Omar received $200,000 of proceeds 27. Omar\'s wife passed away this from life i

Question

Omar received $200,000 of proceeds 27. Omar's wife passed away this from life insurance on his wife, and amount must Omar include in his gross income? year. After her death, $800,000. What he inherited his wife's stock portfolio worth a. $1 million b. $800,000 $500,000 d. Zero but only if Omar does not opt to receive the life insurance proceeds in a lump sum e. Zero None of these benefits is included in gross income 28. Manny is a student who has received an engineering scholarship to The University of California. The scholarship paid $14,000 for tuition, $2,500 for fees, and $1,000 for books. In addition, Manny's dormitory fees of $8,500 were paid by the University when he agreed to be a resident assistant in the dorm. What amount must Manny include in his gross income? a. $9,500 b. $11,000 .$2,500 d. $8,500 e. Zero - None of these benefits is included in gross income 29. A taxpayer's at-risk amount in an activity is increased by: a. cash contributions to the activity b. a reduction in the amount of debt related to the activity that the taxpayer is responsible for paying c. cash distributions from the activity d. A and B e. A and C

Explanation / Answer

27. E- None of the benifits is included in gross profit.

Life Insurance proceeds are not taxable and doesn't need to report the same.

The inherited property is tax free. Only the appreciation after the death is taxable.

28. D $ 8500

scholarship or fellowship is tax free if you are a degree candidate and the award is used to pay for tuition and required fees, books, supplies and equipment, however there are some scholarship and fellowship opportunities that are not tax exempt. Any amounts used to pay for room and board and a stipend for living expenses is taxable.

29. d - A and B

At-Risk Calculation

Cash contributions

+ Property contributions

+ Share of liabilities
+ income items (NI, interest, dividends, etc.)
+ gain items (gain on asset sales, capital gains)
- cash distributions
- property distributions
- release of liabilities
=AMOUNT AT RISK
- Loss items (i.e. net losses allowed to the extent at-risk)
=ENDING AT-RISK AMOUNT

Hence Cash contributions (a) increase the at-risk amount while cash distributions (c) decreases the at-risk amount.

(b) Recourse
- is one in which the taxpayer is personally liable for the debt. A taxpayer's "at-risk" amount increases by his or her share of recourse debt.

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