17. Abigail received $6,000 from her employer as reimbursement for her expenditures on tuition, fees, and books while attending State University. Abigail is working toward a graduate degree in business administration. Must Abigail recognize the $6,000 as income?
18. If an employee is covered by a group-term life insurance plan that pays the entire premium of the policy, must the employee include the premium coverage in income if her salary is over $50,000 per year?
19. In January 2013, Leon McLeod received a gift of a beach cottage valued at $250,000 from
his great-uncle who owned a number of such buildings. The cottage was rented each year to
college students who occupied it during the school year. The annual net rental income received is
$20,000 per year. The 2013 tax return of McLeod would include what elements of this
transaction?
20. The Hightown Council refused to increase the town budget. Robert Read was laid off from
work on August 4, 2013. Earlier in the year he had been temporarily disabled from a job-related
injury and had received disability benefits. At year-end Robert Read and his wife have the
following sources of income:
Disability income
$ 2,500
Unemployment compensation
5,000
Salary—
January 1—August 4, 2013
10,000
Wife’s salary
9,000
Supplemental unemployment compensation—
employer provided
3,000
What amount of Read’s family income was includible in gross income?
21. In 2013, Windsor Knott, an employee of the Victoria Tie Company, was seriously injured in
the factory stockroom. He was hospitalized for 30 days and lost partial use of his left hand.
During his hospitalization and recovery period, he received the following:
Workers’ compensation
$ 9,000
Medical expenses reimbursement
10,000
Disability insurance benefits (insurance paid by taxpayer)
4,000
Accident and health insurance benefits (company policy benefits based on the degree of
permanent injury)
9,500
Determine Knott’s tax liability with regard to these payments. If the medical expenses had
been deducted from Knott’s 2013 tax return and reimbursement was received in 2014, how
would the reimbursement be reflected in the 2014 return?
22. David and Renee Kimberly, ages 75 and 65, respectively, have the following sources of
income:
Private pension receipts
$18,000
Social Security
12,000
Interest on bank deposits
2,500
Dividends from domestic corporations
2,000
Interest on tax-exempt securities
700
Their itemized deductions total $11,000. Compute their taxable income.
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?
