Question

Joanna received $55,800 compensation from her employer, the value of her stock in ABC company appreciated by $12,400 during the year (but she did not sell any of the stock), and she received $34,600 of life insurance proceeds from the death of her husband. What is the amount of Joanna's gross income from these items?

Answer 1

Joanna's gross income from the described items would be $55,800, as only the compensation from her employer is considered taxable. The stock appreciation is not taxable unless sold, and life insurance proceeds are generally not taxable.

Step-by-step explanation:

Calculation of Joanna's Gross Income

To calculate Joanna's gross income, we need to consider the types of income that are taxable and those that are not. In this scenario, Joanna received $55,800 as compensation from her employer, which is fully taxable. Her stock in ABC Company appreciated by $12,400; however, since she did not sell any of the stock, this unrealized gain is not considered taxable income. Lastly, the $34,600 of life insurance proceeds from the death of her husband is generally not taxable. Therefore, the only amount that should be included in Joanna's gross income is the compensation received from her employer.

Gross Income from Compensations: $55,800

Unrealized gains and life insurance proceeds are typically excluded from gross income calculations for tax purposes, which means the amount from stock appreciation and the life insurance proceeds are not counted as part of Joanna's gross income.

Answer 2

Her total income recognizable is $90,400

Step-by-step explanation:

The $55,800 received from her employer and $34,600 received from insurance proceeds are already earned and be recognized . However, $12,400 appreciation in her stock will not be recognized because this can only be earned and recognized only when the stocks are sold.

Hence, it is only $90,400 that will form Joanna's gross income.