Acct 442- HANDOUT #4 1. Mike is a waiter at a restaurant that pays a small hourly amount plus tips Customers are not required to tip the waiter. Mike is especially attentive and friendly, and her tips average 35% of the restaurant charges. Is Mike required to include any of his tips in gross income when the customer has no legal obligation to make the payment? Explain the basis for your conclusion 2. Wes was a major league baseball pitcher who earned $10 million for his 20 wins this year. Sam was also a major league baseball pitcher before a career-ending injury caused by a negligent driver. Sam sued the driver and collected $6 million as compensation for lost estimated future income as a pitcher and $4 million as punitive damages. Do the amounts that Wes and Sam receive have the same effect on their gross income? Explain. 3. Ellie purchases an insurance policy on her life and names her brother, Jason, as the beneficiary. Ellie pays $32,000 in premiums for the policy during her life. When she dies, Jason collects the insurance proceeds of $500,000 As a result, how much gross income does Jason report? 4. Jarrod receives a scholarship of $18,500 from Riggers University to be used to pursue a bachelor's degree. He spends $12,000 on tuition, $1,500 on books and supplies, $4,000 for room and board, and $1,000 for personal expenses How much may Jarrod exclude from his gross income? 5. What is the taxpayer's gross income in each of the following situations? 1. Darrin received a salary of $50,000 in 2018 from his employer, Green 2. In July 2018, Green gave Darrin an all-expense-paid trip to Las Vegas (value of 3. Megan received $10,000 from her employer to help her pay medical expenses Construction. $3,000) for exceeding his sales quota. not covered by insurance. 4. Blake received $15,000 from his deceased wife's employer "to help him in his 5. Clint collected $50,000 as the beneficiary of a group term life insurance policy time of greatest need." when his wife died. The premiums on the policy were paid by his deceased wite s employer 1. Eloise received $150,000 in settlement of a sex discrimination case against her 2. Nell received $10,000 for damages to her personal reputation. She also received 3. Orange Corporation, an accrual basis taxpayer, received $50,000 from a lawsuit 4. Beth received $10,000 in compensatory damages and $30,000 in punitive 6. Determine the effect on gross income in each of the following cases: former employer. $40,000 in punitive damages. filed against its auditor who overcharged for services rendered in a previous year. damages in a lawsuit she filed against a tanning parlor for severe burns she received from using its tanning equipment. 5. Joanne received compensatory damages of $75,000 and punitive damages of $300,000 from a cosmetic surgeon who botched her nose job