Question 1

Income from illegal activities is taxable.

Accepted Answer

A) True 
 B)False

Question 2

Hoyt rented office space two years ago to Harris,receiving the first and last months' rent plus a security deposit of $1,000.In early January of this year,Harris moves and Hoyt refunds $250 of the deposit and keeps the remainder to cover $500 which is spent for repairs to the office space and one week of unpaid rent that amounts to $250.How would this information be reflected on Hoyt's tax return this year?

Accepted Answer

A) $750 income and $500 deduction 
B) $750 income and no deduction 
C) $250 income and $500 deduction 
D) No income is recognized,but a $250 deduction is allowed. 
A) $750 income and $500 deduction 
B) $750 income and no deduction 
C) $250 income and $500 deduction 
D) No income is recognized,but a $250 deduction is allowed.

Question 3

Which of the following bonds do not generate tax-exempt income for federal income tax purposes?

Accepted Answer

A) U)S.Treasury bonds 
B) bonds issued by fire districts 
C) school district bonds 
D) bonds issued by cities 
A) U)S.Treasury bonds 
B) bonds issued by fire districts 
C) school district bonds 
D) bonds issued by cities

Question 4

Frank and Marion,husband and wife,file separate returns.Frank and Marion live in a common law state.Frank's salary is $42,000 and Marion's salary is $46,000.Marion receives dividend income of $4,000 from stock inherited from her parents.Frank receives interest income of $1,000 from bonds purchased with his salary after marriage.Frank and Marion receive $3,200 dividend income from stock they purchased jointly.Marion's income would be

Accepted Answer

A) $50,000. 
B) $50,100. 
C) $51,100. 
D) $51,600. 
A) $50,000. 
B) $50,100. 
C) $51,100. 
D) $51,600.

Question 5

During 2018,Mark's employer withheld $2,000 from his wages for state income tax.Mark claimed the $2,000 as an itemized deduction on his 2018 federal income tax return.His total itemized deductions for 2018 were $15,000 (the 2018 standard deduction was $12,000).Mark's taxable income for 2018 was a negative $25,000 due to substantial business losses.Mark received the $2,000 as a refund from the state during 2019.What amount must Mark include in income in 2019?

Accepted Answer

A) $0 
B) $1,000 
C) $2,000 
D) $6,000 
A) $0 
B) $1,000 
C) $2,000 
D) $6,000

Question 6

In order to be treated as alimony for tax purposes,payments must be made in cash.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements is false?

Accepted Answer

A) Under the cash method,prepaid income such as rent is usually taxed when received rather than when earned. 
B) Municipal bond interest is taxable. 
C) Alimony received by the taxpayer under a 2018 divorce agreement is taxable. 
D) Income earned by selling goods online is taxable. 
A) Under the cash method,prepaid income such as rent is usually taxed when received rather than when earned. 
B) Municipal bond interest is taxable. 
C) Alimony received by the taxpayer under a 2018 divorce agreement is taxable. 
D) Income earned by selling goods online is taxable.

Question 8

Chance Corporation began operating a new retail business in the current year and had $500,000 of sales,$70,000 of which had not been collected by year-end.Total purchases were $350,000 on which $30,000 is still owed.Ending inventory is $60,000; operating expenses are $170,000,$50,000 of which is still owed at year-end.
a.Compute net income from the business under the accrual method.
b.Compute net income from the business under the cash method.
c.Would paying the $50,000 she owes for operating expenses before year-end change her net income under the accrual method? Under the cash method?

Accepted Answer

@#IMG-DLM& * $60,000 - $30,000 (amount still owed)

Question 9

Rocco Corporation,a C corporation,owns 60% of the stock of Bien Corporation.Bien Corporation is a French corporation which conducts all of its business in France.Bien pays a $100,000 dividend to Rocco Corporation.Rocco Corporation will have a 100% dividend received deduction on these dividends,resulting no tax on these dividends.

Accepted Answer

A) True 
 B)False

Question 10

Tara is a taxpayer in the top tax bracket.She has a five-year-old daughter named Jane.Tara owns a small rental property.Tara has written into the lease that the monthly rent checks should be made payable to Jane.The checks are deposited into Jane's bank account.Jane enjoys the benefits of the rental income,and she will recognize the rental income on her tax return.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following criteria is not required to be met under the tax concept of income?

Accepted Answer

A) There must be economic benefit. 
B) Income must be realized. 
C) Income must be recognized. 
D) Cash must be received. 
A) There must be economic benefit. 
B) Income must be realized. 
C) Income must be recognized. 
D) Cash must be received.

Question 12

For federal income tax purposes,income is allocated between a husband and wife depending on the state of residence.

Accepted Answer

A) True 
 B)False

Question 13

Child support is

Accepted Answer

A) deductible by both the payor and the payee. 
B) deductible by the payor and included in income by the payee. 
C) included in income by the payor and deducted by the payee. 
D) an item which does not affect the payor's or the payee's tax reporting. 
A) deductible by both the payor and the payee. 
B) deductible by the payor and included in income by the payee. 
C) included in income by the payor and deducted by the payee. 
D) an item which does not affect the payor's or the payee's tax reporting.

Question 14

In addition to Social Security benefits of $8,000,Mr.and Mrs.Wells have adjusted gross income of $32,000 and tax-exempt interest of $1,000.They will file a joint return.The taxable portion of their Social Security benefits will be

Accepted Answer

A) $0. 
B) $2,500. 
C) $4,000. 
D) $8,000. 
A) $0. 
B) $2,500. 
C) $4,000. 
D) $8,000.

Question 15

Social Security benefits are excluded from taxation for all taxpayers.

Accepted Answer

A) True 
 B)False

Question 16

In December 2019,Max,a cash-basis taxpayer,rents an apartment to Kadeem.Max receives both the first and last months' rent totaling $1,800 plus a security deposit of $400.The amount of income reported by Max as taxable in 2019 is

Accepted Answer

A) $400. 
B) $1,300. 
C) $1,800. 
D) $2,200. 
A) $400. 
B) $1,300. 
C) $1,800. 
D) $2,200.

Question 17

Improvements to leased property made by a lessee are includible in the lessor's gross income only if made in lieu of rent or if rent is reduced because of the improvements.

Accepted Answer

A) True 
 B)False

Question 18

Jan purchased an antique desk at auction.For two years,the desk sat in Jan's garage until she decided to restore it.This year,while cleaning and restoring the desk,Jan discovered $1,500 in a hidden compartment inside one drawer.With respect to the $1,500,Jan must

Accepted Answer

A) report nothing. 
B) amend her previous tax return and report the $1,500. 
C) report only $750 due to the statute of limitations. 
D) report $1,500 on this year's tax return. 
A) report nothing. 
B) amend her previous tax return and report the $1,500. 
C) report only $750 due to the statute of limitations. 
D) report $1,500 on this year's tax return.

Question 19

Except as otherwise provided,gross income means all income from whatever source derived.

Accepted Answer

A) True 
 B)False

Question 20

Jing,who is single,paid educational expenses of $16,000 in 2019.He redeemed Series EE bonds and received principal of $8,000 and interest of $3,000.Jing has other adjusted gross income of $85,100.With respect to the $3,000 of bond interest,Jing must include in taxable income

Accepted Answer

A) $0. 
B) $1,400. 
C) $1,600. 
D) $3,000. 
A) $0. 
B) $1,400. 
C) $1,600. 
D) $3,000.

Exam 19: Gross Income: Inclusions

Income from illegal activities is taxable.

Which of the following bonds do not generate tax-exempt income for federal income tax purposes?

In order to be treated as alimony for tax purposes,payments must be made in cash.

Which of the following statements is false?

Which of the following criteria is not required to be met under the tax concept of income?

For federal income tax purposes,income is allocated between a husband and wife depending on the state of residence.

Child support is

In addition to Social Security benefits of $8,000,Mr.and Mrs.Wells have adjusted gross income of $32,000 and tax-exempt interest of $1,000.They will file a joint return.The taxable portion of their Social Security benefits will be

Social Security benefits are excluded from taxation for all taxpayers.

In December 2019,Max,a cash-basis taxpayer,rents an apartment to Kadeem.Max receives both the first and last months' rent totaling $1,800 plus a security deposit of $400.The amount of income reported by Max as taxable in 2019 is

Improvements to leased property made by a lessee are includible in the lessor's gross income only if made in lieu of rent or if rent is reduced because of the improvements.

Jan purchased an antique desk at auction.For two years,the desk sat in Jan's garage until she decided to restore it.This year,while cleaning and restoring the desk,Jan discovered $1,500 in a hidden compartment inside one drawer.With respect to the $1,500,Jan must

Except as otherwise provided,gross income means all income from whatever source derived.

Jing,who is single,paid educational expenses of $16,000 in 2019.He redeemed Series EE bonds and received principal of $8,000 and interest of $3,000.Jing has other adjusted gross income of $85,100.With respect to the $3,000 of bond interest,Jing must include in taxable income

Tax Research

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Administrative Procedures

U.S. Taxation of Foreign-Related Transactions

an Introduction to Taxation

Determination of Tax

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Property Transactions: Capital Gains and Losses

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Depreciation,cost Recovery,amortization,and Depletion

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Property Transactions: Nontaxable Exchanges

Property Transactions: Sec1231 and Recapture

Special Tax Computation Methods,tax Credits,and Payment of Tax

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