Reference no: EM132972489

Questions -

Q1. Which of the following is correct? Cash received by an employee from an employer:

a. Is never included in gross income until it is earned.

b. Is not taxable unless the employer is legally obligated to make the payment.

c. May never be excluded from gross income.

d. Will be excluded from gross income only if it is a loan.

e. May be excluded from gross income if it is reimbursement for medical expenses.

Q2. Carin, a widow, elected to receive the proceeds of a $150,000 life insurance policy on the life of her deceased husband in 10 installments of $18,500 each. Her husband had paid premiums of $6,000 on the policy. In the first year, Carin collected $18,500 from the insurance company. She must include in gross income in that year:

a. $1,500.

b. $2,900.

c. $3,500.

d. $17,900.

e. $18,500.

Q3. Julie was suffering from a viral infection that caused her to miss work for 90 days in 2020. During the first 30 days of her absence, she received her regular salary of $8,000 from her employer. For the next 60 days, she received $10,000 in salary replacement under an accident and health insurance policy she purchased for herself. During the last 30 days, Julie also received $8,000 on an income replacement policy purchased by her employer. In addition, the employer's policy paid $5,000 in medical bills. All of her sick days and all of the payments occurred in 2020. Of the $31,000 she received, how much does Julie exclude from her gross income?

a. $5,000.

b. $10,000.

c. $15,000.

d. $16,000.

e. $26,000.

Q4. Ron, age 19, is a full-time graduate student at City University. During 2020, he received the following payments or benefits:

Cash award for being the outstanding resident adviser $500

Resident adviser dormitory charge waived 2,500

State scholarship for ten months (tuition and books) 6,000

State scholarship (meals allowance) 2,400

Loan from college financial aid office 3,000

Cash support from parents 3,000

$17,400

Ron served as a resident advisor in a dormitory, which meant he was required to live in one of the rooms. What is Ron's gross income for 2020 from these receipts?

a. $2,900.

b. $3,900.

c. $9,000.

d. $12,400.

e. $15,400.

Q5. Last year, Marion was in an automobile accident during the course of his employment. As a result of the physical injuries he sustained, he received the following payments during the current year:

Reimbursement received from a medical insurance policy purchased by his employer for medical expenses he paid earlier this year $10,000

Damage settlement to replace his lost salary 15,000

With respect to these payments, what is the amount that Marion may exclude from gross income?

a. $25,000.

b. $15,000.

c. $12,500.

d. $10,000.

e. $0.