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Exam 5: Gross Income and Exclusions

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Question 71

Multiple Choice

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Graham has accepted an offer to do graduate work in the chemistry department at State University. The chemistry department offered Graham a $5,000 tuition reduction and $3,500 toward the cost of room and meals. Under the terms of the scholarship Graham must work in the chemistry labs during the summer as a research assistant. What amount must Graham include in his gross income?

A) $8,500
B) $5,000
C) $3,500
D) $2,500
E) $0-none of these benefits are included in gross income

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

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Question 72

Multiple Choice

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Ben received the following benefits from his employer this year. What amount must Ben include in his gross income?

A) $9,400
B) $11,070
C) $10,600
D) $7,000
E) $0-none of these benefits are included in gross income.

F) B) and D)
G) A) and B)

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Question 73

Multiple Choice

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This year, Fred and Wilma, married filing jointly, sold their home (sales price $750,000; cost $200,000) . All closing costs were paid by the buyer. Fred and Wilma owned and lived in their home for 20 years. How much of the gain is included in gross income?

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?

Generally, 85 percent of Social Security benefits are included in income of high-income taxpayers.

Ophra is a cash-basis taxpayer who is employed in the publishing industry. This year her employer informed her that because of her outstanding performance she is entitled to a free world cruise. Ophra asked her employer to issue the cruise tickets to her parents, and he complied with this request. Identify the principle that will determine whether Ophra or her parents are taxed on the value of the cruise tickets.

Caroline is retired and receives income from a number of sources. The interest payments are from bonds that Caroline purchased over past years and a disability insurance policy that Caroline purchased. Calculate Caroline's gross income.

Interest earned on a city of Denver bond is excluded from gross income (for federal tax purposes).

An employee may exclude up to a 40 percent employer-provided discount on services received by the employee.

Andres has received the following benefits this year. Besides these benefits Andres missed work for two months due to an illness. During his illness Andres received $6,500 in sick pay from a disability insurance policy. Assume Andres has disability insurance provided by his employer as a nontaxable fringe benefit. What amount, if any, must Andres include in gross income this year?