In 2011,Theresa was in an automobile accident and suffered physical injuries.The accident was caused by Ramon's negligence.In 2012,Theresa collected from his insurance company.She received $15,000 for loss of income,$25,000 punitive damages,and $8,000 for medical expenses which she had deducted on her 2011 tax return (the amount in excess of 7.5% of adjusted gross income).As a result of the above,Theresa's 2012 gross income is increased by $33,000.

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Theresa received $15,000 for loss of income, $25,000 for punitive damages, and $8,000 for medical expenses. Only the $8,000 for medical expenses that exceeded 7.5% of her adjusted gross income should be counted as income in 2012. Therefore, her 2012 gross income is increased by $8,000, not $33,000.

In 2011,Theresa Was in an Automobile Accident and Suffered Physical