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The tax liability would be for $19,000 as insurance benefits for a personal injury are not taxable. The reimbursement received in 2018 would be treated as income since the deduction was already taken on 2017.22.David and Renee Kimberly, ages 75 and 65, respectively, have the following sources of income:Private pension receipts $20,000Social Security 12,000Interest on bank deposits 2,500Dividends from domestic corporations 2,000Interest on tax-exempt securities 700 Their itemized deductions total $11,000. Compute their taxable income.$20,000 + 2,500 + 2,000 = $24,500 Note that the social security income is not taxable since it is less than the base amount.23.Hi Tech Accounting Services changed its fringe benefit package as of the first of this year. Employees are now eligible to receive group term life insurance equal to twice their annual salary up to $100,000. Harry’s salary is $90,000 per year. Prior to this year employees received group term life insurance up to $50,000. Harry is 52 years of age and has adjusted gross income of $78,000. Does Harry suffer any tax consequences because of this change in policy?An employee can exclude the cost of group term life insurance provided by an employer as long as the face value of the policy does not exceed $50,000. If the policy is over $50,000 the cost of the premium for the excess coverage must be included in the gross income of the employee. Harry’s income will increase by $50,000 as a result of this policy change.
24. Charles Adams, who is single, retired on March 3, 2017, at the age of 65. For the year 2017, he receives the following income: Salary $14,000Interest income 2,000Dividend income 1,000Tax-exempt income 1,000Social Security benefits 5,000Net rental income 6,000What is Charles' modified AGI? What amount, if any, of his Social Security benefits must Charles include in his 2017 gross income? What is Charles’ taxable income for 2017? Charles’ AGI is $23,000 and he must include $0 of his Social security benefits in his 2017 gross income. 25. Felix Boots, a 35-year-old male, is vice president of the Kitty-Lit Pet Products Company and earns $50,000 per year. The company provides paid group-term life insurance of twice the officers’ salaries for all officers of the company. The cost of the policy to the company for Mr. Boots is $650 per year. How much of the $650 must Felix include in his gross income? If Kitty-Lit changed its policy so as to