has $15,000 in U.S.Series EE saving bonds and she is considering whether to cash the bonds.Under what conditions can Brenda exclude the interest on the savings bonds from her gross income?

Income is included in gross income unless a tax provision specifies that it can be deferred or excluded.

Trevor received a gift of $25,000 in cash from his rich uncle.Trevor must include $15,000 of this gift in his gross income this year.

Worker's compensation benefits are excluded from gross income.

The assignment of income doctrine requires that to shift income from property to another person,the taxpayer must transfer only the income to the other person.

To calculate a gain or loss on the sale of an asset,the proceeds from the sale are reduced by which of the following?

Sam,age 45,saved diligently for his college education by putting part of his pay into U.S.Series EE saving bonds.Sam purchased the bonds for $6,500,and this year he redeemed the bonds for $7,200.He has no other income this year.What amount must Sam include in his gross income?

Identify the rule that states that income has been realized when a taxpayer receives the income and there are no restrictions on the taxpayer's use of the income (e.g. ,no obligation to repay the amount) :

This year Mary received a $200 refund of state income taxes that she deducted on her tax return last year.Mary included a total of $4,000 of state income taxes when she itemized deductions last year.What amount of the refund,if any,should Mary include in her gross income this year?

U.S.citizens generally are subject to tax on all income whether it is generated in the United States or in foreign countries.

Hal Gore won a $1 million prize for special contributions to environmental research.This prize is awarded for public achievement,and Hal directed the awarding organization to transfer $400,000 of the award to the Environmental Protection Agency.How much of the prize should Hal include in his gross income?