Question 1

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below.
-David's employer laid him off for three months during the slow winter season.He collects $4,375 in unemployment compensation.

Accepted Answer

Unemployment compensation is fully included in gross income according to current tax laws.

Question 2

Gifts received are not subject to income taxation; however the donor is subject to the gift tax rules on the making of a gift.

Accepted Answer

Gifts received by an individual are generally not subject to income taxation. However, the donor may be subject to gift tax rules and may need to file a gift tax return if the gift exceeds the annual exclusion amount or if they have exceeded their lifetime gift tax exemption.

Question 3

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below.
-Hank's employer gives him fishing gear that is worth $1,250 at his retirement party.

Accepted Answer

The answer of Each of the numbered items below is...

Question 4

Matt,a U.S.citizen,can exclude all of his $100,000 salary he earned as a bullfighter in Spain where he lived all year,from his U.S.tax return.

Accepted Answer

Although Matt may be able to claim a foreign earned income exclusion on his U.S. tax return, the exclusion amount is subject to certain limitations and requirements. Additionally, whether or not his income as a bullfighter qualifies for the exclusion would depend on various factors such as his tax residency status and the nature of his work in Spain.

Question 5

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below. -Raymond dies on July 8^th of the current year.Out of love and respect for Raymond,his employer gives his widow $5,000.

Accepted Answer

The answer of Each of the numbered items below is...

Question 6

No-additional-cost services and employee discounts must be made available to employees on a nondiscriminatory basis and must also be in the same line of business in which the employee works to be excluded from the employee's income.

Accepted Answer

No-additional-cost services and employee discounts are excluded from an employee's income for tax purposes if they meet certain requirements, including being available to all employees on a nondiscriminatory basis and being related to the employee's line of work.

Question 7

Any income earned subsequent to the death of the decedent from inherited property is excludable from the heir's taxable income.

Accepted Answer

Income earned from inherited property is generally taxable, except for certain specific exceptions such as life insurance proceeds and inherited retirement funds.

Question 8

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below.
-Marline receives $14 million in punitive damages for a personal physical injury.

Accepted Answer

Punitive damages, regardless of whether they are related to a personal physical injury, are fully included in gross income according to the Internal Revenue Code.

Question 9

To keep the employees on the premises in case an emergency arises,the Riverview Hotel provides meals to its employees in a room adjacent to their restaurant.Since the meals are provided as a convenience to the employer and on their premises,the value of the meals is excluded in the income of the employees.

Accepted Answer

This statement is true. The meals provided by the employer on their premises for the convenience of the employee are generally excluded from the employee's income, as long as they are not considered a form of compensation or a substitute for wages. This is known as the "de minimis" fringe benefit rule.

Question 10

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below.
-Julian's tenant improves her side of the duplex by making improvements to the bathroom and kitchen that are worth $750.Julian does not adjust her rent for the $750 improvements.

Accepted Answer

Improvements made by a tenant to a landlord's property that the landlord does not pay for and that do not result in a rent reduction or other direct financial benefit to the landlord are generally not considered income to the landlord. Therefore, Julian would not include the value of the improvements in his gross income.

Question 11

Robert's employer provides all of its employees a $40,000 group term life insurance policy.The cost of this policy must be included in Robert's income.

Accepted Answer

The cost of group term life insurance provided by an employer up to $50,000 is excluded from an employee's income. Therefore, Robert does not need to include the cost of the policy in his income.

Question 12

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below.
-Tina receives 100 shares of Welby stock as a result of a 2 for 1 stock split.The shares have a value of $7,000 the day of the split.

Accepted Answer

Stock splits are generally not taxable events. The recipient of the additional shares due to a stock split does not recognize income at the time of the split. Instead, the basis of the original shares is allocated across the total number of shares after the split.

Question 13

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below. -Kenneth receives a new Ford Explorer worth $28,900 that his parents bought him for his 24^th birthday.

Accepted Answer

Gifts are generally excluded from the gross income of the recipient under the current tax law. The fact that Kenneth received a new Ford Explorer as a birthday gift from his parents means it is not considered taxable income for him.

Question 14

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below.
-Dick lives rent-free in an apartment (value $675/month)in a complex where he is the apartment manager and must be on the premises to handle problems.

Accepted Answer

According to IRS publication 525, "if lodging is provided for your convenience, your employer can exclude the value of the lodging from your income." Since Dick must be on the premises to handle problems, the lodging is provided for his convenience and is fully excluded from gross income.

Question 15

Connie received a $1,000 scholarship to attend State University from a local civic group based on her grades and community activities.The $1,000 is included in income.

Accepted Answer

Scholarships received for tuition and fees required for enrollment or attendance at an educational institution, or for books, supplies, and equipment required for courses at the educational institution, are not taxable and therefore not included in income.

Question 16

Myra's employer paid her health and accident insurance premium of $5,600.Since she had the option to take the cash and purchase her own insurance,the $5,600 must be included in income.

Accepted Answer

The payment by an employer for an employee's health and accident insurance premiums is generally excluded from the employee's income, even if the employee had the option to receive cash instead.

Question 17

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below.
-Sarah,the managing partner in an accounting firm,has her downtown parking space ($325/per month)paid by the firm.None of the accounting staff receive parking privileges.

Accepted Answer

The answer of Each of the numbered items below is...

Question 18

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below.
-Julia receives $6.3 million in compensatory damages for a personal physical injury.

Accepted Answer

Compensatory damages received for personal physical injury are fully excluded from gross income by law.

Question 19

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below.
-Jeane's medical insurance carrier reimburses him 80% of his qualified medical expenses.During the current year Jeane receives $3,682 in payments.

Accepted Answer

The amount reimbursed for qualified medical expenses by an insurance carrier is generally excluded from gross income. This means Jeane does not have to include the $3,682 reimbursement in his gross income for tax purposes.

Question 20

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below.
-Jeane's employer pays his medical premiums each month ($130/month).

Accepted Answer

Under current law for the year 2021, employer-paid medical premiums are fully excluded from gross income.

Quiz 4: Income Exclusions

Gifts received are not subject to income taxation; however the donor is subject to the gift tax rules on the making of a gift.

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below. -Hank's employer gives him fishing gear that is worth $1,250 at his retirement party.

Matt,a U.S.citizen,can exclude all of his $100,000 salary he earned as a bullfighter in Spain where he lived all year,from his U.S.tax return.

No-additional-cost services and employee discounts must be made available to employees on a nondiscriminatory basis and must also be in the same line of business in which the employee works to be excluded from the employee's income.

Any income earned subsequent to the death of the decedent from inherited property is excludable from the heir's taxable income.

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below. -Marline receives $14 million in punitive damages for a personal physical injury.

Robert's employer provides all of its employees a $40,000 group term life insurance policy.The cost of this policy must be included in Robert's income.

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below. -Kenneth receives a new Ford Explorer worth $28,900 that his parents bought him for his 24^th birthday.

Connie received a $1,000 scholarship to attend State University from a local civic group based on her grades and community activities.The $1,000 is included in income.

Myra's employer paid her health and accident insurance premium of $5,600.Since she had the option to take the cash and purchase her own insurance,the $5,600 must be included in income.

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below. -Julia receives $6.3 million in compensatory damages for a personal physical injury.

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below. -Jeane's employer pays his medical premiums each month ($130/month) .

Quiz 4: Income Exclusions

Gifts received are not subject to income taxation; however the donor is subject to the gift tax rules on the making of a gift.

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below. -Hank's employer gives him fishing gear that is worth $1,250 at his retirement party.

Matt,a U.S.citizen,can exclude all of his $100,000 salary he earned as a bullfighter in Spain where he lived all year,from his U.S.tax return.

No-additional-cost services and employee discounts must be made available to employees on a nondiscriminatory basis and must also be in the same line of business in which the employee works to be excluded from the employee's income.

Any income earned subsequent to the death of the decedent from inherited property is excludable from the heir's taxable income.

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below. -Marline receives $14 million in punitive damages for a personal physical injury.

Robert's employer provides all of its employees a $40,000 group term life insurance policy.The cost of this policy must be included in Robert's income.

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below. -Kenneth receives a new Ford Explorer worth $28,900 that his parents bought him for his 24th birthday.

Connie received a $1,000 scholarship to attend State University from a local civic group based on her grades and community activities.The $1,000 is included in income.

Myra's employer paid her health and accident insurance premium of $5,600.Since she had the option to take the cash and purchase her own insurance,the $5,600 must be included in income.

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below. -Julia receives $6.3 million in compensatory damages for a personal physical injury.

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below. -Jeane's employer pays his medical premiums each month ($130/month) .

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below. -Kenneth receives a new Ford Explorer worth $28,900 that his parents bought him for his 24^th birthday.