Question 1

Jamal,age 52,is a human resources manager for Triple W Company.His annual salary is $110,000 and he receives the following fringe benefits during the current year:
• Triple W pays for all employees' health and accident insurance.Triple W pays $7,000 for Jamal's health insurance during the year.
• Triple W provides Jamal with group-term life insurance coverage of $200,000 during the year.The monthly inclusion amount per $1,000 of coverage is $.23.
• Triple W has a flexible benefits plan in which employees may participate to pay any qualifying medical costs not reimbursed by their health insurance.Jamal has $1,600 withheld from his salary under the plan.During the year he receives reimbursements of $1,300.
• Triple W pays parking costs for all management employees.Jamal's parking costs $220 a month.
• Triple W pays Jamal's annual membership dues of $450 to the Society of Human Resource Management Association.The company also subscribes to several management journals for Jamal costing $650 a year.
• Jamal took a college class on financial accounting and Triple W reimbursed his tuition of $6,000 through its tuition assistance program for all employees.
• Jamal's consumption of coffee provided by Triple W is estimated at $250 a year.
How much income must Jamal report from his job?

Accepted Answer

The health insurance premiums are excluded.Employer-provided parking of up to $255 a month is excludible.The membership dues and subscriptions are working condition fringe benefits and are not taxable.The maximum exclusion for tuition is $5,250 so the excess is included.Coffee is a de minimis fringe benefit and is not taxable.Reimbursements from flexible benefits plans are excluded when used for qualifying purposes.

Question 2

Sarah receives a $15,000 scholarship from City University.The university specifies that $8,000 is for tuition,books,supplies,and equipment for classes.The other $7,000 is for room and board.Sarah works ten hours per week as a grader,for which she is paid $7,500 for the year.Of the total amount received,Sarah must include the following amount in gross income

Accepted Answer

A)  $7,000.
B)  $7,500.
C)  $14,500.
D)  $22,500. C

Question 3

Each year a taxpayer must include in gross income the rental value of his or her personal residence.

Accepted Answer

A) True 
 B)False  False

Question 4

Upon the sale of property,a portion of the selling price equal to the basis in the property is considered a return of capital to the seller and is,therefore,not taxable.

Accepted Answer

A) True 
 B)False

Question 5

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?

Accepted Answer

The answer of Taylor begins a new job as a...

Question 6

Derrick was in an automobile accident while he was going to work.The doctor advised him to stay home for eight months due to his physical injuries.The resulting lawsuit was settled and Derrick received the following amounts:  How much of the settlement must Derrick include in ordinary income on his tax return?

Accepted Answer

A)  $0
B)  $80,000
C)  $95,000
D)  $175,000

Question 7

After he was denied a promotion,Daniel sued his employer claiming sex discrimination.He was awarded $20,000 to cover medical bills he incurred because of the related emotional distress,$80,000 to punish his employer for discrimination,and $50,000 to compensate him for lost wages.What is the amount that must be included in Daniel's gross income for the year?

Accepted Answer

The answer of After he was denied a promotion,Daniel sued...

Question 8

Katie,a self-employed CPA,purchased an accident & disability insurance policy.As the result of an auto accident,Katie was unable to work and received $3,000 of disability benefits per month for seven months.The benefits were based on her estimated monthly income and should be reported as gross income.

Accepted Answer

A) True 
 B)False

Question 9

In 2015 Bonnie,a sole proprietor,loaned her employee,John,$10,000 to help him buy a car.In 2017,before he repaid the $10,000,Bonnie told John that she was "tearing up" the $10,000 note in recognition of his strong job performance.How should John treat the amount forgiven?

Accepted Answer

A)  taxable income in year of loan
B)  taxable income in year of forgiveness
C)  excludible gift in year of loan
D)  excludible gift in year of forgiveness

Question 10

Greg is the owner and beneficiary of a $100,000 policy on the life of his mother.Greg gives the policy to his brother,Don.Don subsequently pays premiums of $40,000.Upon his mother's death,how much of the insurance proceeds must Don include in income?

Accepted Answer

A)  $0
B)  $40,000
C)  $60,000
D)  $100,000

Question 11

Hope receives an $18,500 scholarship from State University.The university specifies that $8,500 is for tuition,books,supplies,and equipment,while $10,000 is for room and board.In addition,Hope works part-time at the campus library and earns $5,000.Hope's gross income is

Accepted Answer

A)  $5,000.
B)  $15,000.
C)  $18,500.
D)  $23,500.

Question 12

Discuss the requirements for meals provided by employers to be excluded from their employees' income.How is the de minimis rule distinguished from these requirements?

Accepted Answer

The answer of Discuss the requirements for meals provided by...

Question 13

Linda was injured in an automobile accident caused by another driver.Her son,Matthew,was in the automobile but not physically injured.The other driver's insurance company was required by a court to pay Linda $75,000 to cover medical bills relating to her injuries,$30,000 to compensate her for emotional distress attributable to the injuries and $40,000 of punitive damages.Matthew was paid $15,000 to compensate him for emotional distress attributable to his witnessing his mother's injuries.What is the amount taxable to Linda?

Accepted Answer

A)  $30,000
B)  $40,000
C)  $105,000
D)  $145,000

Question 14

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.

Accepted Answer

A) True 
 B)False

Question 15

In 2006,Gita contributed property with a basis of $500,000 and a fair market value of $3,000,000 to a qualified small business corporation for all of its common stock.She sells the stock in 2017 for $4,000,000.
a.What is the amount of taxable gain on the transaction?
b.Assume instead that the stock was acquired in December 2010.What is the amount of the taxable gain?

Accepted Answer

The answer of In 2006,Gita contributed property with a basis...

Question 16

Britney is beneficiary of a $150,000 insurance policy on her father's life.Upon his death,she may elect to receive the proceeds in five yearly installments of $32,000 or may take the $150,000 lump sum.She elects to take the lump sum payment.What are the tax consequences in year one?

Accepted Answer

A)  All $32,000 each year is taxable.
B)  $10,000 interest is taxable in the first year.
C)  There is no taxable income.
D)  The lump sum payment is taxable.

Question 17

Lindsay Corporation made the following payments to the family of Luke Marshall,an employee who died during the year. $5,000 for Luke's final paycheck that he failed to collect
$10,000 for accrued vacation days as required by the employment contract
$25,000 in admiration of Luke's outstanding service to the community
What is the total amount that Luke's family must include in income?

Accepted Answer

A)  $0
B)  $5,000
C)  $15,000
D)  $40,000

Question 18

"No additional cost" benefits are excluded from an employee's gross income if the services are the same type that are sold to customers and in the line of business in which the employee works.

Accepted Answer

A) True 
 B)False

Question 19

Rebecca is the beneficiary of a $500,000 insurance policy on her husband's life.She elects to receive $52,000 per year for 10 years rather than receive the entire amount in a lump sum.Of the amount received each year

Accepted Answer

A)  $2,000 is taxable income.
B)  $50,000 is taxable income.
C)  $52,000 is taxable income.
D)  $5,000 per year is tax free as a death benefit.

Question 20

Which of the following benefits provided by an employer is subject to withholding and must be reported on the employee's W-2?

Accepted Answer

A)  payment of an employee's professional dues
B)  meals provided on the premises for the employer's convenience
C)  $400 cash award for long-term service,awarded at a special employee awards event
D)  None of the above.

Exam 20: Gross Income: Exclusions

Each year a taxpayer must include in gross income the rental value of his or her personal residence.

Upon the sale of property,a portion of the selling price equal to the basis in the property is considered a return of capital to the seller and is,therefore,not taxable.

In 2015 Bonnie,a sole proprietor,loaned her employee,John,$10,000 to help him buy a car.In 2017,before he repaid the $10,000,Bonnie told John that she was "tearing up" the $10,000 note in recognition of his strong job performance.How should John treat the amount forgiven?

Greg is the owner and beneficiary of a $100,000 policy on the life of his mother.Greg gives the policy to his brother,Don.Don subsequently pays premiums of $40,000.Upon his mother's death,how much of the insurance proceeds must Don include in income?

Hope receives an $18,500 scholarship from State University.The university specifies that $8,500 is for tuition,books,supplies,and equipment,while $10,000 is for room and board.In addition,Hope works part-time at the campus library and earns $5,000.Hope's gross income is

Discuss the requirements for meals provided by employers to be excluded from their employees' income.How is the de minimis rule distinguished from these requirements?

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.

Britney is beneficiary of a $150,000 insurance policy on her father's life.Upon his death,she may elect to receive the proceeds in five yearly installments of $32,000 or may take the $150,000 lump sum.She elects to take the lump sum payment.What are the tax consequences in year one?

"No additional cost" benefits are excluded from an employee's gross income if the services are the same type that are sold to customers and in the line of business in which the employee works.

Rebecca is the beneficiary of a $500,000 insurance policy on her husband's life.She elects to receive $52,000 per year for 10 years rather than receive the entire amount in a lump sum.Of the amount received each year

Which of the following benefits provided by an employer is subject to withholding and must be reported on the employee's W-2?