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Exam 5: Gross Income and Exclusions

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Question 61

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Aubrey and Justin file married filing separately.This year,Aubrey earned salary of $130,000,and Justin earned salary of $88,000.Aubrey and Justin live in a common law state.How much income earned will Justin report on his tax return for this year?

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$88,000 Under common law syste...

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Question 62

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Mike received the following interest payments this year.What amount must Mike include in his gross income (for federal tax purposes) ?

A) $1,450
B) $2,300
C) $2,650
D) $3,550
E) $4,400

F) A) and E)
G) C) and E)

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Question 63

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Rhett made his annual gambling trip to Uwin Casino.On this trip Rhett won $250 at the slots and $1,200 at poker.Also this year,Rhett made several trips to the racetrack,but he lost $700 on his various wagers.What amount must Rhett include in his gross income?

Opal deducted $2,400 of state income taxes on her tax return last year.This year she received a state income tax refund of $170.What amount of the refund,if any,should Opal include in her gross income if last year her total itemized deductions exceeded the standard deduction by $350?

Recognized income may be in the form of cash or property received (but not services received).

Excluded income will never be subject to the federal income tax.

Community property laws dictate that income earned by one spouse is treated as though it were earned equally by both spouses.

Taxpayers meeting certain home ownership and use requirements can permanently exclude up to $1,000,000 of realized gain on the sale of their principal residence.

In April of this year Victoria received a $1,400 refund of state income taxes that she paid last year.Last year Victoria claimed itemized deductions of $14,590.Victoria's itemized deductions included state income taxes paid of $3,750.How much of the refund,if any,must Victoria include in gross income if the standard deduction last year was $12,000?

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?

Which of the following is a true statement about the first payment received from a purchased annuity?

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

Brad was disabled for part of the year,and he received $11,500 of benefits from a disability insurance policy purchased by his employer.Brad must include all $11,500 of benefits in his gross income because he was not taxed on the disability insurance premiums paid by his employer.

Bart,a single taxpayer,has recently retired.This year,he received $24,000 in pension payments and $5,000 of Social Security payments.What amount must Bart include in his gross income for the Social Security payments?

Hank is a U.S.citizen and is doing a three- to six-year assignment as a sales executive in Paris for a French company.The assignment began this year.Hank earned $109,500 working for the French company this year but only lived in France for 180 days (out of 365 days) .He will live full time in France next year.What amount of Hank's $109,500 salary this year will he be allowed to exclude from gross income in the United States (rounded to the nearest hundred dollars) ?

Pam recently was sickened by eating spoiled peanut butter.She successfully sued the manufacturer for her medical bills ($3,700) ,her emotional distress ($6,000-she now fears peanut butter) ,and punitive damages ($44,000) .What amount must Pam include in her gross income?

Robert will be working overseas on a permanent assignment for an international company beginning on March 1 of this year (306 days this year).His salary is $11,000 per month while Robert is overseas,but only $9,200 per month otherwise.What is the minimum amount of Robert's salary that he must include in gross income this year? (Round your final answer to the nearest whole dollar amount and assume that there are 365 days in this year.)

Barter clubs are an effective means of avoiding realization for tax purposes.

Irene's husband passed away this year.After his death,Irene received $250,000 of proceeds from life insurance on her husband,and she inherited her husband's stock portfolio,worth $750,000.What amount must Irene include in her gross income?

Earnings from Internal Revenue Code Section 529 plans and Coverdell education savings accounts are excluded from gross income if the earnings are used to pay for qualifying educational expenditures for college students (and not for elementary or secondary education).