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
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
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