Problem 1: Gary and Gladys invest in bonds. In the current year, they received the following interest:
California general revenue bonds: $800
New York City sanitation fund bonds: $1,000
Seattle School District bonds: $400
AT&T 20-year bonds: $600
The state and local bonds are neither private activity bonds nor arbitrage bonds. How much interest may Gary and Gladys exclude from gross income on their joint return?
A. $0
B. $800
C. $1,800
D. $2,200
Problem 2: Ivan Turner, a truck driver, was injured in an accident in the course of his employment in the current year. As a result of injuries sustained, he received the following payments in the current year:
Damages for physical injuries: $5,000
Workers' compensation: $500
Reimbursement from his employer's accident and health plan for medical expenses paid by Turner in the current year (the employer's contribution to the plan was $475 in the current year): $750
The amount to be included in Turner's gross income for the current year should be:
A. $5,000
B. $750
C. $475
D. $0
Problem 3: Rudy retired on disability in July of the current year. He had earned wages of $20,000 before his retirement and received $10,000 in disability benefits after his retirement. The disability benefits were received from an accident and health insurance plan that was paid for by Rudy's employer. He also received a lump-sum payment for accrued annual leave of $5,000, which was paid in the current year due to his disability retirement in that year. How much income should Rudy report in the current year?
A. $20,000
B. $25,000
C. $30,000
D. $35,000