Angie is injured in an automobile accident and sues

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Question 7 (5 points) Angie is injured in an automobile accident and sues the driver of the truck that struck her car. The court finds the driver liable and awards Angie $10,000 to pay her medical expenses, $20,000 for her pain and suffering, and $5,000 for loss of income while she was unable to work. The court also finds the truck driver negligent and awards Angie $50,000 in punitive damages. Which of the following statements concerning the receipt of these payments is/are correct? I-Angie is not taxed on any of the payments because they relate to a personal physical injury. II-Angie must include the loss of income payment in her gross income. III-The punitive damage payment is taxable. a. Only I is correct. ** b. Only III is correct. c. II and III are correct. d. Only II is correct. Question 8 (5 points) Jay receives a $4,000 per year scholarship from Hanover College. The college specifies that $2,500 is for tuition, books, supplies, and equipment for classes. The other $1,500 is for room and board. As part of the conditions of the scholarship, Jay must also work ten hours per week as a grader, for which he is paid $1,700 for the year. Of the total amount received, Jay will be include in income: **
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Question 9 (5 points) Polly dies on January 14, 2006. Her spouse, Carl, is the beneficiary of a $100,000 life insurance policy. Carl elects to receive the proceeds in 10 equal installments of $12,500.In 2006, Carl receives $12,500. The amount included in Carl's 2006 gross income is ** Question 10 (5 points) Katherine, age 38, is an employee of National Tools, Inc. Her annual salary is $50,000. After considering the following list of benefits provided Katherine, determine her gross income for the year. •Katherine has $2,000 of her salary withheld and paid into the company's qualified pension plan. The company matches the contribution at the rate of $.50 for each $1.00 paid in. •Group-term life insurance policy at twice her annual salary paid by the company. Premium cost is $1.08 per $1,000 of coverage. •Health and accident insurance policy costing $1,500 paid by the company. •Katherine elects to have $1,800 of her salary paid into a flexible benefits plan to cover childcare costs. She incurs $2,100 of childcare costs during the year. ** Question 11 (5 points) Danny owes $120,000 to Buddy's Bank. Danny is having financial difficulties during the current year and Buddy's Bank agrees to reduce Danny's debt to $80,000 to help him get his financial affairs in order and avoid bankruptcy. I-If Danny's assets were $300,000 and his liabilities were $290,000 before the discharge, he is taxed on $10,000 of the $40,000 debt reduction. II-If Danny's assets were $300,000 and his liabilities were $400,000 before the discharge, he is not taxed on any of the $40,000 debt reduction. a. Only statement I is correct. ** b. Only statement II is correct. c. Both statements are correct. d. Neither statement is correct.
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Question 12 (5 points) Bernice is the beneficiary of a $50,000 insurance policy on her father's life. If she receives the proceeds in installments from the insurance company that carries the policy, she will earn only five-percent interest per year, receiving $10,500 per year for five years.
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Christopher Reinemann
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