Accounting 3220 Chapter 4


There is no specific statutory exclusion for welfare benefits. Nevertheless, the IRS has ruled that such benefits aren’t taxable. Is this within the specialist of the IRS? Most exclusions exist for one of two reasons. What are those reasons? Give examples of exclusions, which exist for each. If a present of property is made, who’s taxed on the income produced by the property?

How can interfamily gifts reduce a family’s total taxes liability? What role will intent to play in identifying whether a transfer is a gift and therefore not subject to the tax? Are tips received by employees from customers excludable from revenues as gifts? What is the tax significance of the face amount of a full life insurance coverage? Define the word scholarship as it is used in Sec.

If a scholarship covers room and panel, could it be excludable? If an employer provides a scholarship to a worker who’s on leave of absence, is that scholarship taxable? Is the amount paid by a university or college to students for services excludable from the students’ revenues? Answer the following questions in accordance with employer-financed medical and health, impairment, and life insurance programs. May employers deduct payments paid on worker insurance? Do employees have to add such rates in revenues? Are benefits paid to the employee contained in the employee’s revenues?

What conditions must be fulfilled if an employee is to exclude meals and lodging equipped by a company? Are the same fringe benefits that exist to employees available to self-employed individuals also? If a worker requires a customer to lunch and discusses business, can the employee deduct 50% of the meal for both customer and himself?

Are partners and proprietors at a disadvantage with respect to fringe benefits? In which of the following situations would the taxpayer realize taxable income? A mechanic performs focus on his own automobile. 400 for doing the same work. A mechanic fixes his neighbor’s personal automobile. In trade, the neighbor, an accountant, agrees to get ready the mechanic’s taxes return. A mechanic maintenance his daughter’s car with no charge.

Which of the next would be includable in gross income? 500 from his company because he developed an idea that reducing the employer’s production costs. Year in universities 500 from his mother in order to finance his last. 500 to be always a graduation present. 4,000 in the state lottery. 500 prize on her behalf entry in a poetry contest. 2,000 when she was selected as “Teacher of the Year” by the local school district. For each scenario, indicate the amount that must be included in the taxpayer’s gross income.

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Al flies for AAA Airlines. AAA provides its employees with several fringe benefits. Al and his family are permitted to fly on the space-available basis on AAA Airline. 2,000. AAA covered a subscription to two magazines released for pilots. 80. The airline paid for Al’s foods and lodging while he was abroad overnight in connection with his job. 10,000. Although Al could not eat while flying, he was allowed to drink espresso provided by the airline.

100 monthly. The airline treated Al and his family to a one-week all-expenses-paid vacation at a holiday resort near his home. This benefit was granted because of Al’s outstanding protection record. Which of the benefits are taxable to Al? Determine whether the following items represent taxable income. 40,000. One-half of the settlement symbolized wages lost by Pat as a result of the discrimination and the total amount represented an award based on personal injury. Matt sued the neighborhood paper for a whole story that reported he was affiliated with structured crime. 50,000 of libel damages. 10,000 from an employer-sponsored disability plan. 15,000 of medical expenses.