1) Scholarship so and so gets so much

money to go to grad school.... but the

grad program says u have to teach
regardless. How much does she include in
gross income?
Dont have to claim it first part (timing)
18,000 scholarship and tuition was
4,000 a semester
all the kids that are in grad school get
paid for teaching 5,000 a year or
something
would you include what they get paid
in G.I.?
also got free room and board
convenience of the university...b/c
shes a teacher, she doesnt have to
take the room and board....

2) Cash and accrual...4 questions

a. Cash method: payment... which of the
following are considered a cash pmnt.
Credit card, receiving cash,
But promissory note is not cash pmnt

3) Prize for civic activity, how much does

she include in G.I.? Nothing
4) Two people getting divorce both have 50%
stake in the house, originally bought
house for $40,000. Cost basis is 20,000
each. For the divorce, one person gives up
half to other person. So that person now
owns 100%. Market value 100,000. What
do they include on GI?
Nell and Kirby are in the process of negotiating their
divorce agreement. In consideration for her one-half

interest in their personal residence, Kirby will transfer to

Nell stock with a value of $200,000 and $50,000 of
cash. Kirby's cost of the stock was $150,000, and the
value of the personal residence is $500,000. They
purchased the residence three years ago for $300,000.
The transfer of the property is a nontaxable event.
Nell's basis for the stock is $150k. Kirby's basis in the
house is $300k.
Nell will receive $1,000 per month for 120 months. If
she dies before receiving all 120 payments, the
remaining payments will be made to her estate. The
payments do not qualify as alimony and
are excluded from Nell's gross income as they are
received.
The cash payments of $1,000 per month do not qualify
as alimony because they will not cease upon Nell's
death. The payments are excluded from Nell's gross
income as they are received by her, and Kirby may not
deduct the payments (would be a deduction for AGI if
the payments had been classified as alimony).
Nell is to have custody of their 12-year-old son, Bobby.
She is to receive $1,200 per month until Bobby (1) dies
or (2) attains age 21 (whichever occurs first). After
either of these events occurs, Nell will receive only $300
per month for the remainder of her life. 300 per month
is alimony that is included in Nell's gross income, and
the remaining $ per month is considered

support

and is

nontaxable

child

to Nell.

5) Annuity....what happens if person dies

and they havent collected all their
money?
Connor purchased an annuity that was to pay him a
fixed amount each month for the remainder of his life.
He began receiving payments in 2000, when he was 65

years old. (see Exhibit 4.1) In 2016, Connor was killed

in an automobile accident. What are the effects of the
annuity on Connors final tax return?

did not recover all of his capital. Therefore,

the unrecovered capital can be deducted as a loss in
Connor

Connor's final tax return.

No income is recognized by the annuitant at the time
the cash value of the annuity increases because the
taxpayer has not actually received any income. The
income is not constructively received because,
generally, the taxpayer must cancel the policy to receive
the increase in value (the increase in value is subject to
substantial restrictions).
The tax accounting problem associated with receiving
payments under an annuity contract is one of
apportioning the amounts received between recovery of
capital and income. The statutory solution to this
problem depends upon whether the payments began
before or after the annuity starting date and upon when
the policy was acquired.
The annuitant can exclude from income (as a recovery
of capital) the proportion of each payment that the
investment in the contract bears to the expected return
under the contract.
If the annuitant dies before recovering the investment,
the unrecovered cost (adjusted basis) is deductible in
the year the payments cease (usually the year of death)
When Connor began receiving payments, he had a life
expectancy of 20 years (see Exhibit 4.1), but he
collected on the annuity for approximately 16 years
(20002016). Therefore, he did not recover all of his
capital. The unrecovered capital can be deducted as a
loss in Connors final tax return.

6) Group Life Term: Person earns 75k a

year and premium is 50,000, how much
would they deduct from salary? (75,00050,000 premium) an employer pays health
care premiums for Sam and her family. What
should sam include in her GI? Excluded from
gross income..... IN PPT
- Person is covered for 70k in insurance and
then asks how it would be treated? First 50k
is excluded.
An employer provides all of his employees with life
insurance protection equal to twice the employee's annual
salary. Melba, age 42, has an annual salary of $70,000. Is
Melba required to recognize income even though she is still
alive at the end of the year and thus nothing has been
collected on the life insurance policy?
If the coverage exceeds $50,000, the employee must
include in gross income the deemed premiums paid on
the protection above this amount. Therefore, Melba includes
$108.
Melba's insurance coverage of $140,000 is twice her annual
salary of $70,000. Because this exceeds $50,000, she is
required to include in gross income the premiums on
$90,000 of excess insurance coverage. The premiums
amount is computed by using a table provided by the IRS.
For Melba's age, 42 years, the premium amount is $.10 per
month per $1,000 of insurance coverage for her annual
insurance coverage in excess of $50,000 which is $108
[($.10)(12)($90,000/$1,000)].

7) Annuity: Once investment is recovered,

is full amount taxable after they have
recovered their investment? TRUE. Its
fully taxable, if they live past their life
expectancy
8) Damages: punitive damages, if all of
these are included in GI? True
9) Meal lodging: employee fringe benefit....
somebody works at turkey farm and
managers give every associate for
Christmas a turkey? DEMINIMUS (holiday
gift)
10)
11) Physical damages: this person go Car
accident, suid
5000 car deductible
hospital bill
and pain and suffering...NONPHYSICAL
AND EVERYTHING BUT PAIN AND
SUFFERING EXCLUDED FROM GI

wages lost, car repair and pain and

suffering. You do get taxed on pain and
suffering, breach of K is taxable...
anything in excess of what you lost you
have to report it,
** investment property patent what is
basis?
12) Solvent (can pay debt) and insolvent
(cannot pay debt) recourse
13) Somebody is insolvent so they cant
pay debt and settled 3000 exchange in
property for the 5000 debt... TP is saying
they dont owe him anything bc of statue
of limitations, which one of the above is
creditors gift, discharge of solvent,
discharge of real property indebtness
WHAT DOES SITUATION FALL UNDER??
Which law ??
14) Alimony: and child support...500 to
300, child support is 200 and alimony is
300.
15) Interest local income obligations:
federal government can tax local
government but state/local cant tax fed
bonds...which ones will you pay tax on?
State, fed, and local bonds....
16) A guy paid an amount for an annuity and when
he turns a certain age, he gets 120 payments on it.
How much should he exclude? FORMULA

A taxpayer, age 64, purchases an annuity from an

insurance company for $50,000. She is to receive $300
per month for life. Her life expectancy is 20.8 years
from the annuity starting date. Assuming that she
receives $3,600 this year, what is the exclusion
percentage and how much is included in her gross
income?
The taxpayer's expected return is $300 x 12 x 20.8 =
$74,880. The exclusion percentage is .667735, rounded
to 66.77%, ($50,000 investment/$74,880). The
expected return is $2,403.72 (66.77% x $3,600 annual
payment). The $2,403.72 is a nontaxable return of
capital, and $1,196.28 ($3,600 - $2,403.72), rounded
to $1,196 is included in gross income.

17) Debtor borrows money from someone. Gives

you the condition (solvent and not denying that
its debt). Decide whether its liquidated and
whether if it should be included in GI. Remember
in which situation its a gift and its a gain..
bought something, turned it in, and got their
debts forgiven.
18) This woman receives 10,000. Listing all the
conditions, didnt take any actions, not rendering
any services and one other conditions...match
conditions and pick what amount she would
include. And it was 0 dollars bc it was a civil
thing... making it not a part of your income
19) Farmers... when they receive subsidies to not grow
crops. Whether it should be included in GI...think it
should be included.... GET FROM PPT.....
20) Guy taking care of elderly uncle, if you take care of
me Ill take give you 70,000 in bonds. How much
would they exclude? 0.

Fred specified in his will that his nephew John should

serve as executor of Fred's estate. John received
$10,000 for serving as executor.
Can John exclude the $10,000 from his gross income?
No; $10,000 is treated as compensation income.

21) One question.... two people get in car accident and

one person receives income replacement 20,000 for
a physical injury, medical benefits and income from
emotional stress, what would be included in GI?
NONE OF THE ABOVE
Damage to her automobile the collector attempted to
repossess: Excluded from. A payment for damaged
property is treated as an amount received in a sale or
exchange of the property. The taxpayer has a realized
gain only if the payment received exceeds the property's
basis. In this case, the amount is a nontaxable recovery
of capital (i.e., it reduces her basis for the automobile by
$3,300).
Physical injury to her arm caused by the collector:
Excluded from. Damages received on account of
physical personal injury or physical sickness can be
excluded from gross income.
Loss of income while her arm was healing: Excluded
from. Damages received on account of physical
personal injury or physical sickness can be excluded
from gross income. Such exclusion treatment includes
amounts received for loss of income associated with the
physical personal injury or physical sickness.

Punitive damages: Included in. Punitive damages are

amounts the person who caused the harm must pay to
the victim as punishment for outrageous conduct. The
amounts received as punitive damages may actually
place the victim in a better economic position than
before the harm was experienced and, therefore, are
included in gross income.

22) Woman has the following income for x months...

gain on local bond and interest bond. Gains on state
or local bonds = are tax. Interest is not taxable.
Federal is taxable. CALCULATION
Gain on sale of Augusta County bonds: Included
Interest on U.S. government savings bonds:
Included
Interest on state income tax refund: Included
Interest on Augusta County bonds: Excluded
Patronage dividend from Potato Growers
Cooperative: Excluded

23) Person buys prepaid insurance. Decide whether

youre gunna accrue for this year or next year
or .... conditions *** if its for the next 12 months,
or if its for the end of the following tax year,
whichever is longer, include it in the current year
and if its past that include it for the following
year.
24) This company uses the accrual method and
signed contract for some type of show. The

cleaning part of the services occurred the

following year, payment following year, but
transaction doesnt have to take place......
recognize as they occur???expenses are
deductible onlyu if incurred and do economic
performance test...
25) Calculation NOL
26) DEFINTIION OF NOL*** T/F