Question

Michael received the following amounts during the current tax year of 2020. For each item indicate how much is included in his 2020 federal gross income. (14 points)

a)  A cash inheritance of $11,000 from his grandmother’s estate.

b)   $50,000 lump sum cash payment (in 2020) from an elderly neighbor’s life insurance policy. The women died during 2019. Michael was named as the beneficiary even though they were not related.

c)   $2,000 from a PA lottery ticket.

d)  $5,000 in child support from his ex-wife.

e)   $7,000 in unemployment compensation.

f)   Michael received $1,000 from his 2019 Bonus Check in February of 2020.

g)   Michael did not pick up his December 2020 paycheck of $600 until January 2021 because he took a few days off at the end of 2020. The check was available to all employees at the main reception desk.

h)   $10,000 of interest on a New York City Municipal Bond. Michael lives in Pennsylvania.

i)    Michael receives a $13,000 gift from his Aunt Ester.

j)    Michael receives a $30,000 gift from Steve; Steve had given the gift to Michael to thank him for clients that Michael had passed along to him.

k)  Michael received $10,000 in interest income from U. S. Government bonds.

l) $5,000 in stock for tax consulting work that he had performed during the year.

m) His employer paid $110 in premiums on group term life insurance coverage of $110,000 for Michael. In addition, for every $10,000 of insurance, the premiums are $10.

n) Michael purchased a TV from his employer for $800. The TV had cost the employer $1,100.

Answer 1

a)  A cash inheritance of $11,000 from his grandmother’s estate. - NOT INCLUDED IN INCOME

b)   $50,000 lump sum cash payment (in 2020) from an elderly neighbor’s life insurance policy. The women died during 2019. Michael was named as the beneficiary even though they were not related. Included in computation of income $50000.

c)   $2,000 from a PA lottery ticket. - Included full $2000 in income.

d)  $5,000 in child support from his ex-wife. Alimony received is included full i. e. $5000 in income.

e)   $7,000 in unemployment compensation. Included $7000 in the income.

f)   Michael received $1,000 from his 2019 Bonus Check in February of 2020. Included $1000 in the income.

g)   Michael did not pick up his December 2020 paycheck of $600 until January 2021 because he took a few days off at the end of 2020. The check was available to all employees at the main reception desk. Included in total income $600 as it was accrued.

h)   $10,000 of interest on a New York City Municipal Bond. Michael lives in Pennsylvania. Included $10000 in the income.

i)    Michael receives a $13,000 gift from his Aunt Ester. NOT INCLUDED IN THE INCOME.

j)    Michael receives a $30,000 gift from Steve; Steve had given the gift to Michael to thank him for clients that Michael had passed along to him. Included $30000 in income.

k)  Michael received $10,000 in interest income from U. S. Government bonds. Included $10000 in income.

l) $5,000 in stock for tax consulting work that he had performed during the year. Included in total income $5000 as other business income.

m) His employer paid $110 in premiums on group term life insurance coverage of $110,000 for Michael. In addition, for every $10,000 of insurance, the premiums are $10. Included in computation of income the premiums paid $110 will be allowed as deduction.

n) Michael purchased a TV from his employer for $800. The TV had cost the employer $1,100. Included in income $300 ($1100-$800).