For Each of the Following Situations,determine the Amount of Gross

question 34

Essay

For each of the following situations,determine the amount of gross income that the taxpayer should recognize.Explain why any amounts are excluded from gross income.
a.Gary is an employee of G&K Electronics. G&K allows all employees to buy goods from inventory at a 20% discount. Gary purchases a television under the discount plan for $800. The television, which cost G&K $700, normally sells for $1,000.
b.Carolyn receives an $8,000 National Merit Scholarship and a $2,000 Honors at Entrance Scholarship to attend State Tech. The scholarships were given based on national testing scores and high school grades, and require no future services on Carolyn's part. Tuition and other fees are $6,500 per year at State Tech. Carolyn also pays $6,000 for room and board in University housing.
c.Donnie's employer provides free parking to certain management level employees. In 2016, Donnie's employer provided parking cost his employer $3,180.
d.Gretchen receives $5,000 of 6% City of Orlando bonds as a graduation present from her boyfriend on May 1. The bonds pay interest on June 30 and December 31. Gretchen sells the bonds at a gain of $750 in August.

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Definitions:

Investment Earn

The return or profit made on an investment over a certain period, including interest, dividends, and capital gains.

Interest Earning

Refers to the process by which money accrues interest over time in a savings account or investment.

Bank Account

A financial account maintained by a banking institution where a customer can deposit and withdraw money.

Simple Rate

A simple interest rate is calculated only on the principal amount of a loan or investment, without compounding over time.