Question 1

Susie received unemployment benefits in the current year.

Accepted Answer

A) All of the unemployment benefits are taxable. 
B) All of the unemployment benefits are non-taxable. 
C) Half of the unemployment benefits are taxable and half are non-taxable. 
D) The taxability of the unemployment benefits depends upon other income received for the year. 
A) All of the unemployment benefits are taxable. 
B) All of the unemployment benefits are non-taxable. 
C) Half of the unemployment benefits are taxable and half are non-taxable. 
D) The taxability of the unemployment benefits depends upon other income received for the year.

Question 2

Which of the following may be excluded from income?

Accepted Answer

A) Payment for the loss of an arm 
B) Premiums for health insurance paid by the employer 
C) Reimbursement from the insurance company for a physical examination 
D) All of the above are excluded from gross income 
E) None of the above are excluded from gross income 
A) Payment for the loss of an arm 
B) Premiums for health insurance paid by the employer 
C) Reimbursement from the insurance company for a physical examination 
D) All of the above are excluded from gross income 
E) None of the above are excluded from gross income

Question 3

Which of the following is correct?

Accepted Answer

A) Employee discounts are always included in gross income. 
B) Employee discounts of up to 20 percent may be taken on personal property held for investment. 
C) Employee discounts are not tax-free if they exceed the employer's gross markup for merchandise. 
D) Tax-free employee discounts include discounts in lines of business in which the employee does not work. 
A) Employee discounts are always included in gross income. 
B) Employee discounts of up to 20 percent may be taken on personal property held for investment. 
C) Employee discounts are not tax-free if they exceed the employer's gross markup for merchandise. 
D) Tax-free employee discounts include discounts in lines of business in which the employee does not work.

Question 4

Which of the following is classified as nontaxable income?

Accepted Answer

A) Unemployment compensation 
B) Dividend income 
C) Income from real estate rental property 
D) Welfare payments 
E) None of the above 
A) Unemployment compensation 
B) Dividend income 
C) Income from real estate rental property 
D) Welfare payments 
E) None of the above

Question 5

Unemployment compensation is fully taxable to the individual receiving the compensation.

Accepted Answer

A) True 
 B)False

Question 6

Marie had a good year. She received the following prizes and awards: - an iPad from The Oprah Show with a fair market value of $500
- lottery winnings of $1,000 received in cash
- a plaque worth $25 plus $100 of Godiva chocolate in recognition for 100 days on the job without an accident
- a $10,000 cash prize from American Idol
How much of her prizes and awards should Marie report on her tax return?

Accepted Answer

A) None, they are all excluded from income 
B) $11,000; only cash prizes and awards are included 
C) $11,500; the award from her job is excluded 
D) $11,700; the plaque may be excluded 
E) $11,725; everything is included at the highest amount 
A) None, they are all excluded from income 
B) $11,000; only cash prizes and awards are included 
C) $11,500; the award from her job is excluded 
D) $11,700; the plaque may be excluded 
E) $11,725; everything is included at the highest amount

Question 7

Which of the following gifts or prizes would be considered taxable income to the person receiving the gift?

Accepted Answer

A) $5,000 given to the taxpayer by his friend 
B) A mobile home given to the taxpayer by his mother 
C) A ski boat won by the taxpayer on the Price is Right game show 
D) A Mustang GT given to the taxpayer by his brother 
E) None of the above would be considered taxable 
A) $5,000 given to the taxpayer by his friend 
B) A mobile home given to the taxpayer by his mother 
C) A ski boat won by the taxpayer on the Price is Right game show 
D) A Mustang GT given to the taxpayer by his brother 
E) None of the above would be considered taxable

Question 8

Laura and Leon were granted a divorce in 2006. In accordance with the decree, Leon made the following payments to Laura in 2015: How much of the payments can he deduct as alimony in 2015?

Accepted Answer

A) $0 
B) $6,000 
C) $10,000 
D) $4,000 
E) None of the above 
A) $0 
B) $6,000 
C) $10,000 
D) $4,000 
E) None of the above

Question 9

An auto that is received as a prize should be included in the taxpayer's income at its list price rather than its fair market value.

Accepted Answer

A) True 
 B)False

Question 10

In the tax law, the definition of gross income is:

Accepted Answer

A) All cash payments received unless excluded by the tax code 
B) All cash payments received for services performed 
C) All income from whatever source derived 
D) All income of any kind unless the income is earned illegally 
A) All cash payments received unless excluded by the tax code 
B) All cash payments received for services performed 
C) All income from whatever source derived 
D) All income of any kind unless the income is earned illegally

Question 11

Mable is a wealthy widow who has come to you for tax advice. She is in the 35 percent tax bracket. She has a choice between investing in a high-quality municipal bond paying 3.5 percent or a high-quality corporate bond paying 7 percent. From a tax standpoint, which investment would you advise her to make and why?

Accepted Answer

She should invest in the corporate bond.

Question 12

For divorces after 1984, which of the following statements about alimony payments is not correct?

Accepted Answer

A) The payments must be in cash and must be received by the spouse (or former spouse) 
B) Divorced or legally separated parties can be members of the same household at the time the payments are made 
C) The payor must have no liability to make payments for any period following the death of the spouse receiving the payments 
D) The payments must not be designated in the written agreement as anything other than alimony 
A) The payments must be in cash and must be received by the spouse (or former spouse) 
B) Divorced or legally separated parties can be members of the same household at the time the payments are made 
C) The payor must have no liability to make payments for any period following the death of the spouse receiving the payments 
D) The payments must not be designated in the written agreement as anything other than alimony

Question 13

Tim receives $500 of qualified dividends from Exxon in 2015. He is in the 10 percent ordinary tax bracket. Tim's tax on the dividends will be:

Accepted Answer

A) $0 
B) $25 
C) $50 
D) $75 
E) $100 
A) $0 
B) $25 
C) $50 
D) $75 
E) $100

Question 14

Which of the following is generally excluded from gross income?

Accepted Answer

A) Dividends 
B) Rewards 
C) Disability benefits 
D) Passive income 
E) None of the above 
A) Dividends 
B) Rewards 
C) Disability benefits 
D) Passive income 
E) None of the above

Question 15

A gift received from a financial institution for opening a bank account is not taxable income to the recipient.

Accepted Answer

A) True 
 B)False

Question 16

Jerry and Sally were divorced under an agreement executed July 1, 2015. The terms of the agreement provide that Jerry will transfer to Sally his interest in a rental house worth $250,000 with a tax basis to Jerry of $80,000. What is the amount of the gain that must be recognized by Jerry on the transfer of the property and what is Sally's tax basis in the property after the transfer, respectively?

Accepted Answer

A) $170,000 and $250,000 
B) $0 and $250,000 
C) $170,000 and $170,000 
D) $0 and $80,000 
E) None of the above 
A) $170,000 and $250,000 
B) $0 and $250,000 
C) $170,000 and $170,000 
D) $0 and $80,000 
E) None of the above

Question 17

Interest on U.S. Treasury Bonds is not taxable.

Accepted Answer

A) True 
 B)False

Question 18

Geoff is a company president who has had a very good year at work. The owner of the company is pleased and gives him a gift of $50,000 at the end of the year. The owner writes "gift" in the memo section of the check. How much of the gift is taxable to Geoff?

Accepted Answer

The full $50,000 is taxable. T

Question 19

All of the following amounts are excluded from gross income, except:

Accepted Answer

A) Tips and gratuities 
B) Child support payments 
C) Scholarship grants for tuition 
D) Gifts 
E) Veterans' benefits 
A) Tips and gratuities 
B) Child support payments 
C) Scholarship grants for tuition 
D) Gifts 
E) Veterans' benefits

Question 20

A scholarship for room and board granted in 2015 is fully taxable to the recipient.

Accepted Answer

A) True 
 B)False

Susie received unemployment benefits in the current year.

Which of the following may be excluded from income?

Which of the following is correct?

Which of the following is classified as nontaxable income?

Unemployment compensation is fully taxable to the individual receiving the compensation.

Which of the following gifts or prizes would be considered taxable income to the person receiving the gift?

Laura and Leon were granted a divorce in 2006. In accordance with the decree, Leon made the following payments to Laura in 2015: How much of the payments can he deduct as alimony in 2015?

An auto that is received as a prize should be included in the taxpayer's income at its list price rather than its fair market value.

In the tax law, the definition of gross income is:

For divorces after 1984, which of the following statements about alimony payments is not correct?

Tim receives $500 of qualified dividends from Exxon in 2015. He is in the 10 percent ordinary tax bracket. Tim's tax on the dividends will be:

Which of the following is generally excluded from gross income?

A gift received from a financial institution for opening a bank account is not taxable income to the recipient.

Interest on U.S. Treasury Bonds is not taxable.

Geoff is a company president who has had a very good year at work. The owner of the company is pleased and gives him a gift of $50,000 at the end of the year. The owner writes "gift" in the memo section of the check. How much of the gift is taxable to Geoff?

All of the following amounts are excluded from gross income, except:

A scholarship for room and board granted in 2015 is fully taxable to the recipient.

The Individual Income Tax Return

Business Income and Expenses, Part I

Business Income and Expenses, Part II

Itemized Deductions and Other Incentives

Credits and Special Taxes

Accounting Periods and Methods and Depreciation

Capital Gains and Losses

Withholding, Estimated Payments, and Payroll Taxes

Partnership Taxation

The Corporate Income Tax

Tax Administration and Tax Planning

Filters

Exam 2: Gross Income and Exclusions

Susie received unemployment benefits in the current year.

Which of the following may be excluded from income?

Which of the following is correct?

Which of the following is classified as nontaxable income?

Unemployment compensation is fully taxable to the individual receiving the compensation.

Which of the following gifts or prizes would be considered taxable income to the person receiving the gift?

Laura and Leon were granted a divorce in 2006. In accordance with the decree, Leon made the following payments to Laura in 2015: How much of the payments can he deduct as alimony in 2015?

An auto that is received as a prize should be included in the taxpayer's income at its list price rather than its fair market value.

In the tax law, the definition of gross income is:

For divorces after 1984, which of the following statements about alimony payments is not correct?

Tim receives $500 of qualified dividends from Exxon in 2015. He is in the 10 percent ordinary tax bracket. Tim's tax on the dividends will be:

Which of the following is generally excluded from gross income?

A gift received from a financial institution for opening a bank account is not taxable income to the recipient.

Interest on U.S. Treasury Bonds is not taxable.

Geoff is a company president who has had a very good year at work. The owner of the company is pleased and gives him a gift of $50,000 at the end of the year. The owner writes "gift" in the memo section of the check. How much of the gift is taxable to Geoff?

All of the following amounts are excluded from gross income, except:

A scholarship for room and board granted in 2015 is fully taxable to the recipient.

The Individual Income Tax Return

Business Income and Expenses, Part I

Business Income and Expenses, Part II

Itemized Deductions and Other Incentives

Credits and Special Taxes

Accounting Periods and Methods and Depreciation

Capital Gains and Losses

Withholding, Estimated Payments, and Payroll Taxes

Partnership Taxation

The Corporate Income Tax

Tax Administration and Tax Planning

Filters