Indicate whether each of the items listed below would be Included (I) in or excluded (E) from gross income for the 2013 tax year.
A. Welfare payments - Excluded
B. Commissions - Included
C. Hobby income - Included
D. Scholarships for room and board - Included
E. $300 set of gold clubs, an employee awarded for length of service - Included
F. Severence pay - Included
G. Ordinary dividend fo $50 - Included
H. Accident insurance proceeds - Excluded
I. Inheritance - Excluded
J. Gifts - Excluded
K. Tips and gratuities - Included
2. John installed a new roof on his friend's house in return for a used truck worth $8000. How much income must John report on his tax return for his services? John would include the full amount of $8000. Trading for services is a taxable income.
3. Larry is a tax accountant and Sheila is a haridresser. Larry prepares Sheila's tax return for free and Sheila agrees to style Larry's hair six times for free in return for the tax return. The value of the tax return is approximately $300 and the hair styling work is approximately $300.
A. How much of the $300 is includable income to Larry? Why? The full amount of $300 would be considered taxable income because trading for services is taxable income.
B. How much of the $300 is includable income to Shiela? Why? The full amount of $300 would be considered taxable income because trading for services is taxable income.
4. How much of each of the following prizes or awards is taxable?
a. Cheline received a $50000 gift bag at the Oscars in 2013. $50000
b. John received a gold watch worth $350 for 25 years of service to his accounting firm. $0 because the total amount is below the maximum excludable amount of $450.
c. Kerry won $1,000,000 in her state lottery. $1,000,000
d. Deborah is a professor who received $50,000 as an award for her scientific research from the university that employes her. $50,000