Exam 19: Gross Income: Inclusions

A consulting firm,organized as partnership and owned by 20 individual partners,reports about $40 million of gross receipts per year.The partnership must use the accrual method.

Which of the following is least likely to result in a constructive dividend?

AAA Corporation distributes an automobile to Alexandria,a shareholder,in lieu of a cash dividend.Alexandria must report the value of the automobile as dividend income.

An electrician completes a rewiring job and is paid $1,000 by the customer in November.The customer has a small fire in his house and sues the electrician for the repayment of the $1,000 fee plus damages in December.The electrician reaches a settlement with the customer in the following February and refunds the $1,000 fee.How should the electrician treat these events when he files his tax return in April?

Jacob,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.Jacob has other adjusted gross income of $85,100.The $3,000 exclusion must be reduced by

A cash-basis taxpayer can defer income recognition by refusing to accept payment.

The portion of a taxpayer's wages that are garnished by court order and forwarded to pay a delinquent bank loan are not taxable income to the taxpayer.

Todd and Hillary,husband and wife,file separate returns.Todd and Hillary live in a community property state that considers separate property income to be community income.Todd's salary is $82,000 and Hillary's salary is $80,000.Hillary receives dividend income of $7,000 from stock inherited from her parents.Todd receives interest income of $5,000 from bonds purchased with his salary after marriage.Todd and Hillary receive $10,000 dividend income from stock they purchased jointly.Todd's income would be

Unemployment compensation is exempt from federal income tax.

CT Computer Corporation,a cash-basis taxpayer,sells service contracts on the computers it sells.At the beginning of January of this year,CT Corporation sold contracts with service to begin immediately: One for three months \ 200 One for 20 months 800 One for 48 months 4,000 The amount of income CT Corporation must report for this year is

XYZ Corporation declares a 10 percent stock dividend distributable to all shareholders.There is only the one class of stock outstanding,and shareholders do not have any choices with respect to the distribution.Carol had owned 100 shares of stock,and she received 10 new shares as a result of the stock dividend.The stock is trading at $25 per share as of the distribution.Carol will recognize $250 of dividend income.

Under the terms of their divorce agreement,Humphrey transferred Corporation H stock to his former wife,Greta,as a property settlement.At the time of the transfer,the stock had a basis to Humphrey of $40,000 and a fair market value of $55,000.What is the tax consequence of this transaction to Humphrey,and what is Greta's basis in the Corporation H stock?

The Cable TV Company,an accrual-basis taxpayer,allows its customers to pay by the month,by the year,or two years in advance.In December 2019,the company collected the following amounts applicable to future services: Jan 2020 services (monthly contracts)$10,000 Dec 2019 - Nov 2020 services (annual contracts)48,000 Dec 2019 - Nov 2021 contracts (2-year contracts)72,000 Assuming Cable TV wants to minimize income reported for 2019,what is the amount of gross income that must be reported for 2019 and how much of the income from these contracts will be reported in 2020?

An accrual-basis taxpayer receives advance payment for services to be provided over three future years.The taxpayer can recognize the income over the three-year period as services are provided,consistent with its financial statements.

Insurance proceeds received because of the destruction of property are

An individual buys 200 shares of Target Corporation stock.In lieu of receiving quarterly dividends,the individual signs an agreement to have dividends reinvested by Target into additional shares of stock.The individual does not receive dividend checks so he need not recognize the quarterly dividends for tax purposes.

Interest credited to a bank savings account is taxed regardless of whether or not it is withdrawn.

Daniel plans to invest $20,000 in either a corporate bond paying 5% or a tax-exempt bond with a 4% interest rate.The bonds have an equivalent level of risk.Daniel has a 35% marginal tax rate and wants to maximize his after-tax earnings.Daniel should

Lily had the following income and losses during the current year: Salary \ 75,000 Prize from quiz show 25,000 Unemployment compensation 8,000 Embezzled funds 30,000 Share of partnership income 35,000 What is Lily's adjusted gross income?

Tarik,a single taxpayer,has AGI of $55,000 which includes $1,000 of qualified dividends.Tarik does not of itemize deductions.What is his 2019 federal income tax?