Please determine the amount that will be included in the Taxpayers Gross Income in the following situations. Cite the appropriate authority (authorities) for your answer.
2(a): Roger went to the hospital to complain of shooting and radiating pains in his back and legs, as well as weakness. When he got there, the Emergency Department sent him home because they were too busy to help, and he already had an appointment set in two weeks. Roger went home, and when he woke up he could not move his legs anymore, and the damage was irreparable. He sued the hospital, and received a lump sum settlement of 2 million dollars. 1.5 million was allocated to his pain, suffering, and injury, and the other $500,000 was allocated to punitive damages.
(i) How much of this settlement is includible in the year he settles?
(ii) What if this had been awarded at trial, not in a settlement agreement?
(iii) What if this is a settlement for periodic payments to pay $100,000 per year for 20 years?
(iv) What if the entire amount is to compensate him for his pain, suffering, and injury?
(v) Are there policy reasons to exclude this sort of income from GI?
2(b): Stan works for an unnamed non-government agency as a spy. He earns 80K per year, along with cash and other bonuses. How much GI does he have if each of the following occur:
(i) Stan closed more than his required cases in 2012. He receives a cash bonus of 18K for his services.
(ii) Same as above, but instead of a cash bonus, Stan received a new Toyota Forerunner, MSRP 30K.
(iii) Stan’s HQ has a full athletic gym on the premises with swimming pool and sauna, and Stan spends an hour every workday there. Memberships at comparable gyms nearby cost $400 per year.
(iv) Due to the sensitive nature of material kept at HQ, Stan’s wife Francine uses the sister gym in town. Stan’s employer comps her membership dues ($400 annually), as the employer owns that gym and its employees are on employer’s payroll as well. That gym is open to the public.
(v) Stan always eats at the HQ cafeteria-he thinks the food is spot on. His daily lunches are comped for him, but would cost $15 per day offsite. Assume 3 meals per week, 48 weeks per year. Other lower ranking agents have to pay for their own meals, so the cafeteria breaks even each year.
(vi) The unnamed agency pays for a country club membership for Stan so that he can infiltrate the social structure of potential targets. He admits that five times out of ten, he brings his family to the club to “keep up appearances,” and the remainder of the time he is actively working his contacts. Membership costs are $10,000. The agency is not going to deduct the membership costs.
(vii) Stan has free access to the break room, which is stocked with juices, fruit, sodas, beer, and snacks. Stan loves the snacks, and eats $50 worth every week.
(viii) Stan has free access to the agency’s Basketball season tickets on the floor. He uses a pair of these tickets ($500) at six games per year.
2(c): Jane purchased a home in December of 2011. In January, her eleven-year-old son Mikey was playing with his friends, Mouth, Chunk, and Steph. The children followed a treasure map they had found in the attic, leading them to a chest buried under the oak tree the woods behind the backyard containing emeralds and rubies with FMV $50,000, and they got Jane to open the chest to reveal the find. Jane immediately said she did not want them, and handed the gems over to her sister Jill. State law provides that “finders (who report their find and if nobody else claims it within 90 days) are keepers.” Jill reported to the police that she had found the gems, and when no person came forward to claim them after 90 days, the police released the gems to her.
(i) What part of the $50,000 is includible in Jane’s GI and/or in Jill’s GI, and in what year?