All nonforfeitable rights to funds are includible in

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Income Tax Fundamentals 2020
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Chapter 5 / Exercise 25
Income Tax Fundamentals 2020
Altus-Buller/Whittenburg
Expert Verified
All nonforfeitable rights to funds are includible in income (salary, commissions). This includes the accrued salary of $3,000. The collection of Beverly’s interest in the profit sharing plan of $30,000 is subject to taxation. The $35,000 payment by the employer was pursuant to a policy of charity to families of deceased employees, and there is authority for excluding this item as a gift. The IRS will probably challenge the exclusion of the $35,000. The IRS would argue that a policy of making the payment to all families of deceased employees makes the payment appear to be in the nature of compensation for prior services. Life insurance proceeds are tax-exempt. However, all interest paid on life insurance proceeds is includible in gross income
101. Barbara was injured in an automobile accident. She has threatened to file a suit against the other party involved in the accident and has proposed the following settlement: Damages for 25% loss of the use of her right arm $200,000 Medical expenses Loss of wages Punitive damages The defendant’s insurance company is reluctant to pay punitive damages. Also, the company disputes the amount of her loss of wages amount. Instead, the company offers to pay her $300,000 for damages to her arm and $30,000 medical expenses. Assuming Barbara is in the 35% marginal tax bracket, will her after-tax proceeds from accepting the offer be equal to what she considers to be her actual damages (listed above)?
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Income Tax Fundamentals 2020
The document you are viewing contains questions related to this textbook.
Chapter 5 / Exercise 25
Income Tax Fundamentals 2020
Altus-Buller/Whittenburg
Expert Verified
102. George is employed by the Quality Appliance Company. All the full time employees are allowed to purchase appliances at the company’s cost plus 10%. The employee also is given, at no cost, a 1-year service contract on all the goods purchased from the company. George purchased a refrigerator for $500. The company’s normal selling price for the refrigerator is $800. George also received a service contract, at no charge, that had a value of $150. During the year, George was required to have his refrigerator serviced once. The cost of the call would have been $75 if he had not had the service contract. Is George required to recognize any income from the purchase of the refrigerator, the receipt of the service contract, and the service call?

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