1. Which of the following items are inclusions (included) in gross income?

1. During the year, stock that the taxpayer purchased as an investment doubled in value.
2. Amount an off-duty motorcycle police officer received for escorting a funeral procession.
3. While his mother was in the hospital, the taxpayer sold some of her jewelry to help pay for the hospital bills.
4. Child support payments received.
5. A damage deposit the taxpayer recovered when he vacated the apartment he had rented.
6. Interest received by the taxpayer on an investment in general purpose bonds issued by IBM.
7. Amounts received by the taxpayer, a baseball Hall of Famer, for autographing sports equipment (e.g., balls and gloves).
8. Tips received by a bartender from patrons. (Taxpayer is paid a regular salary by the cocktail lounge that employs him.)
9. Taxpayer sells his Super Bowl tickets for three times what he paid for them.
10. Taxpayer receives a new BMW from his grandmother when he passes the CPA exam.

2. Which of the following items are exclusions (excluded) from gross income?

1. Damages award received by the taxpayer for personal physical injurynone were for punitive damages.
2. A new golf cart won in a church raffle.
3. Amount collected on a loan previously made to a college friend.
4. Insurance proceeds paid to the taxpayer on the death of her uncleshe was the designated beneficiary under the policy.
5. Interest income on City of Chicago bonds.
6. Jury duty fees.
7. Stolen funds the taxpayer had collected for a local food bank drive.
8. Reward paid by the IRS for information provided that led to the conviction of the taxpayers former employer for tax evasion.
9. An envelope containing $8,000 found (and unclaimed) by the taxpayer in a bus station.

3. Heather, age 12, lives in the same household with her mother, grandmother, and uncle. Who can claim Heather as a dependent?
4. During the year, Hernando has the following transactions:

• Gain on the sale of stock held as an investment for 10 months.
• Gain on the sale of land held as an investment for 4 years.
• Gain on the sale of a houseboat owned for 2 years and used for family vacations.
• Loss on the sale of a reconditioned motorcycle owned for 3 years and used for recreational purposes.

How should Hernando treat these transactions for income tax purposes?