Question 1

Worker's compensation benefits are excluded from gross income.

Accepted Answer

A) True 
 B)False

Question 2

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 3

This year Joseph joined the board of directors.Besides his director's fees,Joseph received the following employee benefits:
 $\begin{array}{l}
\begin{array}{lll}
\text { Salary } \
\text { Contribution to qualified pension plan } \
\text { Qualified health insurance premiums } \
\text { Stock bonus } \
\text { Annual director }{ }^{\prime} \mathrm{s} \text { fee }\
\text { Group-term life insurance premiums (face }=\$ 40,000 \text { ) } \

\end{array}
\begin{array}{lll}
\$204,000 \
25,000 \
8,000 \
20,000 \
15,000 \
1,800
\end{array}
\end{array}$

The stock bonus consisted of 5,000 shares of Bell stock given to Joseph as compensation.At the time of the transfer the stock was listed at $4 per share.What amounts,if any,should Joseph include in gross income this year?

Accepted Answer

$239,000 = $204,000 + $20,000

Question 4

The cash method of accounting requires taxpayers to recognize income only when that income is received as cash.

Accepted Answer

A) True 
 B)False

Question 5

This year,Fred and Wilma,married filing joint,sold their home (sales price $750,000; cost $200,000).All closing costs were paid by the buyer.Fred and Wilma owned and lived in their home for 20 years.How much of the gain is included in gross income?

Accepted Answer

A) $550,000 
B) $300,000 
C) $250,000 
D) $50,000 
E) None of the choices are correct 
A) $550,000 
B) $300,000 
C) $250,000 
D) $50,000 
E) None of the choices are correct

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Which of the following refers to the date stock options are awarded to an employee?

Accepted Answer

A) Grant date. 
B) Exercise date. 
C) Lapse date. 
D) Vesting date. 
A) Grant date. 
B) Exercise date. 
C) Lapse date. 
D) Vesting date.

Question 8

The standard retirement benefit an employee will receive under a defined benefit plan depends on the number of years of service the employee provides,but does not consider the amount of the employee's compensation near retirement.

Accepted Answer

A) True 
 B)False

Question 9

The date on which stock options are no longer subject to forfeiture is called the vesting date.

Accepted Answer

A) True 
 B)False

Question 10

Taxpayers withdrawing funds from an IRA before they turn 70½ are generally subject to a 10 percent penalty on the amount of the withdrawal.

Accepted Answer

A) True 
 B)False

Question 11

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) Zero - none of the above benefits is included in gross income 
A) $44,000 
B) $50,000 
C) $47,700 
D) $9,700 
E) Zero - none of the above benefits is included in gross income

Question 12

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) Zero - none of the above benefits is included in gross income 
A) $22,500 
B) $18,000 
C) $4,500 
D) $10,550 
E) Zero - none of the above benefits is included in gross income

Question 13

Distributions from defined benefit plans are taxed as long-term capital gains to beneficiaries.

Accepted Answer

A) True 
 B)False

Question 14

Blake is a limited partner in Kling-On Partners.This year Kling-On reported that Blake's share of dividend income was $3,700 and his share of municipal interest was $2,750.Early this year Blake found a bundle of $100 bills in the alley outside his apartment.When no one claimed the money,the cash (a total of $2,400)was returned to Blake.Finally,Blake earned salary of $42,000 but almost $6,500 was withheld for income taxes and FICA tax.Compute Blake's realized income and gross income.

Accepted Answer

$3,700 + $2,750 + $2,400 + $42

Question 15

Fred must include in gross income a $7,500 payment received from his neighbor to compensate Fred for the emotional distress he suffered when his neighbor accidentally ran over his dog.

Accepted Answer

A) True 
 B)False

Question 16

To calculate a gain or loss on the sale of an asset,the proceeds from the sale are reduced by which of the following?

Accepted Answer

A) Tax basis of the property. 
B) Selling expenses. 
C) Amount realized. 
D) Tax basis of the property and selling expenses. 
E) All of the choices are true. 
A) Tax basis of the property. 
B) Selling expenses. 
C) Amount realized. 
D) Tax basis of the property and selling expenses. 
E) All of the choices are true.

Question 17

Which of the following best describes distributions from a traditional defined contribution plan?

Accepted Answer

A) Distributions from defined contribution plans are fully taxable as ordinary income. 
B) Distributions from defined contribution plans are partially taxable as ordinary income and partially nontaxable as a return of capital. 
C) Distributions from defined contribution plans are fully taxable as capital gains. 
D) Distributions from defined contribution plans are partially taxable as capital gains and partially nontaxable as a return of capital. 
A) Distributions from defined contribution plans are fully taxable as ordinary income. 
B) Distributions from defined contribution plans are partially taxable as ordinary income and partially nontaxable as a return of capital. 
C) Distributions from defined contribution plans are fully taxable as capital gains. 
D) Distributions from defined contribution plans are partially taxable as capital gains and partially nontaxable as a return of capital.

Question 18

Jake sold his car for $2,400 in cash this year.He will realize a taxable gain of $1,000 if he purchased the car for $1,400.

Accepted Answer

A) True 
 B)False

Question 19

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 20

Which of the following statements about alimony payments is true for divorce agreements executed before 2019?

Accepted Answer

A) To qualify as alimony,payments must be made in cash. 
B) Alimony payments are includible in the gross income of the recipient. 
C) To qualify as alimony,payments cannot continue after the death of the recipient. 
D) To qualify as alimony,payments must be made under a written agreement or divorce decree that does not designate the payments as "nonalimony" or child support. 
E) All of the choices are correct. 
A) To qualify as alimony,payments must be made in cash. 
B) Alimony payments are includible in the gross income of the recipient. 
C) To qualify as alimony,payments cannot continue after the death of the recipient. 
D) To qualify as alimony,payments must be made under a written agreement or divorce decree that does not designate the payments as "nonalimony" or child support. 
E) All of the choices are correct.

Worker's compensation benefits are excluded from gross income.

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?

The cash method of accounting requires taxpayers to recognize income only when that income is received as cash.

This year,Fred and Wilma,married filing joint,sold their home (sales price $750,000; cost $200,000).All closing costs were paid by the buyer.Fred and Wilma owned and lived in their home for 20 years.How much of the gain is included in gross income?

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

Which of the following refers to the date stock options are awarded to an employee?

The standard retirement benefit an employee will receive under a defined benefit plan depends on the number of years of service the employee provides,but does not consider the amount of the employee's compensation near retirement.

The date on which stock options are no longer subject to forfeiture is called the vesting date.

Taxpayers withdrawing funds from an IRA before they turn 70½ are generally subject to a 10 percent penalty on the amount of the withdrawal.

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?

Distributions from defined benefit plans are taxed as long-term capital gains to beneficiaries.

Fred must include in gross income a $7,500 payment received from his neighbor to compensate Fred for the emotional distress he suffered when his neighbor accidentally ran over his dog.

To calculate a gain or loss on the sale of an asset,the proceeds from the sale are reduced by which of the following?

Which of the following best describes distributions from a traditional defined contribution plan?

Jake sold his car for $2,400 in cash this year.He will realize a taxable gain of $1,000 if he purchased the car for $1,400.

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.

Which of the following statements about alimony payments is true for divorce agreements executed before 2019?

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 for Agi Deductions

Individual Income Tax Computation and Tax Credits

Business Income, deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Entities Overview

Corporate Formations and Operations

Corporate Nonliquidating and Liquidating Distributions

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

Individual From Agi Deductions

Filters

Exam 5: Gross Income and Exclusions

Worker's compensation benefits are excluded from gross income.

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?

The cash method of accounting requires taxpayers to recognize income only when that income is received as cash.

This year,Fred and Wilma,married filing joint,sold their home (sales price $750,000; cost $200,000).All closing costs were paid by the buyer.Fred and Wilma owned and lived in their home for 20 years.How much of the gain is included in gross income?

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

Which of the following refers to the date stock options are awarded to an employee?

The standard retirement benefit an employee will receive under a defined benefit plan depends on the number of years of service the employee provides,but does not consider the amount of the employee's compensation near retirement.

The date on which stock options are no longer subject to forfeiture is called the vesting date.

Taxpayers withdrawing funds from an IRA before they turn 70½ are generally subject to a 10 percent penalty on the amount of the withdrawal.

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?

Distributions from defined benefit plans are taxed as long-term capital gains to beneficiaries.

Fred must include in gross income a $7,500 payment received from his neighbor to compensate Fred for the emotional distress he suffered when his neighbor accidentally ran over his dog.

To calculate a gain or loss on the sale of an asset,the proceeds from the sale are reduced by which of the following?

Which of the following best describes distributions from a traditional defined contribution plan?

Jake sold his car for $2,400 in cash this year.He will realize a taxable gain of $1,000 if he purchased the car for $1,400.

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.

Which of the following statements about alimony payments is true for divorce agreements executed before 2019?

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 for Agi Deductions

Individual Income Tax Computation and Tax Credits

Business Income, deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Entities Overview

Corporate Formations and Operations

Corporate Nonliquidating and Liquidating Distributions

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

Individual From Agi Deductions

Filters