Reference no: EM131765603

In the Old Colony case, the American Woolen Company paid the IRS $681,169.88 in 1919 for the 1918 taxes of the company's president, Mr. Wood. Connie was walking her dog when she came across a paper bag with $20,000 in it. She turned the money into the police. After the appropriate period of time, no one claimed the money and the police returned the money to Connie. True or False: Connie must recognize $20,000 of taxable income even though the income was not derived from capital or labor.

Gil purchased an annuity contract for $20,000. When he turns 65 he will receive $300 a month for the rest of his life. True or False: Once he starts receiving the $300 per month payments, Gil can exclude from taxable income the first $20,000 he receives as a return of his capital.
Stephen and Judy divorce during the year and agree that Stephen will pay Judy $35,000 a year in alimony. Assume the $35,000 is properly classified as "alimony" for tax purposes. True or False: Judy will include the $35,000 in her taxable income and Stephen will get a deduction for the $35,000.