Individual Taxation - Exclusions Flashcards
T/F
Benefits received as workers’ compensation are ALWAYS excluded from gross income
TRUE
T/F
Benefits received as compensation for damages for physical injuries are ALWAYS excluded from gross income
TRUE
Amounts received from an employer’s accident and health plan as reimbursement for medical expenses are excludable as long as ______
The medical expenses are NOT deducted as itemized deductions
T/F
Medical insurance premiums paid by an employer are included in an employee’s gross income
FALSE
Medical insurance premiums paid by an employer are excluded from an employee’s gross income
Qualified moving expense reimbursements are an employee fringe benefit. They can be excluded from gross income as long as ______
The expenses would have been deductible as moving expenses if directly paid or incurred by the employee
T/F
Gifts are excluded from the definition of gross income
TRUE
T/F
Bequests/devises/inheritances are included in the definition of gross income - i.e., one must record their inheritances as gross income and pay taxes on it
FALSE
Property received as a bequest/devise/inheritance is excluded from the definition of gross income
T/F
Dividends received on a life insurance policy are never excluded from gross income
FALSE
Dividends on life insurance policies are treated as a reduction of the cost of insurance if the total dividends have not exceeded accumulated premiums paid. In this case they will be excluded from gross income
T/F
Stock dividends are always excludable from gross income
FALSE
Generally stock dividends are nontaxable; however, stock distributed on preferred stock results in a taxable stock dividend equal to the FMV of the dividend on date of distribution
T/F
Tax refunds are excluded from gross income
TRUE
Note that the refund itself is excluded from gross income, but interest on a refund must be included in gross income
T/F
An individual may be able to exclude from income all (or a part) of the interest received on the redemption of Series EE US Savings Bonds
TRUE
For an individual to qualify for excluding from income all (or a part) of the interest received on the redemption of Series EE US Savings Bonds, the bonds must be issued after December 31, ______
1989
For an individual to qualify for excluding from income all (or a part) of the interest received on the redemption of Series EE US Savings Bonds, the purchaser of the bonds must be _______
the Sole owner of the bonds (or joint owner with his/her spouse)
For an individual to qualify for excluding from income all (or a part) of the interest received on the redemption of Series EE US Savings Bonds, the owner(s) of the bonds must be at least ______ year’s old before the bond’s issue date
24
For an individual to qualify for excluding from income all (or a part) of the interest received on the redemption of Series EE US Savings Bonds, the redemption proceeds must be used for what?
To pay tuition and fees incurred by the taxpayer, spouse, or dependents to attend a college or university or certain vocational schools
T/F
Interest on obligations of a state or one of its political subdivisions (example, New York Port Authority Bonds) are tax-exempt
TRUE
T/F
Interest on a possession of the US (example, Puerto Rico Commonwealth Bonds) are tax-exempt
TRUE
T/F
Interest on state/municipal bonds should be excluded from income
TRUE
A candidate for a degree can exclude amounts received as a scholarship or fellowship if …
according to the conditions of the grant the amounts are used for the payment of tuition, fees, books, supplies, and equipment required for courses at an educational institution
T/F
A lessor includes in income any increase in the value of property caused by improvements made by the lessee
FALSE
A lessor EXCLUDES from income any increase in the value of property caused by improvements made by the lessee UNLESS the improvements were made in lieu of rent
T/F
A lessor excludes from income any increase in value of property caused by improvements made by the lessee when these improvements were made by the lessee in lieu of rent
FALSE
A lessor excludes from income any increase in value of property caused by improvements made by the lessee UNLESS the improvements were made in lieu of rent. If the improvements are made in lieu of rent then this is included in income as rent payments would be included in income.
Alimony is to be _______ (included in/excluded from) gross income by the payee and is _______ (deductible/nondeductible) by the payor
Included
Deductible
Child Support is to be _______ (included in/excluded from) gross income by the payee and is _______ (deductible/nondeductible) by the payor
Excluded
Nondeductible
Basically Child Support is given but ignored for Tax Purposes
T/F
An award for civic achievement is always excluded from gross income
FALSE
What 3 requirements must be met for an award for civic achievement to be excluded from gross income?
1) The recipient was selected without any action on his/her part
2) The recipient is not required to render substantial future services as a condition of receiving the award
3) The recipient designates that the award is to be directly transferred by the payor to a governmental unit, or a tax-exempt charitable, educational, or religious organization
T/F
Advanced/Prepaid Rental Payments are excluded from income until those revenues can be matched with their expenses
FALSE
Advanced Rental Payments must be included in gross income when received
T/F
Lease cancellation payments may be temporarily excluded from income depending on the taxpayer’s method of accounting
FALSE
Lease cancellation payments must be included in gross income immediately when received, no matter what the taxpayer’s method of accounting is
T/F
State unemployment compensation benefits are to be excluded from adjusted gross income
FALSE
State unemployment compensation benefits are included in gross income in full
T/F
A corporation who pays insurance premiums for a life insurance policy on their corporation’s president (corporation is the beneficiary of the policy) will ultimately exclude from income the proceeds of the policy when the president dies
TRUE
