TRUE-FALSE QUESTIONS 1. Interest on insurance dividends left on deposit with an insurance company and withdrawable upon demand is taxable to the policyholder only when actually withdrawn.
2. Payments up to a total of $5,000 to the beneficiaries of a deceased employee by an employer because of that employee's death are excludable from income by the beneficiaries if the employee had no right to receive these payments during life.
3. Gina Gander, a cash basis taxpayer, purchased a Series EE savings bond. She must include the increase in redemption value as interest income each year.
4. Meals furnished to employees as part of their compensation are deductible by the employer at their fair market value.
5. Thomas Thinne, a cash basis taxpayer, may either defer reporting the interest on Series E bonds until he cashes the bonds or he may choose to report the increase in redemption value as interest each year.
6. Max Miller, the owner of a boutique, has a valuable employee for whom he pays a $200 annual premium for a $50,000 life insurance policy. The employee's husband is the beneficiary. This benefit when added to her regular salary does not make the total compensation unreasonable. Max may deduct the premium as a business expense.
7. Dina Durham purchased U.S. savings bonds which she had issued in her name and that of her child as co-owners. Dina let her child redeem the bonds and keep all the proceeds. The interest is taxable to her child.
8. Unemployment compensation is always included in gross income.
9. Social security benefits are always included in gross income.
10. An example of a qualified benefit is an employer-subsidized cafeteria.
11. An annuity is a contract that pays a fixed income at set regular intervals for a specific period of time.
12. Amounts received under worker's compensation as compensation for personal injuries are excludable from gross income.
13. James Jenkins, a key employee, has group-term life insurance coverage of $100,000 paid for by his employer. The plan discriminates in favor of key employees. James must include the actual cost of the $100,000 policy in his income.
14. Wade Woods is an employee of a meat packing plant that allows him to purchase goods at a discount that exceeds the gross profit percentage of the price at which the goods are offered to regular customers. Wade must include the portion of the discounts that exceeds the gross profit percentage in his income.
15. Insurance policy dividends used to purchase additional life insurance are not taxable to the policy owner.
16. Dividend payments made by an insurance company that are based on a policy and that exceed the total amount of premiums paid by the insured are taxable to the insured.
17. In 20X1, Bill, a single individual, earned a salary of $10,000 and received $2,000 in unemployment benefits. The unemployment benefits received by Bill are included in Bill's 20X1 gross income.
18. George, a cash-basis taxpayer, was ill for several days in 20X1 and received sick pay from his company. George will not be required to report this as income for 20X1.
19. Ben is a waiter at a small restaurant. On working days, Ben is required to have lunch on the premises; however, the meal is furnished free-of-charge by Ben's employer. Additionally, Ben is permitted to have lunch free-of-charge on his day off. Under these circumstances, only the value of the lunches eaten by Ben on his day off is includible in Ben's taxable income.
20. Mindy, a hotel manager, is required to reside in the hotel she manages as a condition of her employment. Mindy's hotel residence is provided free-of-charge because Mindy is on call 24 hours a day to handle hotel emergencies. The value of the hotel residence provided to Mindy is not taxable income.
21. LSS Corporation has a health club on its premises that it provides to its employees at no extra charge. Similar health club memberships in the area cost $250. LSS Corporation must include $250 in the income of each employee that uses the health club facilities.