Accounting 3220 Chapter 4

QI:4-2
There is no specific statutory exclusion for welfare benefits.​ Nevertheless, the IRS has ruled that such benefits are not taxable. Is this within the authority of the​ IRS?


QI:4-4
Most exclusions exist for one of two reasons. What are those​ reasons? Give examples of exclusions that exist for each.


QI:4-5

a. If a gift of property is​ made, who is taxed on income produced by the​ property?

b. How can interfamily gifts reduce a​ family's total tax​ liability?

QI:4-6

a. What role does intent play in determining whether a transfer is a gift and therefore not subject to the income​ tax?

b. Are tips received by employees from customers excludable from gross income as​ gifts? Explain.

QI:4-7
What is the tax significance of the face amount of a life insurance​ policy?


QI:4-10

Answer each of the​ following:

a.	Define the term scholarship as it is used in Sec. 117.
b.	If a scholarship covers room and​ board, is it​ excludable?
c.	If an employer provides a scholarship to an employee who is on leave of​ absence, is that scholarship​ taxable?
d.	Is the amount paid by a university to students for services excludable from the​ students' gross​ income?

QI:4-13

Answer the following questions relative to​ employer-financed medical and​ health, disability, and life insurance plans.

a. May employers deduct premiums paid on employee​ insurance?

b. Do employees have to include such premiums in gross​ income?

c. Are benefits paid to the employee included in the​ employee's gross​ income?

QI:4-16
What conditions must be met if an employee is to exclude meals and lodging furnished by an​ employer?


QI:4-18
Are the same fringe benefits that are available to employees also available to​ self-employed individuals?

QI:4-19
If an employee takes a customer to lunch and discusses​ business, can the employee deduct​ 50% of the meal for both the customer and​ himself? Explain.


QI:4-26
Are partners and proprietors at a disadvantage with respect to fringe​ benefits? Explain


PI:4-33

Requirements

In which of the following situations would the taxpayer realize taxable​ income?

a.	A mechanic performs work on his own automobile. The mechanic would have charged a customer​ $400 for doing the same work.
b.	A mechanic repairs his​ neighbor's personal automobile. In​ exchange, the​ neighbor, an​ accountant, agrees to prepare the ​ mechanic's tax return. The services performed are each worth​ $200.
c.	A mechanic repairs his​ daughter's automobile without any charge.

PI:4-34

Requirement

Which of the following would be includable in gross​ income?

a.	Alice appeared on a TV quiz show and received a prize of​ $5,000.
b.	Bart received​ $500 from his employer because he developed an idea that reduced the​ employer's production costs.
c.	Chuck borrowed​ $500 from his mother in order to finance his last year in college. Upon his​ graduation, Chuck's mother told him he did not have to repay the​ $500. She intended the​ $500 to be a graduation present.

PI:4-39

Requirement

For each of the​ following, indicate whether the amount is​ taxable:

a.	Peggy won​ $4,000 in the state lottery.
b.	Jane won a​ $500 prize for her entry in a poetry contest.
c.	Linda was awarded​ $2,000 when she was selected as​ "Teacher of the​ Year" by the local school district.

PI:4-40

Consider the following​ scenarios:

a.

LouisLouis

was given a

$ 4 comma 000$4,000

tuition scholarship to attend

ValleyValley

Law School. In​ addition,

ValleyValley

paid

LouisLouis

$ 7 comma 000$7,000

per year to work​ part-time in the campus bookstore.

Requirement

For each​ scenario, indicate the amount that must be included in the​ taxpayer's gross income.

PI:4-46
Al flies for AAA Airlines. AAA provides its employees with several fringe benefits. Al and his family are allowed to fly on a​ space-available basis on AAA Airline. Tickets used by Al and his family during the year are worth​ $2,000. AAA paid for a subscription to two magazines published for pilots. The subscriptions totaled​ $80. The airline paid for​ Al's meals and lodging while he was away from home overnight in connection with his job. Such meals and lodging cost AAA​ $10,000. Although Al could not eat while​ flying, he was allowed to drink coffee provided by the airline. The coffee was worth about​ $50. AAA provided Al with free​ parking, which is valued at​ $100 per month. The airline treated Al and his family to a​ one-week all-expenses-paid vacation at a resort near his home. This benefit was awarded because of​ Al's outstanding safety record. The value of the vacation was​ $2,300.

Requirement

Which of these benefits are taxable to​ Al?

PI:4-53

Requirements

Determine whether the following items represent taxable income.

a.	As the result of an age discrimination​ suit, Pat received a cash settlement of​ $40,000. One-half of the settlement represented wages lost by Pat as a result of the discrimination and the balance represented an award based on personal injury.
b.	Matt sued the local newspaper for a story that reported he was affiliated with organized crime. The court awarded him​ $50,000 of libel damages.
c.	Pam was injured in an automobile accident and received​ $10,000 from an employer sponsored disability policy. In​ addition, her​ employer-financed medical insurance policy reimbursed her for​ $15,000 of medical expenses.