1.Which one of the following would not be included in gross income for federal t
ID: 2542779 • Letter: 1
Question
1.Which one of the following would not be included in gross income for federal tax purposes?
Frank won $2,000 on the game show Jeopardy
Grant stole $500 from his employer’s petty cash fund
Ben used $10,000 of his academic scholarship to pay his college tuition
Rocky’s employer gave him a watch worth $1,000 when he met his sales goal
2.Which one of the following is not true?
Alice must pay tax on the $500 increase in value of her Apple Corp stock
Ken, a mechanic, who agreed to repair Sarah’s car in exchange for her doing legal for him will pay tax on the value of Sarah’s legal services
The $1,000 Lisa used of her athletic scholarship to pay her sorority dues is included in her gross income
Anthony will pay tax on his $10,000 mortgage that his lender forgave
3.In which of the following would the gain on selling their personal residence would be taxable for federal income tax purposes?
Due to getting divorced, Jack and Madison sold their house 10 months after buying it
After living in her house for 15 months, Gina sold it to move to a nursing home
After living in her house for 1 year, Mary sold it.
After living in his house for 1 year, Sean sold it because he was starting a new job in another state.
4.Which one of the following would not be included in gross income for federal tax purposes?
Cory found $500 of gold coins while he was hiking
Mary received $100 of worker’s compensation after she was injured at work
Becky was paid $15 for jury duty which she was not required to give her employer
Ricky realized a $200 gain when he sold his Xerox stock
5.Which one of the following would be included in gross income for federal tax purposes?
As an employee of Air Canada, Ethel flew to the UK in an empty seat on the plane
Chris received $600 of unemployment compensation after he was laid off from his job
Exxon reimbursed Donna for her legal expenses she paid when she adopted her son
Audrey’s son is enrolled in her employer’s day care center located in her office building
Explanation / Answer
1.
Winnings from gambling, illegal income, and gifts from employer are all taxable. Therefore, amount won by Frank on the game show, amount stolen by Grant from his employer's petty cash, and gift received by Rocky from his employer will be included in their gross income for federal tax purposes.
However, academic scholarship received by a degree candidate from used to pay for tution and fees is tax free.
Therefore, amount received by Ben as academic scholarship and used to pay his collage fee is not required to be included in the gross income for federal tax purposes.
Correct answer is Ben used $10,000 of his academic scholarship to pay his college tuition
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