Tax 3300 Homework 3.docx - Chapter 3 Homework Question 2 The items included in gross income are parts b c f g h and i Explanations follow a The taxpayer

Tax 3300 Homework 3.docx - Chapter 3 Homework Question 2...

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Chapter 3 Homework Question 2) The items included in gross income are parts b., c., f., g., h., and i. Explanations follow. a. The taxpayer still owns the stock. Because there is no realization event, there is no gross income. b. The police officer has earned income, and it is included in gross income. c. If the jewelry was sold at a gain, it is included in the mother’s gross income (this assumes that the son sold it for his mother). If sold at a loss, it is an unallowable loss on a personal use asset. d. Child support payments received are not included in gross income. e. The refunded deposit is a nontaxable return of capital. f. Interest income on corporate bonds is included in gross income. g. The baseball player has earned income, and it is included in gross income. h. Tips are earned income and included in gross income. i. Sale of property at a gain, even if the property is personal use property, is included in gross income [less the cost (basis) of the tickets]. If a personal use asset is sold at a loss, the loss is not included in gross income. j. A gift is an exclusion item, so it is not included in gross income. The grandmother may owe gift tax. Question 3) The treatment of the stated items follows (with the Code Section also noted). Exclusions Inclusions (i.e., not excluded from income) b. Damages for personal injury (§ 104). a. Alimony received (§ 71). d. Repayment of a loan does not involve income. Note that any interest received is income.
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c. Prizes are taxable (§ 74). e. Life insurance proceeds (§ 101). g. Jury duty fees are income and not excluded (§ 61). Note that if the taxpayer must repay the income to his employer, a deduction for AGI should be allowed (§ 62). f. Interest on municipal bonds (§ 103). h. Income from any source derived (even if illegal) is taxable unless excluded (§ 61). i. A whistleblower award is taxable, and no exclusion applies (§ 61).
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