The definition of gross income in the tax law is: All items specifically listed as income in the tax law All cash payments received for goods provided and services performed All income from whatever source derived All income from whatever source derived unless the income is earned illegally LO 2.1 Which of the following is not taxable for income tax purposes? Prizes Severance pay Gifts Partnership income All of the above are taxable LO 2.1 All of the following items are taxable to the taxpayer receiving them, except: Life insurance proceeds Unemployment compensation Embezzled funds Prizes Gambling winnings
Group 1: Multiple Choice Questions
LO 2.1
The definition of gross income in the tax law is:
All items specifically listed as income in the tax law
All cash payments received for goods provided and services performed
All income from whatever source derived
All income from whatever source derived unless the income is earned illegally
LO 2.1
Which of the following is not taxable for income tax purposes?
Prizes
Severance pay
Gifts
All of the above are taxable
LO 2.1
All of the following items are taxable to the taxpayer receiving them, except:
Life insurance proceeds
Embezzled funds
Prizes
Gambling winnings
LO 2.1
Which of the following types of income is tax exempt?
Unemployment compensation
Income earned illegally
Dividends from foreign corporations
Municipal bond interest
Dividends from utility corporations’ stock
LO 2.1
Which of the following is included in gross income?
Loans
Scholarships for room and board
Worker’s compensation
Health insurance proceeds
None of the above
LO 2.3
LO 2.4
LO 2.11
LO 2.12
Which of the following items would be included in the gross income of the recipient?
Insurance payments for medical care of a dependent child
Insurance payments for loss of the taxpayer’s sight
Season tickets worth $2,000 given to a son by his father
Payments to a student for working at the student union food court
Lodging provided to a worker on a remote oil rig
LO 2.3
Malin is a married taxpayer and has three dependent children. Malin’s employer offers health insurance for employees and Malin takes advantage of the benefit for her entire family (her spouse’s employer also offers health insurance but they opt out). During the year, Malin paid $1,200 toward her family’s health insurance premiums through payroll deductions while the employer paid the remaining $9,200. Malin’s family visited health care professionals numerous times during the year and made total co-payments toward medical services of $280. Malin’s daughter had knee surgery due to a soccer injury and the insurance company paid the hospital $6,700 directly and reimbursed Malin $400 for her out-of-pocket health care expenses related to the surgery. How much gross income should Malin recognize related to her health insurance?
$0
$9,200
$14,020 (9200+6,700-1200-280-400)
$8000 (9200-1200)
None of the above
LO 2.4
George works at the Springfield Nuclear Plant as a nuclear technician. The plant is located 15 miles from the town of Springfield. George likes to eat his lunch at the plant’s cafeteria because he is required to be available for nuclear emergencies during his shift. Unsurprisingly, there are no other eating establishments located near the plant. George estimates the value of the meals he was provided during the current year as $1,300. He estimates the cost for him to have prepared those lunches for himself as about $560. The cost of the meals to the power company was $470. How much income does George need to recognize from the meals?
$1,300
$560
$470
$830 ($1,300-$470)
None of the above
LO 2.5
Which of the following is a
A mechanic at Denise’s employer, a car rental company, provides $1,000 of repair services to Denise’s personal car for free
Alfa-Bet, a high-tech corporation, pays for each employee’s membership at the 24 Hour Biceps Gym closest to each Alfa-Bet office
Quickchat Inc. gives each employee a $10 giftcard to the local coffee shop on National Coffee Day
Hedaya, a doctoral student at Ivy University, receives a full tuition waiver while serving as research assistant
LO 2.5
Which of the following will result in the recognition of gross income?
Gail’s employer allows her to set aside $4,000 from her wages to cover the cost of daycare for Gail’s four-year-old daughter. Gail’s daycare costs are $4,300 for the year.
Hannah purchases a new sofa from her employer, Sofas-R-Us, for $1,200. The cost of the sofa to the furniture store is $1,100 and the sofa normally sells for $1,700.
Jayden’s employer purchases her commuting pass for the subway at a cost of $225 per month.
Havana is a lawyer. The law firm she works for pays for her subscription to Lawyer’s Weekly, a trade magazine for attorneys.
None of the above will result in recognition of gross income.
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