Question 1

A taxpayer who borrows money will include that amount borrowed in their gross incomeunder the all-inclusive definition of income.

Accepted Answer

A) True 
 B)False

Question 2

Wendell is an executive with CFO Tires. At the beginning of this year the corporation loaned Wendell $50,000 at an interest rate of one percent. Wendell would have paid interest of $2,500 this year if the interest rate on the loan had been set at the prevailing Federal interest rate. Wendell used the funds as a down payment on a vacation home and during the year he paid $500 of interest to CFO. On December 31, CFO forgave the loan and remaining interest. What amount of gross income does Wendell recognize from the loan this year?

Accepted Answer

The answer of Wendell is an executive with CFO Tires....

Question 3

When a taxpayer sells an asset, the entire proceeds from the sale must be included in gross income regardless of the cost of the asset.

Accepted Answer

A) True 
 B)False

Question 4

Mike received the following interest payments this year. What amount must Mike include in87h)is gross income (for federal tax purposes)?

Accepted Answer

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

Question 5

Sam, age 45, saved diligently for his college education by putting part of his pay into U.S. Series EE saving bonds. Sam purchased the bonds for $6,500, and this year he redeemed the bonds for $7,200. He has no other income this year. What amount must Sam include in his gross income?

Accepted Answer

A)  $700 unless Sam uses at least some portion of the proceeds to pay for his college tuition and fees. 
B)  $7,200. 
C)  $6,500. 
D)  A maximum of $350 if Sam uses the proceeds to pay for his college tuition and fees. 
E)  Zero - proceeds from cashing bonds sold at a discount is not realized income. 
A)  $700 unless Sam uses at least some portion of the proceeds to pay for his college tuition and fees. 
B)  $7,200. 
C)  $6,500. 
D)  A maximum of $350 if Sam uses the proceeds to pay for his college tuition and fees. 
E)  Zero - proceeds from cashing bonds sold at a discount is not realized income.

Question 6

Anna received $15,000 from life insurance paid upon the death of her grandmother.Anna can exclude the entire amount of the life insurance from her gross income.

Accepted Answer

A) True 
 B)False

Question 7

Qualified fringe benefits received by an employee can be excluded from gross income.

Accepted Answer

A) True 
 B)False

Question 8

Cyrus is a cash method taxpayer who reports on a calendar-year. Last year Cyrus received salary of$88,000 and at year-end his employer announced that Cyrus would receive an additional year-end bonus of $10,000 in cash and a new TV worth $2,000. Cyrus didn't receive his bonus check until January of this year and the TV didn't arrive until March of this year. Determine the amount Cyrus should include in his gross income for last year.

Accepted Answer

The answer of Cyrus is a cash method taxpayer who...

Question 9

Gross income includes:

Accepted Answer

A)  all income from whatever source derived unless excluded by law. 
B)  excluded income. 
C)  all realized income. 
D)  deferred income. 
E)  All of the choices are correct. 
A)  all income from whatever source derived unless excluded by law. 
B)  excluded income. 
C)  all realized income. 
D)  deferred income. 
E)  All of the choices are correct.

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

This year Barney purchased 500 shares of Bell common stock for $20 per share. Atyear-end the Bell shares were only worth $2 per share. What amount can Barney deduct as a loss this year?

Accepted Answer

A)  $1,000 
B)  $9,000 
C)  $10,000 
D)  Barney can deduct $10,000 only if he includes $1,000 in his taxable income 
E)  None of the choices are correct - Barney is not entitled to a loss deduction. 
A)  $1,000 
B)  $9,000 
C)  $10,000 
D)  Barney can deduct $10,000 only if he includes $1,000 in his taxable income 
E)  None of the choices are correct - Barney is not entitled to a loss deduction.

Question 12

Frank received the following benefits from his employer this year. What amount must Frank90)include in his gross income?

Accepted Answer

A)  $54,450 
B)  $56,250 
C)  $59,150 
D)  $57,350 
E)  Zero - these benefits are excluded from gross income. 
A)  $54,450 
B)  $56,250 
C)  $59,150 
D)  $57,350 
E)  Zero - these benefits are excluded from gross income.

Question 13

The assignment of income doctrine requires that in order to shift income from the property producing the income to another person, the taxpayer must transfer only the income to the other person.

Accepted Answer

A) True 
 B)False

Question 14

Kevin provided services to several clients this year who paid with different types of property. Which of the following payments is not included in Kevin's gross income?

Accepted Answer

A)  Cash. 
B)  Gold coins. 
C)  A used car. 
D)  Shares of stock listed on the New York Stock Exchange. 
E)  All of the choices are included in gross income. 
A)  Cash. 
B)  Gold coins. 
C)  A used car. 
D)  Shares of stock listed on the New York Stock Exchange. 
E)  All of the choices are included in gross income.

Question 15

A below-market loan (e.g., from an employer to an employee) is a common example of a transaction that generates taxable imputed income.

Accepted Answer

A) True 
 B)False

Question 16

Hillary is a cash-basis calendar-year taxpayer. During the last week of December shereceived a letter containing a $5,000 check for services rendered. Which of the following is a true statement?

Accepted Answer

A)  Hillary is taxed on the $5,000 of service income in the year she cashes the check. 
B)  Hillary is taxed on the $5,000 of service income in the year she receives the check. 
C)  Hillary is taxed on the $5,000 of service income in the year the check was mailed. 
D)  Hillary is taxed on the $5,000 of service income in the year she provides the services. 
E)  None of the choices are true. 
A)  Hillary is taxed on the $5,000 of service income in the year she cashes the check. 
B)  Hillary is taxed on the $5,000 of service income in the year she receives the check. 
C)  Hillary is taxed on the $5,000 of service income in the year the check was mailed. 
D)  Hillary is taxed on the $5,000 of service income in the year she provides the services. 
E)  None of the choices are true.

Question 17

The principle of realization for tax purposes is very different from realization as it isunderstood for financial reporting purposes.

Accepted Answer

A) True 
 B)False

Question 18

George purchased a life annuity for $3,200 that will provide him $80 monthly payments for as long as he lives. Based on IRS tables, George's life expectancy is 100 months. How much of the first $80 payment will George include in his gross income?

Accepted Answer

A)  $48 
B)  $32 
C)  $80 
D)  $72 
E)  None of the choices are correct. 
A)  $48 
B)  $32 
C)  $80 
D)  $72 
E)  None of the choices are correct.

Question 19

When an asset is sold, the taxpayer calculates the gain or loss on the sale of the asset by subtracting the tax basis of the asset from the proceeds of the sale.

Accepted Answer

A) True 
 B)False

Question 20

Ben's employer offers employees the following benefits. What amount must Ben include in h91is)gross income?

Accepted Answer

A)  $11,070 
B)  $7,000 
C)  $9,400 
D)  $10,600 
E)  Zero - none of the benefits is included in gross income. 
A)  $11,070 
B)  $7,000 
C)  $9,400 
D)  $10,600 
E)  Zero - none of the benefits is included in gross income.

Exam 5: Gross Income and Exclusions

A taxpayer who borrows money will include that amount borrowed in their gross incomeunder the all-inclusive definition of income.

When a taxpayer sells an asset, the entire proceeds from the sale must be included in gross income regardless of the cost of the asset.

Mike received the following interest payments this year. What amount must Mike include in87h)is gross income (for federal tax purposes)?

Sam, age 45, saved diligently for his college education by putting part of his pay into U.S. Series EE saving bonds. Sam purchased the bonds for $6,500, and this year he redeemed the bonds for $7,200. He has no other income this year. What amount must Sam include in his gross income?

Anna received $15,000 from life insurance paid upon the death of her grandmother.Anna can exclude the entire amount of the life insurance from her gross income.

Qualified fringe benefits received by an employee can be excluded from gross income.

Gross income includes:

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

This year Barney purchased 500 shares of Bell common stock for $20 per share. Atyear-end the Bell shares were only worth $2 per share. What amount can Barney deduct as a loss this year?

Frank received the following benefits from his employer this year. What amount must Frank90)include in his gross income?

The assignment of income doctrine requires that in order to shift income from the property producing the income to another person, the taxpayer must transfer only the income to the other person.

Kevin provided services to several clients this year who paid with different types of property. Which of the following payments is not included in Kevin's gross income?

A below-market loan (e.g., from an employer to an employee) is a common example of a transaction that generates taxable imputed income.

Hillary is a cash-basis calendar-year taxpayer. During the last week of December shereceived a letter containing a $5,000 check for services rendered. Which of the following is a true statement?

The principle of realization for tax purposes is very different from realization as it isunderstood for financial reporting purposes.

George purchased a life annuity for $3,200 that will provide him $80 monthly payments for as long as he lives. Based on IRS tables, George's life expectancy is 100 months. How much of the first $80 payment will George include in his gross income?

When an asset is sold, the taxpayer calculates the gain or loss on the sale of the asset by subtracting the tax basis of the asset from the proceeds of the sale.

Ben's employer offers employees the following benefits. What amount must Ben include in h91is)gross income?

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, 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 US Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

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