| Course | ACC 456 Individual/Estate Taxation (ACC/456) |
|---|---|
| Week | 2 |
| Paper type | Gross income and exclusions paper |
| Length | about 1,011 words, 4 double-spaced pages plus title page and references |
| Format | APA 7 student paper |
| School | University of Phoenix |
| Program | BS in Accounting |
| Updated | September 2026 |
Free sample paper for ACC 456 Week 2
Eleven Items, One Return: Deciding What Counts as Gross Income for a Composite Physical Therapist With a Weekend Photography Business in 2025
[Student Name]
University of Phoenix
ACC/456: Individual/Estate Taxation
Week 2 Assignment
[Instructor Name]
[Date]
The taxpayer and all figures are composites written for a model paper; the law is stated from the sources listed for the 2025 tax year.
A composite physical therapist, 34 and single, works for a hospital outpatient clinic and runs a weekend photography business shooting weddings and family portraits. In 2025 she received money and property from many directions: her paycheck, clients, investments, her grandmother's estate, a life insurance policy, her parents, a casino, a photo contest and even a credit card company. The question for each item is not whether it feels like income, but whether any provision of the Code lets her leave it out. This paper decides each one.
The Definition of Income
The Code's starting point is Section 61, which reaches income from any source at all unless another provision excludes it. Its list of examples, from compensation and business income to interest, dividends and discharge of debt, is illustrative rather than complete. The Supreme Court in Commissioner v. Glenshaw Glass Co. (1955) treated income as any clear gain in wealth that the taxpayer has actually received and fully controls, which is why punitive damages were taxable in that case. The practical rule follows: a receipt is included unless a specific exclusion applies (Internal Revenue Service, 2025b).
Wages and Employer Benefits
Her wages of $78,000 are included. Her employer paid $7,200 toward her health insurance, which is excluded as employer-provided accident and health coverage. The employer also paid $4,000 of tuition for a certificate course in sports rehabilitation under a written educational assistance program. Employer educational assistance is excluded up to $5,250 a year, so the full $4,000 is excluded.
The Photography Business
Clients paid her $14,500 for photography. Her business expenses for equipment, editing software, mileage and a website were $4,100. Business income enters gross income as net profit, $10,400, reported on Schedule C. She will also owe self-employment tax on it, a separate calculation.
Interest and Dividends
Her savings account paid $600 of interest, which is included. She owns bonds issued by her state's turnpike authority that paid $900; the Code leaves interest paid by states, cities and their agencies out of gross income. Her mutual fund paid $1,100 of qualified dividends, which are included in gross income, though taxed at the lower rates for qualified dividends.
The Inheritance and the Life Insurance
Her grandmother's estate distributed $25,000 to her. Property acquired by bequest or inheritance is excluded from gross income. She was also the beneficiary of her grandmother's life insurance policy and received $50,000; life insurance proceeds paid by reason of the insured's death are excluded. Interest she earns later on either amount will be taxable.
The Gift
Her parents gave her $10,000 toward a down payment on a condominium. Gifts are excluded from the recipient's income. Her parents' gift is within their annual exclusion for gift tax purposes, so no gift tax return is required for it.
The State Tax Refund
She received an $800 refund of 2024 state income tax. Under the tax benefit rule, a refund is included only to the extent the earlier deduction reduced federal tax. She took the standard deduction in 2024, so the state tax gave her no federal benefit, and the refund is excluded.
The Jackpot and the Camera
On a weekend trip she won $1,200 on a slot machine. Gambling winnings are included in full; losses could be deducted only if she itemized and only up to winnings. She also won a professional camera valued at $3,000 in a photography contest she entered. Prizes are included at fair market value (Internal Revenue Service, 2025a).
The Canceled Debt
After a dispute over charges from an old credit card, the issuer agreed to settle a $4,500 balance for $2,500 and canceled $2,000. Canceled debt is included in income unless an exception applies, such as insolvency immediately before the discharge. She was solvent, with assets well above her liabilities, so the $2,000 is included.
Records and Reporting
Several items will arrive on information returns that the IRS also receives. Her employer reports wages on Form W-2, the bank and fund report interest and dividends on Forms 1099-INT and 1099-DIV, the casino issued a Form W-2G because the jackpot reached its reporting threshold and the card issuer will send a Form 1099-C for the canceled debt. The contest sponsor may issue a Form 1099-MISC for the camera. Her photography clients who are businesses may issue Forms 1099-NEC, but most of her clients are families, so her own invoices and bank deposits are the main record of that income. Because the IRS matches information returns to the return she files, leaving out any of these items would likely trigger a notice. The excluded items produce different paperwork: the estate's records show the inheritance, and the insurer's letter documents the death benefit.
Total Gross Income
Included items are wages of $78,000, net business income of $10,400, bank interest of $600, dividends of $1,100, gambling winnings of $1,200, the camera at $3,000 and canceled debt of $2,000, a total of $96,300. Excluded items total $97,900: the employer health coverage, tuition assistance, municipal interest, inheritance, life insurance, gift and state refund.
The Theory Behind the Rules
Simons (1938) defined personal income as consumption plus the change in net worth over a period, a broad concept that would reach nearly every item here. The Code starts from a similarly broad definition and then carves out exclusions for policy reasons: gifts and inheritances because the giver has usually been taxed already or will face transfer taxes, life insurance to protect survivors, municipal interest to lower state and local borrowing costs and employer health coverage to encourage insurance. Each exclusion is a choice, which is why each one must be found in the law rather than assumed.
Conclusion
Of the physical therapist's receipts, $96,300 is gross income and $97,900 is excluded. Her largest receipts, the inheritance and life insurance, are not taxed, while smaller windfalls, the jackpot, the camera and the canceled debt, are. The broad definition of income and the specific wording of each exclusion decide every item.
References
Commissioner v. Glenshaw Glass Co., 348 U.S. 426 (1955).
Internal Revenue Service. (2025a). Taxable and nontaxable income (Publication 525). https://www.irs.gov/publications/p525
Internal Revenue Service. (2025b). Your federal income tax: For individuals (Publication 17). https://www.irs.gov/publications/p17
Simons, H. C. (1938). Personal income taxation: The definition of income as a problem of fiscal policy. University of Chicago Press.
What the ACC 456 Week 2 instructions ask
The ACC 456 Week 2 assignment typically asks students to determine gross income for an individual and explain exclusions. Typical items include compensation and fringe benefits, business and self-employment income, interest and dividends, gains, prizes and gambling winnings, alimony under old and new agreements, unemployment compensation, Social Security benefits, discharge of debt and state tax refunds, along with exclusions such as gifts, inheritances, life insurance proceeds, municipal bond interest, qualified scholarships and employer-provided health coverage. Students usually list each item, state whether it is included and why and total gross income. Explanations should cite the Code, case law or IRS publications in APA style and apply each rule to the facts.
How this ACC 456 Week 2 example is built
A physical therapist with a side business receives an unusually wide range of items in one year, which lets the paper test the definition of income on realistic facts rather than a list. The paper opens with the broad definition from the Code and the Supreme Court, then takes each item in turn, stating whether it is included, the rule that decides it and any nuance, such as the tax benefit rule for her state refund or the exception to debt cancellation for insolvent taxpayers. The self-employment income is computed from gross receipts and expenses. The items are then totaled, and a closing section explains the theory of income behind the rules.
ACC 456 Week 2 grading rubric: where the points go
The grading for gross income generally depends on correct inclusion or exclusion of each item with a correct reason. Faculty check that gifts, inheritances and life insurance proceeds paid by reason of death are excluded, that municipal bond interest is excluded, that prizes and gambling winnings are included at fair market value, that canceled debt is included unless an exception applies and that a state tax refund is included only to the extent the prior deduction produced a tax benefit. Employer fringe benefits must be matched to their specific exclusions. A correct total, organized presentation and citations of the Code, a leading case and IRS guidance complete the grade.
ACC 456 Week 2 help: mistakes to avoid
ACC 456 Week 2 papers often exclude items because they feel like windfalls, such as prizes or canceled debt. The rule runs the other way: everything is income unless a specific provision excludes it. Name the exclusion for each item you leave out. Another error is including a state tax refund automatically; check whether the taxpayer itemized in the prior year. Students also include the full amount of self-employment receipts rather than net income from the business. Value noncash prizes at fair market value. For employer benefits, check the specific limit, such as the educational assistance cap. Finally, remember that income earned on an inheritance is taxable even though the inheritance is not.
Related ACC 456 sample papers
Other ACC 456 week samples
- ACC 456 Week 1: Tax Formula and Filing Status
- ACC 456 Week 3: Deductions and Credits
- ACC 456 Week 4: Property Transactions and Basis
- ACC 456 Week 5: Estate and Gift Taxation
More BS in Accounting sample papers
- ACC 421 Week 2: Income Statement and Balance Sheet
- ACC 422 Week 2: Depreciation, Impairment, Intangibles
- ACC 423 Week 2: Investments and Revenue Recognition
- ACC 455 Week 2: Computing Corporate Taxable Income
ACC 456 Week 2 questions, answered
What does ACC/456 Week 2 usually cover?
It usually covers gross income for individuals and the major exclusions, such as gifts, inheritances, life insurance proceeds, municipal bond interest and certain employer fringe benefits.
Where can I find a free ACC 456 Week 2 sample paper?
The physical therapist example here sorts eleven items into income and exclusions, with margin notes on each rule, and nothing is behind a paywall. Send your own list of items and the first custom paper we write for you is free.
Is an inheritance taxable income?
No. Property received by gift, bequest or inheritance is excluded from the recipient's gross income, although later income earned on it, such as interest, is taxable.
Is canceled debt taxable?
Generally yes, as ordinary income, unless an exception applies, such as insolvency immediately before the cancellation or discharge in bankruptcy.
When is a state tax refund taxable?
Only to the extent the taxpayer deducted the state tax in a prior year and the deduction reduced federal tax, under the tax benefit rule.
Write yours, or have the desk draft it
This paper is an original model document written by our desk, not a submitted student paper and not an official University of Phoenix document. Read it for the moves, then write your own to the instructions in your classroom. If you want one built to your exact prompt and rubric, the first custom sample is free and arrives in 24 to 48 hours.
Request this one custom, free · All ACC 456 week samples · All courses