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Exam 5: Gross Income and Exclusions

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Question 91

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Jack and Jill are married. This year Jack earned $72,000 and Jill earned $80,000 and they received $4,000 of interest income from a joint savings account. How much gross income would Jack report if he files married-separate from Jill?

A) $72,000 if they reside in a common law state.
B) $76,000 if they reside in a community property law state.
C) $84,000 if they reside in a common law state.
D) $78,000 if they reside in a community property law state.
E) All of the above

F) A) and D)
G) A) and C)

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Question 92

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Excluded income will never be subject to the federal income tax.

A) True
B) False

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Question 93

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Losses associated with personal-use assets, sales to related parties, and wash sales are not currently deductible.

Helen is a U.S. citizen and CPA, who moved to London, England three years ago to work for a British company. This year, she spent the entire year in London and earned a salary of $110,000. How much of her salary will she be allowed to exclude from gross income in the U.S.?

Income is included in gross income unless a tax provision specifies that it can be deferred or excluded.

Which of the following refers to the date stock options are awarded to an employee?

Charles and Camilla are getting divorced. Under the terms of the decree Charles will pay Camilla $50,000 in cash in each of the next five years (or until Camilla's death or remarriage) . In addition, Charles will transfer a castle worth $2,000,000 to Camilla and pay $12,000 per year to support their son, Clyde, until he turns 19 years old. What amount (if any) is included in Camilla's gross income this year?

Rhett made his annual gambling trip to Uwin Casino. On this trip Rhett won $250 at the slots and $1,200 at poker. Also this year, Rhett made several trips to the race track, but he lost $700 on his various wagers. What amount must Rhett include in his gross income?

This year Ann has the following stock transactions. What amount is included in her gross income if Ann paid a $200 selling commission for each sale? $\begin{array} { | r | r | r | r | r | } \hline \text { Shares } & \text { Firm } & \begin{array} { r } \text { Total } \\\text { Purchase Price }\end{array} & \text { Sales price } & \begin{array} { r } \text { Value } \\\text { at year end }\end{array} \\\hline 100 & \text { IBM } & \$ 5,000 & & 7,000 \\\hline 200 & \text { ATT } & 7,500 & 9,500 & \\\hline 500 & \text { Dell } & 12,500 & 13,000 & \\\hline\end{array}$

Irene's husband passed away this year. After his death, Irene received $250,000 of proceeds from life insurance on her husband, and she inherited her husband's stock portfolio worth $750,000. What amount must Irene include in her gross income?

Taxpayers meeting certain home ownership and use requirements can permanently exclude up to $1,000,000 of realized gain on the sale of their principal residence.

In X8, Erin had the following capital gains (losses) from the sale of her investments: $2,000 LTCG, $25,000 STCG, ($9,000) LTCL, and ($15,000) STCL. What is the amount and nature of Erin's capital gains and losses?

Gambling winnings are included in gross income only to the extent that the winnings exceed gambling losses incurred during the same period.