PROBLEM 3

For each of the following situations, determine the amount of Gross Income to be included by the taxpayer.

Situation 1

April received the following items in 2014

Salary $ 35,800

Productivity bonus 3,000

Alimony 9,000

Child support 20,000

State tax refund (no deduction taken in 2013) 1,530

Interest on Wayne County school bonds 10,000

Workers compensation 11,000

Dental insurance premiums (paid by employer) 1,700

Medical insurance premiums (paid by employer) 6,000

Reimbursement for medical benefits (not deducted) 500

Reimbursement for lost wages from an employer

provided plan 1,000

Life insurance proceeds from deceased uncles policy 15,000

Situation 2

John, age 23, is a full time student at Wayne State University and a candidate for a bachelors degree in Accounting. During 2014, he received the following items:

Salary $ 4,200

Sale of term papers 400

Loan from financial aid office 7,500

Cash prize from radio contest 700

Inheritance from aunt 30,000

Unemployment compensation 1,000

Scholarship for room and board 4,000

Tuition Scholarship 2,000

Spring Break trip paid for by grandfather 950