The item out of the list that is not taxable to the taxpayer receiving it is 'b. Damages for physical personal injury.' These are generally excluded from taxable income, whereas bonuses, unemployment compensation, prizes, and gambling winnings are taxable.
The question is asking which item out of a list is not taxable to the taxpayer receiving it. The correct answer is b. Damages for physical personal injury. Generally, in the U.S., damages received for personal physical injury are not included in taxable income. In contrast, bonuses, unemployment compensation, prizes, and gambling winnings are all examples of taxable income and must be reported to the Internal Revenue Service (IRS).
Under U.S. tax law, compensatory damages awarded for physical injury are an exclusion from gross income. This means that if someone receives a settlement or award specifically for physical injuries, such as pain and suffering directly related to the physical injury, it is not considered taxable income.
However, all other types of income, including the other options listed, are generally taxable. For instance, bonuses are considered supplemental income and taxes are withheld accordingly. Unemployment compensation is also taxable and must be reported on your federal tax return. Prizes and gambling winnings are other sources of income that are subject to income tax.
The probable question may be:
"All of the following items are taxable to the taxpayer receiving them, except:
a. Bonuses
b. Damages for physical personal injury
c. Unemployment compensation
d. Prizes
e. Gambling winnings"