Final answer:
For a divorce settlement in 2016, alimony payments received are included in gross income; damages for personal physical injury are excluded; a new golf cart won in a raffle is included; the amount collected on a loan is excluded; life insurance proceeds as a beneficiary are excluded.
Step-by-step explanation:
Inclusion or Exclusion of Items from Gross Income
To clarify whether certain items should be included in or excluded from gross income for a taxpayer, let's review each scenario:
a. Alimony payments received (relates to a divorce settlement in 2016) - Included in gross income prior to the Tax Cuts and Jobs Act of 2017. However, for divorce agreements executed after December 31, 2018, alimony payments are no longer taxable income for the recipient.
b. Damages award received for personal physical injury—none were for punitive damages - Excluded from gross income as personal injury compensation is generally not taxable.
c. A new golf cart won in a church raffle - Included in gross income because prizes and awards are taxable unless given to a qualified charity.
d. Amount collected on a loan previously made to a college friend - Excluded from gross income because repayment of a loan principal is not income.
e. Insurance proceeds paid on the death of her uncle—she was the designated beneficiary under the policy - Excluded from gross income as life insurance proceeds are typically not taxed.
Understanding what is included or excluded from gross income is crucial for accurately reporting income and calculating the correct tax owed. These determinations can be complex and are subject to change with new tax laws. Therefore, it is always advisable to consult the Internal Revenue Service (IRS) guidelines or a tax professional for the most current regulations.