Question 1

Recognized income may be in the form of cash or property received (but not services received).

Accepted Answer

A) True 
 B)False

Question 2

This year Zach was injured in an auto accident.As a result,he received the following payments. Zach received $18,000 of disability pay.Zach has disability insurance provided by his employer as a nontaxable fringe benefit.Zach's employer paid $4,300 in disability premiums for Zach this year.
Zach's hospital bills totaled $4,500 and were paid by his health insurance.Zach has health insurance provided by his employer as a nontaxable fringe benefit.Zach's employer paid $6,250 in health insurance premiums for Zach this year.
What amount must Zach include in his gross income?

Accepted Answer

A) $22,500 
B) $18,000 
C) $4,500 
D) $10,550 
E) $0-none of these benefits are included in gross income 
A) $22,500 
B) $18,000 
C) $4,500 
D) $10,550 
E) $0-none of these benefits are included in gross income

Question 3

Realized income is included in gross income unless a tax provision specifies that it can be deferred or excluded.

Accepted Answer

A) True 
 B)False

Question 4

Earnings from Internal Revenue Code Section 529 plans and Coverdell education savings accounts are excluded from gross income if the earnings are used to pay for qualifying educational expenditures for college students (and not for elementary or secondary education).

Accepted Answer

A) True 
 B)False

Question 5

Barter clubs are an effective means of avoiding realization for tax purposes.

Accepted Answer

A) True 
 B)False

Question 6

Brad was disabled for part of the year,and he received $11,500 of benefits from a disability insurance policy purchased by his employer.Brad must include all $11,500 of benefits in his gross income because he was not taxed on the disability insurance premiums paid by his employer.

Accepted Answer

A) True 
 B)False

Question 7

In April of this year Victoria received a $1,400 refund of state income taxes that she paid last year.Last year Victoria claimed itemized deductions of $14,590.Victoria's itemized deductions included state income taxes paid of $3,750.How much of the refund,if any,must Victoria include in gross income if the standard deduction last year was $12,000?

Accepted Answer

$1,400 The tax benefit is the lesser of

Question 8

Irene's husband passed away this year.After his death,Irene received $250,000 of proceeds from life insurance on her husband,and she inherited her husband's stock portfolio,worth $750,000.What amount must Irene include in her gross income?

Accepted Answer

A) $1 million. 
B) $750,000. 
C) $500,000. 
D) $0,but only if Irene does not opt to receive the life insurance proceeds in a lump sum. 
E) $0-none of these benefits are included in gross income. 
A) $1 million. 
B) $750,000. 
C) $500,000. 
D) $0,but only if Irene does not opt to receive the life insurance proceeds in a lump sum. 
E) $0-none of these benefits are included in gross income.

Question 9

Pam recently was sickened by eating spoiled peanut butter.She successfully sued the manufacturer for her medical bills ($3,700),her emotional distress ($6,000-she now fears peanut butter),and punitive damages ($44,000).What amount must Pam include in her gross income?

Accepted Answer

A) $44,000 
B) $50,000 
C) $47,700 
D) $9,700 
E) $0-none of these benefits are included in gross income 
A) $44,000 
B) $50,000 
C) $47,700 
D) $9,700 
E) $0-none of these benefits are included in gross income

Question 10

Rhett made his annual gambling trip to Uwin Casino.On this trip Rhett won $250 at the slots and $1,200 at poker.Also this year,Rhett made several trips to the racetrack,but he lost $700 on his various wagers.What amount must Rhett include in his gross income?

Accepted Answer

A) $1,450 
B) $1,200 
C) $750 
D) $250 
E) $0-gambling winnings are not included in gross income 
A) $1,450 
B) $1,200 
C) $750 
D) $250 
E) $0-gambling winnings are not included in gross income

Question 11

Taxpayers meeting certain home ownership and use requirements can permanently exclude up to $1,000,000 of realized gain on the sale of their principal residence.

Accepted Answer

A) True 
 B)False

Question 12

Robert will be working overseas on a permanent assignment for an international company beginning on March 1 of this year (306 days this year).His salary is $11,000 per month while Robert is overseas,but only $9,200 per month otherwise.What is the minimum amount of Robert's salary that he must include in gross income this year? (Round your final answer to the nearest whole dollar amount and assume that there are 365 days in this year.)

Accepted Answer

$39,618 The maximum foreign-earned incom

Question 13

Community property laws dictate that income earned by one spouse is treated as though it were earned equally by both spouses.

Accepted Answer

A) True 
 B)False

Question 14

Mike received the following interest payments this year.What amount must Mike include in his gross income (for federal tax purposes)?

Accepted Answer

A) $1,450 
B) $2,300 
C) $2,650 
D) $3,550 
E) $4,400 
A) $1,450 
B) $2,300 
C) $2,650 
D) $3,550 
E) $4,400

Question 15

Excluded income will never be subject to the federal income tax.

Accepted Answer

A) True 
 B)False

Question 16

Bart,a single taxpayer,has recently retired.This year,he received $24,000 in pension payments and $5,000 of Social Security payments.What amount must Bart include in his gross income for the Social Security payments?

Accepted Answer

A) $4,250 
B) $2,500 
C) $1,500 
D) $750 
E) $0 
A) $4,250 
B) $2,500 
C) $1,500 
D) $750 
E) $0

Question 17

Aubrey and Justin file married filing separately.This year,Aubrey earned salary of $130,000,and Justin earned salary of $88,000.Aubrey and Justin live in a common law state.How much income earned will Justin report on his tax return for this year?

Accepted Answer

$88,000 Under common law syste

Question 18

Hank is a U.S.citizen and is doing a three- to six-year assignment as a sales executive in Paris for a French company.The assignment began this year.Hank earned $109,500 working for the French company this year but only lived in France for 180 days (out of 365 days).He will live full time in France next year.What amount of Hank's $109,500 salary this year will he be allowed to exclude from gross income in the United States (rounded to the nearest hundred dollars)?

Accepted Answer

A) Hank can exclude his entire salary because he worked more than 330 days overseas. 
B) $102,000 
C) $52,200 
D) $105,900 
E) None of his salary can be excluded from gross income because Hank must reside overseas for the entire year. 
A) Hank can exclude his entire salary because he worked more than 330 days overseas. 
B) $102,000 
C) $52,200 
D) $105,900 
E) None of his salary can be excluded from gross income because Hank must reside overseas for the entire year.

Question 19

Which of the following is a true statement about the first payment received from a purchased annuity?

Accepted Answer

A) The payment is included in gross income. 
B) A portion of the payment is a return of capital. 
C) The payment can only be taxed in the year after the annuity was purchased. 
D) The payment is not taxed until the annuity payments cease altogether. 
E) None of these are true statements. 
A) The payment is included in gross income. 
B) A portion of the payment is a return of capital. 
C) The payment can only be taxed in the year after the annuity was purchased. 
D) The payment is not taxed until the annuity payments cease altogether. 
E) None of these are true statements.

Question 20

Opal deducted $2,400 of state income taxes on her tax return last year.This year she received a state income tax refund of $170.What amount of the refund,if any,should Opal include in her gross income if last year her total itemized deductions exceeded the standard deduction by $350?

Accepted Answer

A) $2,050 
B) $350 
C) $180 
D) $170 
E) None of these - refunds of state income taxes are not included in gross income 
A) $2,050 
B) $350 
C) $180 
D) $170 
E) None of these - refunds of state income taxes are not included in gross income

Exam 5: Gross Income and Exclusions

Recognized income may be in the form of cash or property received (but not services received).

Realized income is included in gross income unless a tax provision specifies that it can be deferred or excluded.

Earnings from Internal Revenue Code Section 529 plans and Coverdell education savings accounts are excluded from gross income if the earnings are used to pay for qualifying educational expenditures for college students (and not for elementary or secondary education).

Barter clubs are an effective means of avoiding realization for tax purposes.

Brad was disabled for part of the year,and he received $11,500 of benefits from a disability insurance policy purchased by his employer.Brad must include all $11,500 of benefits in his gross income because he was not taxed on the disability insurance premiums paid by his employer.

Irene's husband passed away this year.After his death,Irene received $250,000 of proceeds from life insurance on her husband,and she inherited her husband's stock portfolio,worth $750,000.What amount must Irene include in her gross income?

Pam recently was sickened by eating spoiled peanut butter.She successfully sued the manufacturer for her medical bills ($3,700),her emotional distress ($6,000-she now fears peanut butter),and punitive damages ($44,000).What amount must Pam include in her gross income?

Rhett made his annual gambling trip to Uwin Casino.On this trip Rhett won $250 at the slots and $1,200 at poker.Also this year,Rhett made several trips to the racetrack,but he lost $700 on his various wagers.What amount must Rhett include in his gross income?

Taxpayers meeting certain home ownership and use requirements can permanently exclude up to $1,000,000 of realized gain on the sale of their principal residence.

Community property laws dictate that income earned by one spouse is treated as though it were earned equally by both spouses.

Mike received the following interest payments this year.What amount must Mike include in his gross income (for federal tax purposes)?

Excluded income will never be subject to the federal income tax.

Bart,a single taxpayer,has recently retired.This year,he received $24,000 in pension payments and $5,000 of Social Security payments.What amount must Bart include in his gross income for the Social Security payments?

Aubrey and Justin file married filing separately.This year,Aubrey earned salary of $130,000,and Justin earned salary of $88,000.Aubrey and Justin live in a common law state.How much income earned will Justin report on his tax return for this year?

Which of the following is a true statement about the first payment received from a purchased annuity?

Opal deducted $2,400 of state income taxes on her tax return last year.This year she received a state income tax refund of $170.What amount of the refund,if any,should Opal include in her gross income if last year her total itemized deductions exceeded the standard deduction by $350?

An Introduction to Tax

Tax Compliance,the Irs,and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview,dependents,and Filing Status

Individual Deductions

Investments

Individual Income Tax Computation and Tax Credits

Business Income,deductions,and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Entities Overview

Corporate Operations

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Corporate Formation,reorganization,and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The Ustaxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters