2. Randy is the manager of a motel. As a condition of his employment, Randy is required to live in a room on the premises so that he would be there in case of emergencies. Randy considered this a fringe benefit since he would otherwise be required to pay $800 per month rent. The room that Randy occupied normally rented for $70 per night, or $2,100 per month. On the average, 90% of the motel rooms were occupied. As a result of this rent-free use of a room, what amount is Randy is required to include in gross income?

a. $-0-. b. $800 per month. c. $2,100 per month. d. $1,890 ($2,100 0.90).

3. Margaritas interest and gains on investments for the current year are as follows: Interest on Madison County school bonds $600 Interest on U.S. government bonds 700 Interest on a Federal income tax refund 200 Gain on the sale of Madison County school bonds 500 Margarita must report gross income in the amount of:

a. $2,000. b. $1,800. c. $1,400. d. $1,300.

4. Carin, a widow, elected to receive the proceeds of a $150,000 life insurance policy on the life of her deceased husband in 10 installments of $17,500 each. Her husband had paid premiums of $60,000 on the policy. In the first year, Carin collected $17,500 from the insurance company. She must include in gross income:

a. $0. b. $2,500. c. $10,000. d. $25,000.

5. Kristens employer owns its building and provides parking space for its employees. The value of the free parking is $150 per month. Karens employer does not have parking facilities but reimburses its employees for the cost of parking in a nearby garage up to $150 per month.

a. Kristen and Karen must recognize gross income from the parking services. b. Kristen can exclude the employer-provided parking from gross income, but Karen must include her reimbursement in gross income. c. Kristen must include the value of the employer-provided parking from her gross income, but Karen can exclude her reimbursement from gross income. d. Neither Kristen nor Karen is required to include the cost of parking in gross income.