Federal Income Taxation and the Inclusions and Exclusions from Gross Income

Federal Income Taxation HW#3
Name Course Instructor Date
Chapter 3:
Questions 2, 3, 6, 7, 10, 11, and 13
2LO.1 Which of the following items are inclusions in gross income?
b, c, f, g, h, i.
a. During the year, a stock that the taxpayer purchased as an investment doubled in value.
b. Amount an off-duty motorcycle police officer received for escorting a funeral procession.
Inclusions in gross income
c. While his mother was in the hospital, the taxpayer sold some of her jewelry to help pay for the hospital bills.
Inclusions in gross income
d. Child support payments received.
e. A damage deposit the taxpayer recovered when he vacated the apartment he had rented.
f. Interest received by the taxpayer on investment in general-purpose bonds issued by IBM.
Inclusions in gross income
g. Amounts received by the taxpayer, a baseball "Hall of Famer," for autographing sports equipment (e.g., balls and gloves).
Inclusions in gross income
h. Tips received by a bartender from patrons. (Taxpayer is paid a regular salary by the cocktail lounge that employs him.)
Inclusions in gross income
i. The taxpayer sells his Super Bowl tickets for three times what he paid for them.
Inclusions in gross income
j. The taxpayer receives a new BMW from his grandmother when he passes the CPA exam
3 LO.1 Which of the following items are exclusions from gross income?
a. Alimony payments received (relates to a divorce settlement in 2016).
b. Damages award received by the taxpayer for personal physical injury—none were for punitive damages- exclusions from gross income
c. A new golf cart won in a church raffle.
d. Amount collected on a loan previously made to a college friend- exclusions from gross income
e. Insurance proceeds paid to the taxpayer on the death of her uncle—she was the designated beneficiary under the policy. Exclusions from gross income
f. Interest income on City of Chicago bonds. Exclusions from gross income
g. Jury duty fees. Exclusions from gross income
h. Stolen funds the taxpayer had collected for a local food bank drive.
i. Reward paid by the IRS for information provided that led to the conviction of the taxpayer's former employer for tax evasion.
j. An envelope containing $8,000 found (and unclaimed) by the taxpayer in a bus station
6LO.2, 3, 5 In 2020, David is age 78, is a widower and is being claimed as a dependent by his son. How does this situation affect the following?
a. David's own individual filing requirement.
As a dependent, the filing requirements depend on whether he has earned income, unearned income, both of these incomes, and the amount of gross income.
b. The standard deduction allowed to David.
For 2020 a dependent's basic standard deduction for to the greater of $1,100 or the sum of the individual's earned income for the year plus $350 ().
c. The availability of any additional standard deduction.
Additional standard deduction of $1,650 is allowed as he is 78 years, which is above (65 years
7 LO.4 Magda maintains a household that includes a son (age 30) and a cousin (age 28). She can claim the cousin as a dependent but not her son. Explain
Because of the age requirement (19 years old or be a "s...