Question

3. For each of the following independent situations, indicate the amount the taxpayer must include in gross income: (Leave no answer blank. Enter zero if applicable.)

a. Phil won $840 in the scratch-off state lottery. There is no state income tax.

Amount to be included?

4. For each of the following independent situations, indicate the amount the taxpayer must include in gross income: (Leave no answer blank. Enter zero if applicable.)

b. Ted won a compact car worth $25,200 in a TV game show. Ted plans to sell the car next year.

Amount to be included?

5. For each of the following independent situations, indicate the amount the taxpayer must include in gross income: (Leave no answer blank. Enter zero if applicable.)

c. Al Bore won the Nobel Peace Prize of $795,000 this year. Rather than take the prize, Al designated that the entire award should go to Weatherhead Charity, a tax-exempt organization.

Amount to be included?

6. For each of the following independent situations, indicate the amount the taxpayer must include in gross income: (Leave no answer blank. Enter zero if applicable.)

d. Jerry was awarded $4,250 from his employer, Acme Toons, when he was selected most handsome employee for Valentine’s Day this year.

Amount to babe included?

7. For each of the following independent situations, indicate the amount the taxpayer must include in gross income: (Leave no answer blank. Enter zero if applicable.)

e. Ellen won a $1,370 cash prize in a school essay contest. The school is a tax-exempt entity, and Ellen plans to use the funds to pay her college education.

Amount to be included?

8. For each of the following independent situations, indicate the amount the taxpayer must include in gross income: (Leave no answer blank. Enter zero if applicable.)

f. Gene won $325 in the office March Madness pool.

Amount to be included?

9. For each of the following situations, indicate how much the taxpayer is required to include in gross income: (Leave no answer blank. Enter zero if applicable.)

a. Steve was awarded a $8,850 scholarship to attend State Law School. The scholarship pays Steve's tuition and fees.

Amount to be included?

10. For each of the following situations, indicate how much the taxpayer is required to include in gross income: (Leave no answer blank. Enter zero if applicable.)

b. Hal was awarded a $14,500 scholarship to attend State Hotel School. All scholarship students must work 25 hours per week at the School residency during the term.

Amount to be included?

11. Irene is disabled and receives payments from a number of sources. The interest payments are from bonds that Irene purchased over past years and a disability insurance policy that Irene purchased herself.

Interest, bonds issued by City of Austin, Texas	$	3,400
Social Security benefits		10,500
Interest, U.S. Treasury bills		2,450
Interest, bonds issued by Ford Motor Company		4,200
Interest, bonds issued by City of Quebec, Canada		1,230
Disability insurance benefits		29,200
Distributions from qualified pension plan		7,300

Calculate Irene’s gross income.

Gross income?

Answer 1

3.a. All $840 is economic income realized this year and is, therefore, included in gross income.

4.b. The value of the car, $25200, is economic income realized this year and is, therefore, included in the gross income.

5.c. Amount to be included is $0 . The entire award is excluded and therefore tax exempt. The award is excluded because it was for scientific, literary, or charitable achievement, and the tax payer immediately transferred the award to the qualified charity.

6.d. All $4250is economic income realized this year and therefore are included in gross income.

7.e. All $1370 is economic income realized this year and therefore included in gross income.

8.f. Gene should include $325 in his gross income.  

9.a. The $8850 scholarship is excluded from gross income because it is used to pay Steve's tution and fees.

10.b. The $14500 scholarship is included in gross income because the terms of the scholarship require Hal to perform services.

11.

Irene's gross income :

Particulars	Amount $
Interest, U.S. Tresury bills	2450
Interest, bonds issued by Ford Motor Company	4200
Interest , bonds issued by City of Quebec, Canada	1230
Distributions from qualified pension plan	7300
Gross income	$15180