1.Foreign Earned Income Exclusion.(Obj. 1) From March 9, 2014 until August 15, 2015 Eva is
sent to London on a temporary work assignment. Saints’s salary during 2014 is
$100, 000,of which $84,000 is earned while working in London. Her salary during
2010 is $125,000, of which $77,000 is earned while working in London.

a.
How much of Eva’s salary is taxed in
2014 and 2015? Assume the maximum foreign earned income exclusion for 2014
remains at $99,200.

b.
Beside
taking the excludion for foreign earned income ,what other option are available
to Eva?

5. Group-Term Life Insurance.(Obj. 2) Remix, Inc. provides group-term life
insurance coverage for each of its employees. The amount of coverage is equal to one year’s
salary. Remix pays 100%of the cost for the premiums. Tony and Ruth are
employees of Remix. Wright is46 years old; his salary for the year is $85,000.
Ruth is 52 years old; her salary for the year is$120,000. Ruth is a key employee
of Remix; Tony is not.

a.
Discuss the consequences to Tony and Ruth if
Remix’s plan does not favor key and highly paid employees.

b. Discuss
the consequences to Tony and Ruth if Remix’s plan favors key or highly paid

employees.

6.Employer-Provided Health Insurance.(Obj. 2) Monix Enterprises provides its employees with
health insurance coverage. During the year, it pays $7,500 of insurance
premiums for each of its employees. Randy is a highly paid employee of Monix.
Jois not one of Monix’shighly paid employees.

a.
Discuss the consequences toRandy andJohn
if the plan favors highly paid employees.

b.
Discuss the consequences to Randy and John if the plan does not favor key or
highly paid employees.

8.Bond Interest.(Obj. 1) A single taxpayer owns five
different bonds listed below. During the current year she received the interest
amounts shown. In the space provided for each bond, state the amount of
interest to be included in or excluded from gross income. If excluded, state
why.

Bond
Issue
Date Purchased Interest

A Racer Tannery 12–10–95 $ 276

B Village of Austin 7–1–97 800

C U.S. Treasury 2–1–99 600

D Matured Series EE U.S.
Savings 11–1–98 1,000

E Kingsville School
District 7–10–96 500

BondInterest Includable Interest
Excludable and Why

A ___________________
_____________________________________

B ___________________ _____________________________________

C ___________________
_____________________________________

D ___________________
_____________________________________

E
___________________ _____________________________________

11. Scholarships.(Obj.
5) On August 1, 2014, Robert was granted a $5,400 scholarship for each of four
academic years (nine months each year) to earn a degree from Birdhaven
University. The scholarship grant includes $3,600 for tuition, fees, and books
and $1,800 for room and board. Payment is one-ninth each month, starting
September 10, 2014, and is made on the tenth of each month thereafter.

a.
How much of the scholarship payments can Rob exclude from gross income in 20014?Why?

b.
If Rob is not a degree candidate, is there any limitation to the amount of his
exclusion?

Explain.

12. Gross Income Exclusions.(Obj. 1) Indicate, by placing anXin the proper
column, whethereach of the following items is includable in or excludable from
gross income.

Item
Includable
Excludable
a..Life insurance proceeds paid because
of insured’s death

b.
Workers’ compensation for physical
injury

c.
Employee-paid health insurance premiums paid to a

Non-key,
not –highly paid employee

d.
FMV of automobile won on television
game show

e.
Free parking in employer’s lot
(valued at $100/month)

f.
A nonbankrupt taxpayer is forgiven
of$1000 of credit

Card debt.

g.
Gold necklace received as a gift

h.
Health resort fee paid for taxpayer
by employer

18.Moving
Expenses.(Obj. 3) Trey Wilson accepted a new
job in Baltimore, Maryland, which is 778miles from his old home. In April he
flew out to Baltimore to start his new job. His wife, Veronica remained at
their old home so that the children could finish out the school year. In July,
the Wilsons paid a moving company $6,200 to move their belongings to Baltimore.
Veronica then drove the family out to their new home. Trey’s airfare to
Baltimore was $450. Veronica paid $151 for gas,$260 for lodging, and $110 for
meals while en route to Baltimore. Trey’s employer reimbursed him $5,000 for
the cost of the moving company.

a.
Compute the Wilsons’ moving expense deduction.

b.
Where is this amount reported on their return?

26.Student Loan Interest.(Obj.
5) Larry Matthews paid $580 interest on a qualify student loan. Larry fi les
his tax returns as a single taxpayer. His modified AGI is $69,810.

Compute
Larry deduction for AGI for the interest on his student loan.

28.Miscellaneous Questions.(Obj.
3)

a.
Explain the deduction for the penalty on early withdrawal of savings.

b.
What are the tax consequences of purchasing a new truck with funds from a Roth
IRA for a taxpayer of age 50?

c.What
are the tax consequences of purchasing a new truck with funds from a
traditional IRA for a taxpayer of age 50?

Use the information below to compute the 2014 taxable
income and tax liability for an unmarried taxpayer (age 52 with no dependents).
Prepare an analysis showing each item and amount under the appropriate headings
of (1) income, (2) gross income exclusions, (3) total gross income,
(4)deductions for AGI, (5) AGI, (6) deductions from AGI, and (7) taxable
income.

Cash Received

Interest
on savings account
$ 1,728

Gift
of money from parent 1,000

Rent
from farmland owned
30,000

Proceeds
of life insurance policy received upon parent’s death 40,000

Nondegree
candidate fellowship, granted 8/20/14, of $450 per month

for
four months
1,800

Net pay receivedGross salary of $33,000 less
$7440 state

and
federal income taxes,$2,046 social security taxes and

$479
Medicare Tax
23035

Employer’s
share of health insurance premiums,
$4260
0

De
minims employee fringe benefits valued at $25 0

Company
provided parking costing employer $300/month for 12 months 0

Total
cash received
$97,563

Cash Payments

Expenses
of farmland rental (real estate taxes) $ 1,750

Personal
living expenses
26,600

Total
cash payments $28,350