Included in Income

Question 1

Alimony/ Separate Maintenance Payments

Answer 1

Payee- income
Payor- deduction
As long as payments cease at payee’s death and there is a divorce decree

Front end loading - recaptured in the 3rd year after separation- unless remarried or dies

Question 2

Annuities

Answer 2

Contract between you and insurance company where you make payments and at a specified time they begin making payments to you

partially taxable but partially non taxable as capital

Pension plans

Question 3

Services performed by Children

Answer 3

Amounts received- taxable on to child not parents

All unearned income of a child under 19 or full time student under 24 may be included in parent’s return for amounts between $950 and $9500

Question 4

Unearned income

Answer 4

all income not earned from job or business

Question 5

Prizes and Awards

Answer 5

Includable

Exception: excluded where- made by recognition of religious, charitable, scientific, edu, artistic….; recipient was not part of the selection process; recipient doesn’t have to render future services

Exception: employee achievement awards: tangible property worth less than $400; is for length of services or safety achievement

Question 6

Group Term Life Insurance

Answer 6

includable but only to the extent that costs exceed $50K- N/A- key employees

Employer-provided costs of an ordinary life insurance policy is includable in full

Question 7

Distributed Pension Plans

Answer 7

Includable at distribution

Question 8

Discharge of Indebtedness

Answer 8

Debtor discharges debt- the extent that has been discharged is includable

Unless: the cancellation was a gift, debtor insolvent or bankrupt

Question 9

Dividends

Answer 9

includable to shareholders

Question 10

Trust

Answer 10

if property is irrevocably transferred to a trust- trust or bennies will be taxed

Bennies taxed when it is distributed to them