Requirement Which of the following would be includable in gross income? a. Alice

Question

Requirement

Which of the following would be includable in gross income?

a.

Alice appeared on a TV quiz show and received a prize of $5,000.

b.

Bart received $500 from his employer because he developed an idea that reduced the employer's production costs.

c.

Chuck borrowed $500 from his mother in order to finance his last year in college. Upon his graduation, Chuck's mother told him he did not have to repay the $500. She intended the $500 to be a graduation present.

Are the above 3 includable in gross income? Answer Yes or No for each.

a.

Alice appeared on a TV quiz show and received a prize of $5,000.

b.

Bart received $500 from his employer because he developed an idea that reduced the employer's production costs.

c.

Chuck borrowed $500 from his mother in order to finance his last year in college. Upon his graduation, Chuck's mother told him he did not have to repay the $500. She intended the $500 to be a graduation present.

Are the above 3 includable in gross income? Answer Yes or No for each.

Explanation / Answer

ANSWERS: a. The amount would be a taxable prize. The payment is not a gift as donative intent is not present.

b. The payment would be taxable compensation

. c. The $500 would seem to be a nontaxable gift. The forgiveness was based on the family relationship and was given as a graduation present.

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