Explore BrainMass

Tax Question - Exclusions

Of the items specifically excluded from gross income which one do you feel should not be excluded. Defend your response.

1. Donative items
Gifts, bequests, and inheritances (102)
Life insurance proceeds paid by reason of death (101)
Accelerated death benefits (101(g))
Survivor benefits for public safety officer killed in the line of duty (101(h))
Scholarships (117)
2. Personal and welfare items
Injury or sickness payments (104)
Public assistance payments (Rev.Rul. 71-425, 1971-2 C.B. 76)
Amounts received under insurance contracts for certain living expenses (123)
Reimbursement for the cost s of caring for a foster child (131)
Disaster relief payments (139)
3. Wage and salary supplements
1. Fringe benefits
Accident and health benefits (105 and 106)
Health Savings Accounts (106(d))
Lodging and meals furnished for the convenience of the employer (119)
Rental value of parsonages (107)
Employee achievement awards (74(c))
Employer contributions to employee group term life insurance (79)
Cafeteria plans (125)
Educational assistance payments (127)
Child or dependent care (129)
Services provided to employees at no additional cost to the employer (132)
Employee discounts (132)
Working condition and de minimis fringes (132)
Athletic facilities provided to employees (132)
Qualified transportation fringe (132)
Qualified moving expense reimbursement (132)
Qualified retirement planning services (132)
Tuition reductions granted to employees of educational institutions (117)
Child adoption expenses (137)
Long-term care Insurance (77028)
b. Military benefits
Combat pay (112)
Housing, uniforms, and other benefits (134)
c. Foreign earned income (911)
4. Investor items
Interest on state and local government obligations (103)
Improvements by tenant to landlord's property (109)
Fifty percent, 75 percent, or 100 percent exclusion for gain from sale of certain small business stock (1202)
5. Benefits for the elderly
Social Security benefits (except in the case of certain higher-income taxpayers) (86)
6. Other benefits
Income from discharge of indebtedness (108)
Recovery of a prior year's deduction that yielded no tax benefit (111)
Gain from sale of personal residence (121)
Educational savings bonds (135)
Qualified tuition program (529)
Coverdell Education Savings Account (530)
Lessee construction allowances for short-term leases (110)
Conservation cost-sharing payments (126)

© BrainMass Inc. brainmass.com June 21, 2018, 10:42 am ad1c9bdddf

Solution Preview

In my opinion, public assistance payments should be considered taxable income. We will use person A and person B as an example for this discussion. Both A & B are adults and both have children. We could even compare the two people as the head of their household. Perhaps both are single parents providing for themselves and their children, or they are married and haven't been able to maintain full-time employment to the degree (dollar amount) that provides for the care and upkeep of their households. In both situations, the same basic theories would apply.

Now let's take person A. Person A goes out every day to look for work. This person is no ...

Solution Summary

This solution explains which of the items that are currently excluded from gross income should be included as taxable income. A comprehensive example defending the choice is provided.