Chapter 4
1. Your brother is short on cash and cannot pay his rent this month. You pay his rent for him. Is this taxable income to your brother? Do you get a deduction? (2 pts)
No, this would not be taxable income to my brother. A person cannot reassign income to another person. It would fall under the gift category which has its own set of rules. No, you would not have a deduction for your taxes. In fact if the amount you gave your brother was over $13,000 you would have to pay a gift tax.

2. Which of the following items would be excluded from income? (a) $100 bill found under the sugar caddy at the restaurant (b) Inheritance of a car from your grandmother valued at $5,000. (c) Loan from your father-in-law to start your business, (d) Child Support received totaling $16,500. (4 pts)
The inheritance of a car from your grandmother valued at $5,000 would be excluded from income as long as the $5,000 was under the caps. The tax code where you would find this would be under sections 101-139.

Chapter 5
3. Shaun & Kayla earned the following in 2013: Interest on a Savings account of $36, Interest on a U.S. Series EE Savings Bond of $25, Interest on a CD that has not matured yet of $20. How much taxable interest income must they report on their 2013 tax return? (4 pts)
It depends on whether the series EE Savings Bond has matured. If the savings bond had matured then the taxable interest income they would report would be $81. If it has not yet matured or been redeemed they would only report the interest on the CD and Savings account for a total of $56.

4. Explain what a Cafeteria Plan is (hint: it has nothing to do with what you eat between classes :-) ). (5 pts)
A Cafeteria plan is an employee benefit package that allows the employee to choose between qualified benefits or cash. If the employee chooses to take the cash over benefits the