1 For each of the following independent situations indicate

(1). For each of the following independent situations, indicate the amount the taxpayer must include in gross income:

a.

Phil won $435 in the scratch-off state lottery. There is no state income tax.

     

b.

Ted won a compact car worth $18,800 in a TV game show. Ted plans to sell the car next year.

     

c.

Al Bore won the Nobel Peace Prize of $712,500 this year. Rather than take the prize, Al designated that the entire award should go to Weatherhead Charity, a tax-exempt organization.

     

d.

Jerry was awarded $3,450 from his employer, Acme Toons, when he was selected most handsome employee for Valentine’s Day this year.

     

e.

Ellen won a $1,270 cash prize in a school essay contest. The school is a tax-exempt entity, and Ellen plans to use the funds to pay her college education.

     

f.

Gene won $430 in the office March Madness pool.

(2). For each of the following situations, indicate how much the taxpayer is required to include in gross income:

a.

Steve was awarded a $5,600 scholarship to attend State Law School. The scholarship pays Steve\'s tuition and fees.

b.

Hal was awarded a $22,000 scholarship to attend State Hotel School. All scholarship students must work 35 hours per week at the School residency during the term.

a.

How much of scholarship is Steve required to include in his gross income?

        

b.

What is the amount of scholarship Hal should include in his gross income?

    

   

(3). Dontae’s employer has offered him the following employment package.

  

  Salary

$ 300,000

  Health insurance

10,500

  Dental insurance

800

  Membership to Heflin Country Club

15,000

  Season tickets to Atlanta Braves games

4,000

  Tuition reimbursement for graduate courses

3,600

  Housing allowance (for a McMansion in his
  neighborhood of choice)

32,000

    

What is Dontae’s gross income from his employment?

(1). For each of the following independent situations, indicate the amount the taxpayer must include in gross income:

Solution

1)

a) The amount won is an economic income realized in the current year and therefore, the total amount of $435 should be included in gross income.

b) The value of the car, $18800 is economic income realized this year and is, therefore, included in gross income.

c) The award is excluded because it was for the scientific, literary, or charitable achievement, and the taxpayer immediately transferred the award to qualified charity. Therefore, the total amount $712,500 is excluded from the gross income.

d) The total amount $3,450 is an income in the current year and therefore, it is included in gross income.

e) The total amount $1,270 is an income in the current year and therefore, it is included in gross income.

f) The amount $430 should be included in the gross income.