Taxes: Gross Income - Exclusions Flashcards Preview

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Flashcards in Taxes: Gross Income - Exclusions Deck (8)
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1

Taxes:
Gross Income - Exclusions
Prized & Awards

Prized & Awards
- FMV included in income
- exclude if civic, artistic, educational, scientific, or literary
Criteria
1. selected without action on their part
2. not required to perform services
3. if amount is paid directly to a tax-exempt or governmental organization

2

Taxes:
Gross Income - Exclusions
Scholarships

Scholarships
- excluded if:
1. used by degree seeking student for tuition, books, or supplies
2. room and board treated as earned income

3

Taxes:
Gross Income - Exclusions
Life Insurance Proceeds

Life Insurance Proceeds
- excluded from income
- usually subject to estate tax
- exchange/sale of policy for cash surrender value is treated as sale and proceeds>costs are income
- except by terminally ill taxpayer (exclude)
- life insurance policy purchased for consideration is treated like an asset and proceeds>cost are income

4

Taxes:
Gross Income - Exclusions
Gifts

Gifts
- excluded from income
- made by generosity
- income accrued before gift is taxed to donor
- income accrued after gift is taxed to donee

5

Taxes:
Gross Income - Exclusions
Forgiveness of Debt

Forgiveness of Debt
- income unless gift or bankruptcy
- if insolvent, not bankrupt, can exclude only to extent of insolvency
- cancellation of debt on real property used in trade of business, not taxable, but must reduce basis of property
- discharge of indebtedness on foreclosure, exclude up to $2M

6

Taxes:
Gross Income - Exclusions
Social Security Benefits

Social Security Benefits
- generally excluded from income
- if PI exceeds certain limit, up to 85% taxable

7

Taxes:
Gross Income - Exclusions
Foster Child Payments

Foster Child Payments
- if for the child's expenses

8

Taxes:
Gross Income - Exclusions
Welfare Payments

Welfare Payments
- excluded

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