Question

Question 6:Roger, age 19, is a full-time graduate student at State College. During 2018, he received the following payments. What is his taxable income:

State scholarship for ten months (tuition and books)

$3,600

Loan from college financial aid office

1,500

Cash support from parents

3,000

Cash prize awarded in contest

500

$8,600

Group of answer choices

$8,600

$500

$2,900

$4,100

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Question 8: Early in the year, Mike was in an automobile accident during the course of his employment. As a result of the injuries he sustained, he received the following payments during the year:

Worker’s compensation benefit

$5,000

Reimbursement of medical expenses from the company’s group medical insurance plan

15,000

Regular salary under the company’s sick pay plan

10,000

Punitive Damages 20,000

What is the amount that Mike must include in gross income for the current year?

Group of answer choices

$30,000

50,000

$35,000

20,000

Answer 1

6) Ans: $ 500

Explanation:

1)Section 117 excludes, to the extent of actual tuition and fees, amounts received as a scholarship from a government or other qualified organization. Therefore, the $3,600 state scholarship is excluded from taxableincome.

2) The $1,500 loan is not considered income as long as there is a bona fide obligation to repay it.

3)The cash support from the parents of $3,000 is a gift which is excluded from gross income.

4) The prize of $500 is specifically included by Sec. 74.

So, Roger's Taxable Income is $ 500.

7) Ans: $ 30,000

Explanation:

1) The $10,000 Mike received under the company’s sick pay plan must be included in his gross income.

2) As per IRS, Pumitive damages needs to be reported as other income and it is fully taxable.

3) Therefore, Mike's Gross income would be:

= $ 10,000 + $ 20,000

= $ 30,000