Ch05TB - 563 Chapter 5 Gross IncomeExclusions TRUE-FALSE...

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© 2009 CCH. All Rights Reserved. Chapter 5 563 Chapter 5 Gross Income—Exclusions TRUE-FALSE QUESTIONS—CHAPTER 5 *The True-False questions have been adapted from the IRS Examinations. Interest on insurance dividends left on deposit with an insurance company and withdrawable upon demand is taxable 1. to the policyholder only when actually withdrawn. Payments up to a total of $5,000 to the bene f ciaries of a deceased employee by an employer because of that 2. employee’s death are excludable from income by the bene f ciaries if the employee had no right to receive these payments during life. Gina Gander, a cash basis taxpayer, purchased a Series EE savings bond. She must include the increase in redemption 3. value as interest income each year. Meals furnished to employees as part of their compensation are deductible by the employer at their fair market value. 4. Thomas Thinne, a cash basis taxpayer, may either defer reporting the interest on Series E bonds until he cashes the 5. bonds or he may choose to report the increase in redemption value as interest each year. Max Miller, the owner of a boutique, has a valuable employee for whom he pays a $200 annual premium for a 6. $50,000 life insurance policy. The employee’s husband is the bene f ciary. This bene f t when added to her regular salary does not make the total compensation unreasonable. Max may deduct the premium as a business expense. Dina Durham purchased U.S. savings bonds which she had issued in her name and that of her child as co-owners. 7. Dina let her child redeem the bonds and keep all the proceeds. The interest is taxable to her child. Unemployment compensation is always included in gross income. 8. Social security bene f ts are always included in gross income. 9. An example of a quali f ed bene f t is an employer-subsidized cafeteria. 10. An annuity is a contract that pays a f xed income at set regular intervals for a speci f c period of time. 11. Amounts received under worker’s compensation as compensation for personal injuries are excludable from gross 12. income. James Jenkins, a key employee, has group-term life insurance coverage of $100,000 paid for by his employer. The 13. plan discriminates in favor of key employees. James must include the actual cost of the $100,000 policy in his income. Wade Woods is an employee of a meat packing plant that allows him to purchase goods at a discount that exceeds 14. the gross pro f t percentage of the price at which the goods are offered to regular customers. Wade must include the portion of the discounts that exceeds the gross pro f t percentage in his income. Insurance policy dividends used to purchase additional life insurance are not taxable to the policyowner. 15. Dividend payments made by an insurance company that are based on an policy and that exceed the total amount of
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This note was uploaded on 10/17/2010 for the course ACTG 310 taught by Professor Neal during the Spring '10 term at N.E. Illinois.

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Ch05TB - 563 Chapter 5 Gross IncomeExclusions TRUE-FALSE...

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