Excludable Gifts . Which of the following would be includable in gross income ?
· a . Alice appeared on a TV quiz show and received a prize of $ 5,000 .
· b . Bart received $ 500 from his employer because he developed an idea that reduced the employer ’ s production costs .
· c . Chuck borrowed $ 500 from his mother in order to finance his last year in college . Upon his graduation , Chuck ’ s mother told him he did not have to repay the $ 500 . She intended the $ 500 to be a graduation present .
I : 4-35
Life Insurance Proceeds . Don is the beneficiary of a $ 50,000 insurance policy on the life of his mother , Anna . To date , Anna has paid premiums of $ 16,000 . What amount of gross income must be reported in each of the following cases ?
· a . Anna elects to cancel the policy and receives $ 20,000 , the cash surrender value of the policy .
· b . Anna dies and Don receives the face amount of the policy , $ 50,000 .
· c . Anna dies and Don elects to receive $ 15,000 per year for four years .
I : 4-36
Transfer of Life Insurance . Ed is the beneficiary of a $ 20,000 insurance policy on the life of his mother . Because Ed needs funds , he sells the policy to his sister , Amy , for $ 6,000 . Amy subsequently pays premiums of $ 9,000 .