Question

Arnie was the beneficiary of his wife's life insurance policy. He received $100,000 in June from the policy after his wife's death. He also sold some land that he had purchased a couple of years earlier. He sold the land for $6,000. He only paid $3,500 for the land when he bought it. Arnie is self-employed and earned a profit in his business of $55,000 (ignoring the self-employment tax deduction). What is the amount of Arnie's gross income for the current year

Answer 1

Answer:

$161,000

Explanation:

Gross Income is the total receipt or payment to an individual or other economic entity, without accounting or adjusting for taxes or depreciation.

When taxes or wear & tear have to be deducted or accounted for, the measure is Net Income.

Although the question gives information about the price Arnie bought the land years back, we will ignore, as we are calculating gross income for the current year and not net income.

Arnie's gross income for the current year is now;

$100,000 + $6,000 + $55,000

= $161,000

This is the gross income received by Arnie in the current year.