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.