CHAPTER 3 1. The maximum amount of social security benefits which will ever be taxable is 85%. 2. If the repayment of a disputed amount is over $2,000, taxpayers have the option of reducing current tax by the tax paid in the prior year(s) on the repaid amount. 3. A refund of an amount previously deducted is always fully taxable in the year of receipt. CHAPTER 4 4. If a debt is cancelled or forgiven the cancelled or forgiven amount is always included in income. 5. Worker's compensation payments are taxable since they are payments for loss of future income. 6. Under the recovery of capital doctrine the gain on sale and not the entire sales price is taxable. 7. Premiums paid by an employer for an employee's medical and health insurance premiums as well as disability and life insurance premiums are excluded from an employee's gross income. 8. Foreign-earned income does not include amounts paid to an employee of the U.S. government or any U.S. government agency or instrumentality. 9. Sec. 104(a)(3) excludes from gross income amounts collected under an accident and health insurance policy purchased by the employer, even if the benefits are a substitute for lost income