Determine the effect on gross income in each of the following cases: A. Allison received $35,000 in
Question:
Determine the effect on gross income in each of the following cases:
A. Allison received $35,000 in compensatory damages in a lawsuit she filed against a tanning salon for burns she received from the tanning equipment. Allison also received $6,500 in loss of wages as she was not able to work as a result of the burns. In addition, she also received punitive damages in the amount of $45,000. What if any amount will be included in Allison's income for 2021?
B. In 2021 Jack collected $160,000 on a life insurance policy when his wife, Diane died in 2020. The insurance policy was provided by Diane's employer and the premiums were excluded from Diane's gross income as group term life insurance. Also in 2021, Jack collected the $2,800 of accrued salary owed to Diane at the time of her death. Determine Jack's gross income for tax purposes.
