Question

16. Which of the following would be considered income to Joe for tax purposes in 2020? I. Joe steals $5,000 on June 1, 2020. II. Joe grows vegetables in his back yard garden and then receives $200 after selling the vegetables at a farmers market (on July 1, 2020). a. b. C. d. I only II only Both I and II Neither I nor II 17. Your client receives a scholarship to State University. Which of the items listed below is income to your client and will not be excluded under code section 117? a. b. c. a $15,000 payment made for tuition a $10,000 payment made for room and board a $200 payment for lab fees which are required for a course that the client is taking a $500 payment for required course textbooks d.

Answer 1

Ans:

16. The correct answer is (a) I only.

Explanation: the federal government requires that, "Income from illegal activities, such as money from dealing illegal drugs, must be included in your income on Form 1040, line 21, or on Schedule C or Schedule C-EZ (Form 1040) if from your self-employment activity." Therefore, embezzlement of cash hs to be included in joe's Income

The sale of vegetables to farmers which are grown in his backyard does not constitute his agricultural income because backyard does not qualify to be a farm as per IRS. As per IRS, A farm is a tract of land cultivated for the purpose of agricultural production. A farm is classified of having $1,000 or more of agricultural products being produced or sold. A Small Farm, according to USDA census is a farm that is 179 acres or less in size, or earns $50,000 or less in gross income per year.

17. The correct answer is (b) a $10000 payment made for room and board.

Explanation: The qualified education expenses for the purpose of tax free scholarships and fellowships are

• Tuition and fees required to enroll at and attend an eligible educational instituition
• Course-related expenses, such as fees, books, supplies, and equipment that are required for the courses at the eligible educational institution

Qualified education expenses don’t include the cost of:

• Room and board
• Travel
• Reasearch
• Clerical help
• Equipment and other expenses not required for enrollment in or attendance at an eligible educational institution.