Question

true or false

1.     The fair market value of inherited property is included in the gross income of the beneficiary.

2.     Adjustments to income reported on Form 1040 are deductions from gross income to arrive at AGI.

3.     Occasional use of the copy machine is an example of a no-additional-cost services fringe benefit.

4.     Taxpayers may make nondeductible contributions to traditional IRAs in excess of the annual limits without incurring a penalty.

Answer 1

1. False. Fair market value of the inherited property is not included gross income of the beneficiary. Rather Fair value is used as adjusted basis in the property when such property is sold by the beneficiary.

2. True. Adjustements to income are "above-the-line" deductions which are deducted from gross income to calculate the AGI.

3. True. Occasional use of employer's copying machine is a "de minimis benefit" and is included in fringe benefits provided by employer to employee. However, employer should impose significant restrictions on the personal use of the machine so that at least 85% of the use of the machine is for business purposes.

4. False. a 6% penalty is leviable on excess contribution. Contribution amount differs from year to year.