Chapter 563 5 Gross Income Exclusions TB - Chapter 563 5...

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Chapter 563 5 Gross Income Exclusions TRUE-FALSE QUESTIONS CHAPTER 5 *The True- False questions have been adapted from the IRS Examinations. 1. Interest on insurance dividends left on deposit with an insurance company and withdrawable upon demand is taxable to the policyholder only when actually withdrawn. 2. Payments up to a total of $5,000 to the bene ciaries of a deceased employee by an employer because of that employee s death are excludable from income by the bene ciaries if the employee had no right to receive these payments during life. 3. Gina Gander, a cash basis taxpayer, purchased a Series EE savings bond. She must include the increase in redemption value as interest income each year. 4. Meals furnished to employees as part of their compensation are deductible by the employer at their fair market value. 5. Thomas Thinne, a cash basis taxpayer, may either defer reporting the interest on Series E bonds until he cashes the bonds or he may choose to report the increase in redemption value as interest each year. 6. Max Miller, the owner of a boutique, has a valuable employee for whom he pays a $200 annual premium for a $50,000 life insurance policy. The employee s husband is the bene ciary. This bene t when added to her regular salary does not make the total compensation unreasonable. Max may deduct the premium as a business expense. 7. Dina Durham purchased U.S. savings bonds which she had issued in her name and that of her child as co-owners. Dina let her child redeem the bonds and keep all the proceeds. The interest is taxable to her child. 8. Unemployment compensation is always included in gross income. 9. Social security bene ts are always included in gross income. 10. An example of a quali ed bene t is an employer-subsidized cafeteria. 11. An annuity is a contract that pays a xed income at set regular intervals for a speci c period of time. 12. Amounts received under worker s compensation as compensation for personal injuries are excludable from gross income. 13. James Jenkins, a key employee, has group-term life insurance coverage of $100,000 paid for by his employer. The plan discriminates in favor of key employees. James must include the actual cost of the $100,000 policy in his income. 14. Wade Woods is an employee of a meat packing plant that allows him to purchase goods at a discount that exceeds the gross pro 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 t percentage in his income. 15. Insurance policy dividends used to purchase additional life insurance are not taxable to the policyowner. 16. Dividend payments made by an insurance company that are based on an policy and that exceed the total amount of premiums paid by the insured are taxable to the insured. 17. In 2009, Bill, a single individual, earned a salary of $10,000 and received $2,000 in unemployment bene ts. The unemployment bene ts received by Bill are included in Bill s 2009 gross income. 18. George, a cash-basis taxpayer, was ill for
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This note was uploaded on 04/03/2011 for the course ACCOUNTING 3550 taught by Professor Comb during the Spring '11 term at University of Texas at Dallas, Richardson.

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Chapter 563 5 Gross Income Exclusions TB - Chapter 563 5...

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