Question 1

Noncash items received as income must be included in income at their fair market value.

Accepted Answer

A) True 
 B)False

Question 2

A "no-additional-cost" service includes only those services in the major line of business in which the employee is employed.

Accepted Answer

A) True 
 B)False

Question 3

Ordinarily life insurance proceeds are excluded from gross income. Why would they be taxable if the policy had been transferred for valuable consideration, prior to the death of the insured?

Accepted Answer

If a policy is transferred for valuable

Question 4

Andy landscaped his friend's house in return for a couch set and an HD television worth $8,000. How much income must Andy report on his tax return for his services?

Accepted Answer

The noncash payment of $8,000 for servic

Question 5

Jim, a single individual, was unemployed for a few months during the current year. During the year, he received $3,600 in unemployment compensation payments. How much of his unemployment compensation payments must be included in gross income?

Accepted Answer

$3,600. Unemployment

Question 6

In some cases, Social Security benefits may be partially taxable.

Accepted Answer

A) True 
 B)False

Question 7

In regards to Social Security benefits:

Accepted Answer

A) The Social Security inclusion formula is the same amount for each filing status. 
B) Social Security benefits are always excluded because wages are subject to Social Security tax when earned. 
C) Tax-free interest income must be included in the formula used to determine if Social Security is included in taxable income. 
D) Up to 100 percent of Social Security benefits received may be included in taxable income. 
A) The Social Security inclusion formula is the same amount for each filing status. 
B) Social Security benefits are always excluded because wages are subject to Social Security tax when earned. 
C) Tax-free interest income must be included in the formula used to determine if Social Security is included in taxable income. 
D) Up to 100 percent of Social Security benefits received may be included in taxable income.

Question 8

​Which of the following are not excludable as an employee fringe benefit?

Accepted Answer

A) ​Employee deductions of $4,200 for dependent childcare expenses 
B) Premiums for up to $50,000 of group term life insurance 
C) ​An employee discount that permits the sale of merchandise to employees for just over cost 
D) ​Public transportation costs of $130 per month provided by the employer 
E) ​All of the above are excludable as an employee fringe benefit 
A) ​Employee deductions of $4,200 for dependent childcare expenses 
B) Premiums for up to $50,000 of group term life insurance 
C) ​An employee discount that permits the sale of merchandise to employees for just over cost 
D) ​Public transportation costs of $130 per month provided by the employer 
E) ​All of the above are excludable as an employee fringe benefit

Question 9

To promote business activity, the tax rules generally are very liberal in treating business gifts as tax-free income to the recipient.

Accepted Answer

A) True 
 B)False

Question 10

An investor is comparing the following two bonds: a bond from ABC Corp which pays an interest rate of 9 percent per year and a municipal bond which pays an interest rate of 7.9 percent per year. The investor is in the 15 percent tax bracket. Which bond will give the investor a higher after-tax interest rate and for which reason?

Accepted Answer

A) The ABC bond because it pays a 9 percent interest rate, while the municipal bond only pays 7.9 percent . 
B) The ABC bond because it pays an equivalent after-tax rate of 10.6 percent, while the municipal bond pays out an equivalent after-tax rate of 9.3 percent. 
C) The municipal bond because it pays an equivalent after-tax rate of 9.3 percent, while the ABC bond pays out a 9 percent interest rate. 
D) The municipal bond because it pays an equivalent after-tax rate of 7.9 percent, while the ABC bond pays out an equivalent after-tax rate of 7.65 percent. 
E) None of the above is correct. 
A) The ABC bond because it pays a 9 percent interest rate, while the municipal bond only pays 7.9 percent . 
B) The ABC bond because it pays an equivalent after-tax rate of 10.6 percent, while the municipal bond pays out an equivalent after-tax rate of 9.3 percent. 
C) The municipal bond because it pays an equivalent after-tax rate of 9.3 percent, while the ABC bond pays out a 9 percent interest rate. 
D) The municipal bond because it pays an equivalent after-tax rate of 7.9 percent, while the ABC bond pays out an equivalent after-tax rate of 7.65 percent. 
E) None of the above is correct.

Question 11

Which of the following is nontaxable income to the recipient for tax purposes?

Accepted Answer

A) Salary income 
B) Income from real estate rental property 
C) Income from tips 
D) Inheritances 
E) None of the above 
A) Salary income 
B) Income from real estate rental property 
C) Income from tips 
D) Inheritances 
E) None of the above

Question 12

In June of the current year, a wealthy aunt gave Janie a stock portfolio worth $150,000. During the year, she collects $4,000 in dividends. How much of these amounts, if any, should Janie include in gross income for the current year? Why?

Accepted Answer

$4,000. The gift of

Question 13

Robert works for American Motors. American Motors pays a $1,200 premium on Robert's health insurance in 2015. Robert has an operation on his big toe in 2015 that cost $7,200. The insurance company paid for $6,800 of it. Which one of the following is true for 2015?

Accepted Answer

A) Robert must claim the $1,200 premium paid by his employer as income. 
B) Robert must claim the $6,800 paid by the insurance company for the operation as income. 
C) Robert must claim the $1,200 premium and the $6,800 insurance payment as income. 
D) None of these events are taxable on his 2015 return. 
A) Robert must claim the $1,200 premium paid by his employer as income. 
B) Robert must claim the $6,800 paid by the insurance company for the operation as income. 
C) Robert must claim the $1,200 premium and the $6,800 insurance payment as income. 
D) None of these events are taxable on his 2015 return.

Question 14

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 should Laura include in her 2015 taxable income as alimony?

Accepted Answer

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

Question 15

Tim receives a $25,000 gift from his parents for a down payment on a house. They know he can not buy a house without their help. They write "gift" in the memo line of the check. How much of the gift is taxable to Tim?

Accepted Answer

None of the gift is taxable. G

Question 16

Richard and Alice are divorced and under the terms of their written divorce agreement signed on December 30, 2008, Richard was required to pay Alice $1,500 per month of which $600 was designated as child support. He made 12 such payments in 2015. Additionally, Richard voluntarily paid Alice $1,200 per month for 12 months of 2015, no portion of which was designated as child support. Assuming that Alice has no other income, her tax return for 2015 should show gross income of:

Accepted Answer

A) $0 
B) $9,600 
C) $10,800 
D) $18,000 
E) None of the above 
A) $0 
B) $9,600 
C) $10,800 
D) $18,000 
E) None of the above

Question 17

Which of the following is not taxable income?

Accepted Answer

A) Dividends 
B) Income from relief of debt 
C) Interest 
D) Royalties 
E) Welfare benefits 
A) Dividends 
B) Income from relief of debt 
C) Interest 
D) Royalties 
E) Welfare benefits

Question 18

Van is sick and tired of his job. His doctor certifies that his health may be compromised if he continues to work at his current job. He sells his life insurance policy to Life Settlements, Inc. for $50,000 so he can take a break from work. He has paid $10,000 so far for the policy. How much of the $50,000 must Van include in his taxable income?

Accepted Answer

He must pay tax on the $40,000

Question 19

Which of the following amounts must be included in the gross income of the recipient?

Accepted Answer

A) Child support payments 
B) Welfare payments 
C) Gifts 
D) Royalties 
E) All of the above are included in gross income 
A) Child support payments 
B) Welfare payments 
C) Gifts 
D) Royalties 
E) All of the above are included in gross income

Question 20

All of the following amounts must be included in gross income, except:

Accepted Answer

A) Gambling winnings 
B) Partnership income 
C) Accident insurance proceeds 
D) Dividends 
E) Jury duty fees 
A) Gambling winnings 
B) Partnership income 
C) Accident insurance proceeds 
D) Dividends 
E) Jury duty fees

Noncash items received as income must be included in income at their fair market value.

A "no-additional-cost" service includes only those services in the major line of business in which the employee is employed.

Ordinarily life insurance proceeds are excluded from gross income. Why would they be taxable if the policy had been transferred for valuable consideration, prior to the death of the insured?

Andy landscaped his friend's house in return for a couch set and an HD television worth $8,000. How much income must Andy report on his tax return for his services?

Jim, a single individual, was unemployed for a few months during the current year. During the year, he received $3,600 in unemployment compensation payments. How much of his unemployment compensation payments must be included in gross income?

In some cases, Social Security benefits may be partially taxable.

In regards to Social Security benefits:

Which of the following are not excludable as an employee fringe benefit?

To promote business activity, the tax rules generally are very liberal in treating business gifts as tax-free income to the recipient.

Which of the following is nontaxable income to the recipient for tax purposes?

In June of the current year, a wealthy aunt gave Janie a stock portfolio worth $150,000. During the year, she collects $4,000 in dividends. How much of these amounts, if any, should Janie include in gross income for the current year? Why?

Robert works for American Motors. American Motors pays a $1,200 premium on Robert's health insurance in 2015. Robert has an operation on his big toe in 2015 that cost $7,200. The insurance company paid for $6,800 of it. Which one of the following is true for 2015?

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 should Laura include in her 2015 taxable income as alimony?

Tim receives a $25,000 gift from his parents for a down payment on a house. They know he can not buy a house without their help. They write "gift" in the memo line of the check. How much of the gift is taxable to Tim?

Which of the following is not taxable income?

Which of the following amounts must be included in the gross income of the recipient?

All of the following amounts must be included in gross income, except:

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

Noncash items received as income must be included in income at their fair market value.

A "no-additional-cost" service includes only those services in the major line of business in which the employee is employed.

Ordinarily life insurance proceeds are excluded from gross income. Why would they be taxable if the policy had been transferred for valuable consideration, prior to the death of the insured?

Andy landscaped his friend's house in return for a couch set and an HD television worth $8,000. How much income must Andy report on his tax return for his services?

Jim, a single individual, was unemployed for a few months during the current year. During the year, he received $3,600 in unemployment compensation payments. How much of his unemployment compensation payments must be included in gross income?

In some cases, Social Security benefits may be partially taxable.

In regards to Social Security benefits:

​Which of the following are not excludable as an employee fringe benefit?

To promote business activity, the tax rules generally are very liberal in treating business gifts as tax-free income to the recipient.

Which of the following is nontaxable income to the recipient for tax purposes?

In June of the current year, a wealthy aunt gave Janie a stock portfolio worth $150,000. During the year, she collects $4,000 in dividends. How much of these amounts, if any, should Janie include in gross income for the current year? Why?

Robert works for American Motors. American Motors pays a $1,200 premium on Robert's health insurance in 2015. Robert has an operation on his big toe in 2015 that cost $7,200. The insurance company paid for $6,800 of it. Which one of the following is true for 2015?

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 should Laura include in her 2015 taxable income as alimony?

Tim receives a $25,000 gift from his parents for a down payment on a house. They know he can not buy a house without their help. They write "gift" in the memo line of the check. How much of the gift is taxable to Tim?

Which of the following is not taxable income?

Which of the following amounts must be included in the gross income of the recipient?

All of the following amounts must be included in gross income, except:

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

Which of the following are not excludable as an employee fringe benefit?