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For each of the following situations, determine the amount of gross income that the taxpayer should recognize. Explain why any amounts are excluded from gross
For each of the following situations, determine the amount of gross income that the taxpayer should recognize. Explain why any amounts are excluded from gross income. a. Harvey is injured in an automobile accident. The driver of the other car is found to be at fault. A judge awards Harvey $10, 000 for pain and suffering $20, 000 in punitive damages, and $15, 000 for medical expenses. Harvey's total medical costs are $25, 000 and his employer provided insurance policy pays $8, 000 of the remaining medical costs. He also receives $800 of worker's compensation while he was unable to work. In addition, his employer provided insurance pays him $450 of disability pay while he recuperated and a separate plan that Harvey purchased paid $300 of disability payments. b. Heather owes $35, 000 of credit card debt to First City Bank. Heather is having financial difficulties during the current year and First City agrees to reduce her debt to $15, 000 to have her get her financial affairs in order and avoid bankruptcy. Heather's assets were $100, 000 her liabilities were $110, 000 before the discharge. For each of the following situations, determine the amount of gross income that the taxpayer should recognize. Explain why any amounts are excluded from gross income. a. Harvey is injured in an automobile accident. The driver of the other car is found to be at fault. A judge awards Harvey $10, 000 for pain and suffering $20, 000 in punitive damages, and $15, 000 for medical expenses. Harvey's total medical costs are $25, 000 and his employer provided insurance policy pays $8, 000 of the remaining medical costs. He also receives $800 of worker's compensation while he was unable to work. In addition, his employer provided insurance pays him $450 of disability pay while he recuperated and a separate plan that Harvey purchased paid $300 of disability payments. b. Heather owes $35, 000 of credit card debt to First City Bank. Heather is having financial difficulties during the current year and First City agrees to reduce her debt to $15, 000 to have her get her financial affairs in order and avoid bankruptcy. Heather's assets were $100, 000 her liabilities were $110, 000 before the discharge
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