Exam 2: Gross Income and Exclusions

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?

In June of 2014, a wealthy aunt gave Janie a stock portfolio worth $150,000. During the year, she collects $4,000 in dividends. How much of these amounts, if any, should Janie include in gross income for 2014? Why?

Martin retired in May, 2014. His pension is $1,000 per month from a qualified retirement plan to which he contributed $42,000, and to which his employer contributed $12,000. Martin was 67 when the plan payments started. During 2014, he received 8 months of payment for a total of $8,000 from the plan. a.Using the simplified method, calculate Martin's taxable income for 2014 from the retirement plan distributions. b.​If Martin's contributions to the plan had been $25,200, instead of $42,000, how much taxable income would he have to report in 2014 from the plan distributions?

For 2014, the maximum percentage of Social Security benefits which must be included in a taxpayer's gross income is?

Laura and Leon were granted a divorce in 2005. In accordance with the decree, Leon made the following payments to Laura in 2014: How much should Laura include in her 2014 taxable income as alimony?

Tim receives $500 of qualified dividends from Exxon in 2014. He is in the 10 percent ordinary tax bracket. Tim's tax on the dividends will be:

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

Child support payments are deductible by the spouse making the payments.

Qualified dividends are given special tax treatment. Describe how they are taxed.

In which of the following cases may the employee exclude the meals and/or lodging:

Laura and Leon were granted a divorce in 2005. In accordance with the decree, Leon made the following payments to Laura in 2014: How much of the payments can he deduct as alimony in 2014?

Indicate whether each of the items listed below would be (a) included in gross income or (b) excluded from gross income for the 2014 tax year. ​ a.Included b.Excluded -Lottery winnings

Joey is a single taxpayer. Joey's employer pays $1,800 per year for his health insurance. During the year, Joey had medical expenses of $2,500 and the insurance company reimbursed him for the full $2,500. How much of the above amounts, if any, must be included in Joey's gross income? Why?

Taxpayers must report interest income on Series EE savings bonds as the interest accrues.

All of the following amounts are taxable income to the recipient except:

Steve and Laura were divorced in 2008. Laura pays Steve alimony of $1,200 a month. The payment amount was agreed upon in the decree of divorce. To save money, Steve and Laura still live together. Are the alimony payments that Steve receives in 2014 includable in his income? Can Laura take a deduction for alimony paid?

In 2014, Uriah received the following interest payments: ​ Interest of $400 on an overpayment of 2013 Federal income taxes Interest of $300 from his bank certificate of deposit. Interest of $1,500 on municipal bonds Interest of $1,000 on United States savings bonds (Series HH) ​ What amount, if any, should Uriah report as taxable interest income on his 2014 individual income tax return?

Which of the following is not taxable income?

Under a divorce agreement executed in 2012, Bob is required to pay his ex-wife, Carol, $3,000 a month until their youngest daughter is 21 years of age. At that time, the required payments are reduced to $2,000 per month. a.How much of each $3,000 payment may be deducted as alimony by Bob? b.How much of each $3,000 payment must be included in Carol's taxable income?

As a new benefit to employees, the Acme Company is providing a dining allowance every Tuesday for use in one of the twenty restaurants that they own around town. Should this benefit be included in the employees' wages?