4. LO.1 Which of the following items are exclusions from gross income?
a. Alimony payments received.
b. Damages award received by the taxpayer for personal physical injury—none were for punitive damages.
d. Amount collected on a loan previously made to a college friend.
e. Insurance proceeds paid to the taxpayer on the death of her uncle—she was the designated beneficiary under the policy

5. LO.1 To save on U.S. income taxes, Lucas (a U.S. citizen and resident of Vermont) invests in foreign stocks and bonds. Is Lucas correct in his approach? Explain.

He cannot avoid income taxes because “Gross income from “whatever source derived” includes income from both U.S. and foreign sources. This approach to taxation, where the government taxes its citizens and residents on their worldwide income regardless of where earned, is referred to as a global system” p3-6

8. LO.2 In choosing between the standard deduction and itemizing deductions from AGI, what effect, if any, does each of the following have?

a. The age of the taxpayer(s).
A taxpayer who is age 65 or over or blind in 2013 qualifies for an additional standard deduction of $1,200 or $1,500, depending on filing status

b. The health (i.e., physical condition) of the taxpayer.
For example, additional standard deduction is available for blind people

c. Whether taxpayers rent or own their residence.
When the taxpayers pay for their house, the interest deduction happens.

d. Taxpayer’s filing status (e.g., single, married, filing jointly).
The amount of deduction really depends on the status.

e. Whether married taxpayers decide to file separate returns.
If the wife or husband itemizes their partner, one another need to itemize too.

f. The taxpayer’s uninsured personal residence was recently destroyed by fire.
It could be big amount loss, insurance should cover it. g. The