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For each of the following independent situations, indicate the amount the taxpayer must include in gross income:

a. Phil won $650 in the scratch-off state lottery. There is no state income tax.

Amount to be included =

b. Ted won a compact car worth $23,300 in a TV game show. Ted plans to sell the car next year.

Amount to be included =

c. Al Bore won the Nobel Peace Prize of $622,500 this year. Rather than take the prize, Al designated that the entire award should go to Weatherhead Charity, a tax-exempt organization.

Amount to be included =

d. Jerry was awarded $5,400 from his employer, Acme Toons, when he was selected most handsome employee for Valentine’s Day this year.

Amount to be included =

e. Ellen won a $1,110 cash prize in a school essay contest. The school is a tax-exempt entity, and Ellen plans to use the funds to pay her college education.

Amount to be included =

f. Gene won $575 in the office March Madness pool.

Amount to be included =

Answer 1

Answer -

	Situation	Amount to be included in gross income	Explanation
a.	Phil won $650 in the scratch-off state lottery. There is no state income tax.	$650	All $650 is economic income realized this year and is, therefore, included in gross income.
b.	Ted won a compact car worth $23300 in a TV game show. Ted plans to sell the car next year.	$23300	The value of the car, $23300, is economic income realized this year and is, therefore, included in gross income.
c.	Al Bore won the Nobel Peace Prize of $622500 this year. Rather than take the prize, Al designated that the entire award should go to Weatherhead Charity, a tax-exempt organization.	$0	The entire award is excluded and therefore tax exempt. The award is excluded because it was for scientific, literary, or charitable achievement, and the taxpayer immediately transferred the award to a qualified charity.
d.	Jerry was awarded $5400 from his employer, Acme Toons, when he was selected most handsome employee for Valentine’s Day this year.	$5400	All $5400 is economic income realized this year and is, therefore, included in gross income.
e.	Ellen won a $1110 cash prize in a school essay contest. The school is a tax-exempt entity, and Ellen plans to use the funds to pay her college education.	$1110	All $1110 is economic income realized this year and is, therefore, included in gross income.
f.	Gene won $575 in the office March Madness pool.	$575	Gene should include $575 in his gross income.