Week 2 Chapter 8

Question 1

Gross income

Answer 1

Defined by IRC as income from any source unless specifically excluded

Question 2

key components

Answer 2

compensation of services
interest and dividends
other income

Question 3

compensation for services rendered

Answer 3

includes wages, commissions, and other payments (cash or noncash)

Ex. Employer pays employees car payment - considered gross income

Question 4

interest and dividends

Answer 4

generally taxable unless an exclusion applied

reported via form 1099-INT or 1099-DIV

Question 5

other income

Answer 5

Alimony
business income
digital assets

Question 6

alimony

Answer 6

included in gross income for divorce decrees executed before 2019

Question 7

business income

Answer 7

reported on form 1040 Sch C
includes prepaid income recognized in the year received

Question 8

digital assets

Answer 8

treated as property
fair market value included in gross income when received

Question 9

compensation for services rendered

Answer 9

All forms of payment for services
Form 1040, W-2

Question 10

Interest

Answer 10

Income from bank accounts, etc.
Form 1099-INT

Question 11

Dividends

Answer 11

Earnings distributed to shareholders
Form 1099-DIV

Question 12

Alimony

Answer 12

Payments received by the recipient
Schedule 1

Question 13

Business Income

Answer 13

Income and expenses from sole proprietorships
Schedule C

Question 14

Rental Income

Answer 14

Reported income from rental properties
Schedule E

Question 15

exclusions

Answer 15

general rule and common exclusions

Question 16

general rule

Answer 16

income is gross income unless specifically excluded by the IRC

Question 17

common exlusions

Answer 17

unrealized income
life insurance proceeds
scholarships
gain from sale of principle residence

Question 18

Unrealized Income

Answer 18

Fluctuations in market value are not taxable until realized.

Question 19

Life Insurance Proceeds

Answer 19

Death benefits are typically excluded.
Scholarships: Excluded if used for qualified expenses.

Question 20

Gain from Sale of Principal Residence

Answer 20

Up to $250,000 ($500,000 for married couples) may be excluded if requirements are met.

Question 21

special exclusions in detail

Answer 21

gifts
compensation of injury
employer provided life insurance

Question 22

Gifts

Answer 22

Excluded from gross income.

Question 23

Compensation for Injury

Answer 23

Excludes disability payments but includes interest on such awards.

Question 24

Employer-Provided Life Insurance

Answer 24

Excluded from gross income up to $50,000 of coverage.

Question 25

important example

Answer 25

taxable social security benefits gambling winnings cancellation of debt

Question 26

taxable social security benefits

Answer 26

Portion taxed based on provisional income exceeding base amounts.

Question 27

gambling winnings

Answer 27

Fully included; losses can offset but not exceed winnings.

Question 28

cancellation of debt

Answer 28

Generally included; exceptions exist for bankruptcies and insolvency.

Question 29

gross income findings

Answer 29

character of income reporting requirements

Question 30

character of income

Answer 30

Different forms of income have diverse tax implications.

Question 31

exclusion fundamentals

Answer 31

Understanding what can be excluded from gross income is critical for tax liability calculations. Familiarity with specific exclusions can lead to significant tax savings, especially for life insurance and real estate transactions.

Question 32

reporting requirements

Answer 32

Knowledge of correct forms (W-2, 1099-INT, etc.) is essential for tax preparation.