Julia Suffered a Severe Stroke and Has Been Admitted to a Private

question 104

Multiple Choice

Julia suffered a severe stroke and has been admitted to a private hospital where she is expected to remain for the rest of her life.She is certified by a licensed health care practitioner as being a "chronically ill individual." Her hospital expenses amount to $280 per day.She will receive $270 per day from a $500,000 life insurance policy as an accelerated death benefit.In 2014,she was in the hospital for 10 days and received $2,700.How much of this amount is taxable?

• A)$0
• B)$500
• C)$100
• D)$2,700

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Definitions:

Schedule M-1

A form used by corporations to reconcile financial statement income with taxable income as reported on the corporation's tax return.

Taxable Income

The amount of income used to calculate how much tax an individual or a company owes to the government.

Book Income

The income reported by a business based on the accounting rules of the firm, not necessarily reflecting the taxable income reported to the IRS.

Net Capital Loss

The result when the total capital losses from investments exceed the total capital gains.