Chapter 5 Class Question 2011

Chapter 5 Class Question 2011 - Bob Ryan DePaul University...

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Bob Ryan DePaul University Class Questions Accounting 380 Tax Treatment of Individuals and Property Transactions Chapter 5 – Gross Income: Exclusion 2011 True/False 2. In his will, John named his nephew Steve as executor of the estate. Steve is to receive a fee of $12,000 for serving as executor. When John died, Steve performed the executorial services and received the fee. Steve can exclude the $12,000 from gross income as an inheritance from his uncle’s estate. 4. Marvin was the beneficiary of a $50,000 group term life insurance policy on his wife. His wife’s employer paid all of the premiums on the policy. Marvin used the life insurance proceeds to purchase a United States Government bond, which paid him $2,000 interest during the current year. Marvin’s Federal gross income from the above is $2,000. 8. When Betty was diagnosed as having a terminal illness, she sold her life insurance policy to Insurance Purchase, Inc., a company that is licensed to invest in these types of contracts. Betty sold the policy for $32,000 and Insurance Purchase, Inc., became the beneficiary. She had paid total premiums of $19,000. Betty died 8 months after the sale. Insurance Purchase, Inc., collected $50,000 on the policy. The company had paid additional premiums of $4,000 on the policy. Insurance Purchase, Inc., is required to recognize income from the above transactions, but Betty is not required to include her gain in gross income. 10. If a scholarship does not satisfy the requirements for a gift, the scholarship must be included in gross income. 13. Because graduate teaching assistantships are awarded on the basis of academic achievement, the payments are generally scholarships and therefore are excluded from gross income. 14. In 2010, Theresa was in an automobile accident and suffered physical injuries. The accident was caused by Ramon’s negligence. In 2011, 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 2010 tax return (the amount in excess of 7.5% of adjusted gross income). As a result of the above, Theresa’s 2011 gross income is increased by $33,000. 18. Meg’s employer carries insurance on its employees that will pay an employee his or her regular salary while the employee is away from work due to illness. The premiums for Meg’s coverage were $1,200. Meg was absent from work for two months as a result of a kidney infection. Meg’s employer’s insurance company paid Meg’s regular salary of $8,000 while she was away from work. Meg also collected $2,000 on a wage continuation policy she had purchased. Meg is not taxed on any of the above amounts. 22.
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This note was uploaded on 01/27/2012 for the course ACC 548 taught by Professor Ryan during the Spring '11 term at DePaul.

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Chapter 5 Class Question 2011 - Bob Ryan DePaul University...

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