Question

1.

1. What is Mary’s total gross income if as a result of suing her employer for her injuries she sustained on the job she received: 1) $100 in punitive damages; 2) $200 for loss of income; and 3) $300 for medical expenses?

2. Which one of the following would be included in gross income for federal tax purposes?

a)Tom and Marty received pots and pans worth $200 as a wedding present

b)Madison received insurance proceeds of $500 to replace her stolen TV

c)Alice received $10,000 as the beneficiary of her mother’s life insurance policy

d)Vicky won $100 playing poker in a Las Vegas casino

Answer 1

1. Mary's taxable income = $ 100. any workmen compensation reeived for loss of income and medical expenses is exempt thus $200 for loss of income and $ 300 for medical expenses are exempt. However punitive damages are taxable

2. a) Tom and Marty received as wedding present $ 200 . as wedding present is taxable although he will be able to deduct annual tax exculsion from taxable amount depending on tax status.

b) Madison received as insurance proceedsto replac tv is exempt from tax .if we gain from such proceeds then it is taxable

c) moey received as beneficiary on account f mothers life insurance is exempt so $ 10000 is exempt

d) amount received on playing poker is taxable. So $100 is taxable.