Question 1

Awards for emotional distress attributable to a physical injury are excluded from gross income.

Accepted Answer

According to the IRS, damages received for emotional distress caused by a physical injury or sickness are generally not taxable. However, damages received for emotional distress not related to a physical injury or sickness are taxable.

Question 2

Dividends on life insurance policies are generally excludible income because they are considered a return of premium.

Accepted Answer

Dividends on life insurance policies are generally considered a return of premium, which is not taxable income and therefore excludible from gross income.

Question 3

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

Accepted Answer

The answer of Sam received a scholarship for room and...

Question 4

Amounts withdrawn from qualified tuition plans are tax- free if the amounts are used for qualified higher education expenses including tuition, fees, books, and room and board for students attending on at least a half- time basis.

Accepted Answer

This statement is true according to the rules of qualified tuition plans, also known as 529 plans.

Question 5

Ming, who has been employed by the Frostine Corporation for five years, receives a $400 Amazon.com gift card for his years of hard work. The employee service award is taxable.

Accepted Answer

Employee service awards are considered taxable income by the IRS.

Question 6

The exclusion for employee discounts on services is limited to 30% of the price charged regular customers.

Accepted Answer

The exclusion for employee discounts on services is not limited to 30% of the price charged regular customers. There is no specific limit mentioned in the statement.

Question 7

"Working condition fringe benefits," such as memberships in professional organizations paid for by the employer, are generally excluded from the employee's gross income.

Accepted Answer

Working condition fringe benefits are generally excluded from the employee's gross income.

Question 8

Amounts collected under accident and health insurance policies purchased by the taxpayer are excludible from income.

Accepted Answer

This is true according to the Internal Revenue Code - amounts collected under accident and health insurance policies are generally excluded from taxable income.

Question 9

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

Disability benefits received from a policy purchased by an individual with after-tax dollars are generally not taxable and do not need to be reported as gross income.

Question 10

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

Accepted Answer

This is because the premiums are considered to be a fringe benefit and are therefore excluded from the employee's gross income. However, if the premiums are paid for by the employee on an after-tax basis, any benefits received would be tax-free.

Question 11

While payments received because a person has been physically injured are excluded from gross income, payments on account of non- physical injury must be included in gross income.

Accepted Answer

This is correct according to IRS rules. Payments received for physical injury or sickness are generally not included in gross income, while payments for non-physical injuries such as emotional distress or reputation damage are typically included.

Question 12

Martina, who has been employed by the Smythe Corporation for ten years, receives a $400 watch as a length of service award in a meaningful presentation. The fair value of the watch is taxable.

Accepted Answer

The answer of Martina, who has been employed by the...

Question 13

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.

Accepted Answer

The answer of Mattie has group term life insurance coverage...

Question 14

Premiums paid by an employer for employee disability coverage are excluded from the employee's gross income.

Accepted Answer

Employer-paid disability insurance premiums are generally excluded from an employee's gross income for tax purposes. This means that the employee does not have to report the premiums as income on their tax return. However, if the employer provides disability coverage as part of a cafeteria plan or flexible spending account, the rules may be different.

Question 15

Payments received from a workers' compensation plan funded by employer contributions are taxable.

Accepted Answer

Payments received from a workers' compensation plan funded by employer contributions are generally not taxable under federal and state law. However, there may be exceptions if the employee receives both workers' compensation benefits and Social Security disability insurance (SSDI) benefits, in which case a portion of the workers' compensation benefits may become taxable. It is recommended to consult a tax professional for specific guidance on individual cases.

Question 16

Nondiscrimination requirements do not apply to working condition fringe benefits.

Accepted Answer

The answer of Nondiscrimination requirements do not apply to working...

Question 17

Punitive damages are taxable unless they are awarded for physical injuries.

Accepted Answer

The answer of Punitive damages are taxable unless they are...

Question 18

Any distribution from a qualified tuition plan not used for qualified higher education expenses is both included in income and subject to a 10% penalty.

Accepted Answer

The answer of Any distribution from a qualified tuition plan...

Question 19

"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

According to IRS regulations, "no additional cost" benefits, such as free or discounted goods and services, are excluded from an employee's gross income if they are the same type that are sold to customers and in the line of business in which the employee works.

Question 20

John, an employee of a manufacturing company, suffered a heart attack and was unable to work for six months. He received $1,500 per month of disability benefits as a result of an employer- provided group policy. The benefits are includible in John's gross income.

Accepted Answer

Disability benefits received through an employer-provided group policy are generally taxable and includible in the recipient's gross income.

Quiz 16: Tax Deductions and Travel Expenses for Employees and Self-Employed Individuals