Federal Income Tax Chapter 5 Solved Rated A+
[Education-Related Exclusions]
Scholarships that pay for tuition, fees, books, supplies and other equipment required for
the student's coursework are __________________ - ANSWER-excluded from taxable
income
[Education-Related Exclusions]
The scholarship exclusion applies only if the recipient ______________________ -
ANSWER-is not required to perform services in exchange for receiving the scholarship
[Life Insurance Proceeds]
_____________ benefits are not taxable if used to pay for the taxpayer's long-term care
- ANSWER-Accelerate death benefits
[Other Educational Subsidies]
Taxpayers can exclude from gross income earnings on investments in qualified
education plans if _________________________ - ANSWER-earnings are used to pay
for qualifying educational expenses
All payments associated with compensating a taxpayer for physical injury are excluded
from gross income. This includes ____________ damages on account of physical injury
or physical sickness - ANSWER-compensatory damages
Any payments a taxpayer receives from a state-sponsored workers' compensation plan
are ___________ from the taxpayer's income - ANSWER-excluded
Any reimbursement a taxpayer receives from a health and accident insurance policy are
_________ from gross income - ANSWER-excluded
Awards for scientific, literary, or charitable achievement such as Nobel Prize are
excluded from gross income but only if ________________ - ANSWER-(1) the recipient
was selected without any action on his part to enter the contest or proceeding
(2) the recipient is not required to render substantial future services as a condition to
receive the prize or award
(3) the payor of the price or award transfers the prize or award to a federal state or local
governmental unit or qualified charity such as a church, school, or charitable
organization designated by the taxpayer
By receiving the award, recognizing the income, and then contributing funds to a
charity, the taxpayer is deducting the donation as a deduction _____________ -
ANSWER-from AGI
, Community property systems apply to ___________ - ANSWER-Married couples
Contributions to qualifying retirement accounts are not currently included in the
employee's gross income, but are _________________________________ -
ANSWER-deferred until the employee withdraws the contribution + earnings from the
plan
Designating the award for payment to a federal, state, or local governmental unit or
qualified charity has the same effect as claiming that transfer as a deduction
____________ - ANSWER-for AGI
Distinguish between Child Support payments and Alimony payments - ANSWER-(1)
Child support payments are not taxable
(2) Alimony payments cannot change, but Child Support payments can change
(3) Alimony payments do not continue after the death of the spouse receiving the
payments
For cash basis taxpayers, the claim of right doctrine states that _________________ -
ANSWER-income has been realized if a taxpayer receives income and there are no
restrictions on the taxpayer's use of the income (the taxpayer does not have an
obligation to repay the amount)
For property own jointly, under the common law system, each co-owner is taxed
________________________ - ANSWER-on the income attributable to his or her share
of the property
For property owned separately, under the common law systems, all of the income from
the separately owned property is _________________ - ANSWER-included in that
spouse's gross income
For taxpayers using a cash method of accounting, the Constructive Receipt Doctrine
states that income must be recognized when _______________, ______________, and
_____________ - ANSWER-(1) income is unconditionally available to the taxpayer
(2) the taxpayer is aware of the income's availability
(3) there are no restrictions on the taxpayer's control of income
From a tax perspective we must determine two things about an annuity: - ANSWER-(1)
how much of each annuity payment represents gross income (ordinary income), AND
(2) how much represents nontaxable return of capital (return of investment)
Gain in excess of the exclusion generally qualifies as a long-term capital gain subject to
tax at _______ - ANSWER-preferential rates
Gambling winnings must be included in __________ - ANSWER-gross income
[Education-Related Exclusions]
Scholarships that pay for tuition, fees, books, supplies and other equipment required for
the student's coursework are __________________ - ANSWER-excluded from taxable
income
[Education-Related Exclusions]
The scholarship exclusion applies only if the recipient ______________________ -
ANSWER-is not required to perform services in exchange for receiving the scholarship
[Life Insurance Proceeds]
_____________ benefits are not taxable if used to pay for the taxpayer's long-term care
- ANSWER-Accelerate death benefits
[Other Educational Subsidies]
Taxpayers can exclude from gross income earnings on investments in qualified
education plans if _________________________ - ANSWER-earnings are used to pay
for qualifying educational expenses
All payments associated with compensating a taxpayer for physical injury are excluded
from gross income. This includes ____________ damages on account of physical injury
or physical sickness - ANSWER-compensatory damages
Any payments a taxpayer receives from a state-sponsored workers' compensation plan
are ___________ from the taxpayer's income - ANSWER-excluded
Any reimbursement a taxpayer receives from a health and accident insurance policy are
_________ from gross income - ANSWER-excluded
Awards for scientific, literary, or charitable achievement such as Nobel Prize are
excluded from gross income but only if ________________ - ANSWER-(1) the recipient
was selected without any action on his part to enter the contest or proceeding
(2) the recipient is not required to render substantial future services as a condition to
receive the prize or award
(3) the payor of the price or award transfers the prize or award to a federal state or local
governmental unit or qualified charity such as a church, school, or charitable
organization designated by the taxpayer
By receiving the award, recognizing the income, and then contributing funds to a
charity, the taxpayer is deducting the donation as a deduction _____________ -
ANSWER-from AGI
, Community property systems apply to ___________ - ANSWER-Married couples
Contributions to qualifying retirement accounts are not currently included in the
employee's gross income, but are _________________________________ -
ANSWER-deferred until the employee withdraws the contribution + earnings from the
plan
Designating the award for payment to a federal, state, or local governmental unit or
qualified charity has the same effect as claiming that transfer as a deduction
____________ - ANSWER-for AGI
Distinguish between Child Support payments and Alimony payments - ANSWER-(1)
Child support payments are not taxable
(2) Alimony payments cannot change, but Child Support payments can change
(3) Alimony payments do not continue after the death of the spouse receiving the
payments
For cash basis taxpayers, the claim of right doctrine states that _________________ -
ANSWER-income has been realized if a taxpayer receives income and there are no
restrictions on the taxpayer's use of the income (the taxpayer does not have an
obligation to repay the amount)
For property own jointly, under the common law system, each co-owner is taxed
________________________ - ANSWER-on the income attributable to his or her share
of the property
For property owned separately, under the common law systems, all of the income from
the separately owned property is _________________ - ANSWER-included in that
spouse's gross income
For taxpayers using a cash method of accounting, the Constructive Receipt Doctrine
states that income must be recognized when _______________, ______________, and
_____________ - ANSWER-(1) income is unconditionally available to the taxpayer
(2) the taxpayer is aware of the income's availability
(3) there are no restrictions on the taxpayer's control of income
From a tax perspective we must determine two things about an annuity: - ANSWER-(1)
how much of each annuity payment represents gross income (ordinary income), AND
(2) how much represents nontaxable return of capital (return of investment)
Gain in excess of the exclusion generally qualifies as a long-term capital gain subject to
tax at _______ - ANSWER-preferential rates
Gambling winnings must be included in __________ - ANSWER-gross income
