Question 1

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 2

Brenda has $15,000 in U.S. Series EE saving bonds and she is considering whether to cash the bonds. Under what conditions can Brenda exclude the interest on the savings bonds from her gross income?

Accepted Answer

A)  Brenda can exclude the interest if she uses the proceeds to pay for college tuition. 
B)  Brenda's modified AGI must be below a phase-out range for the exclusion. 
C)  The proceeds must be used for higher education expenses of Brenda, her spouse, or Brenda's dependent. 
D)  All of these are necessary conditions for Brenda to exclude the interest. 
E)  None of these - the interest is always included in gross income 
A)  Brenda can exclude the interest if she uses the proceeds to pay for college tuition. 
B)  Brenda's modified AGI must be below a phase-out range for the exclusion. 
C)  The proceeds must be used for higher education expenses of Brenda, her spouse, or Brenda's dependent. 
D)  All of these are necessary conditions for Brenda to exclude the interest. 
E)  None of these - the interest is always included in gross income

Question 3

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, which began this year. Hank earned $109,500 working for the French company this year but only lived in France for 340 days (out of 365 days). What amount of Hank's $109,500 salary this year will he be allowed to exclude from gross income in the U.S. (rounded to the nearest one-hundred dollars)?

Accepted Answer

A)  Hank can exclude his entire salary because he worked more than 330 days overseas 
B)  102,000 
C)  92,400 
D)  99,200 
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)  92,400 
D)  99,200 
E)  None of his salary can be excluded from gross income because Hank must reside overseas for the entire year

Question 4

Mike received the following interest payments this year. What amount must Mike include in his gross income (for federal tax purposes)? $$\begin{array} {c} 
{ \underline { \text { Bond } } } & \underline { \text { Interest } } \
\text { General Motors } & \$ 1,450 \
\text { City of New York } & 900 \
\text { State of New Jersey } & 1,200 \
\text { U.S. Treasury } & 850
\end{array}$$

Accepted Answer

A)  $2,650 
B)  $2,350 
C)  $2,050 
D)  $2,300 
E)  $3,500 
A)  $2,650 
B)  $2,350 
C)  $2,050 
D)  $2,300 
E)  $3,500

Question 5

An employee may exclude up to a 40 percent employer-provided discount on services.

Accepted Answer

A) True 
 B)False

Question 6

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)  $7,200. 
B)  $6,500. 
C)  a maximum of $350 if Sam uses the proceeds to pay for his college tuition and fees. 
D)  $700 unless 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)  $7,200. 
B)  $6,500. 
C)  a maximum of $350 if Sam uses the proceeds to pay for his college tuition and fees. 
D)  $700 unless 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 7

Interest earned on a city of Denver bond is excluded from gross income (for federal tax purposes).

Accepted Answer

A) True 
 B)False

Question 8

Aubrey and Justin divorced on June 30 of this year. Through June 30 Aubrey earned $62,000 of salary and Justin earned $45,000. For the year Aubrey reported a total salary of $130,000 and Justin earned a total salary of $88,000. Aubrey and Justin live in a community property state. How much of the income will Aubrey report on her tax return for this year?

Accepted Answer

$121,500 = [1/2 × ($

Question 9

Dora made a gift of stock to her granddaughter. At the time of the gift, the stock was worth $15,000. Several months after the gift, a $500 dividend was declared on the stock and paid to Dora's granddaughter. What amount must Dora's granddaughter include in her gross income?

Accepted Answer

A)  $2,000 
B)  $15,000 
C)  $15,500 
D)  $2,500 
E)  None of these 
A)  $2,000 
B)  $15,000 
C)  $15,500 
D)  $2,500 
E)  None of these

Question 10

Ethan competed in the annual Austin Marathon this year and won a $25,000 prize for fastest wheelchair entrant. Ethan indicated that he would transfer the prize to the local hospital. How much of the prize should Hal include in his gross income?

Accepted Answer

A)  $25,000 
B)  $25,000 because all prizes are taxable 
C)  Zero because prizes transferred to charities are excludible 
D)  Zero because all prizes are excludible 
E)  Zero because prizes from charities are excludible 
A)  $25,000 
B)  $25,000 because all prizes are taxable 
C)  Zero because prizes transferred to charities are excludible 
D)  Zero because all prizes are excludible 
E)  Zero because prizes from charities are excludible

Question 11

Generally, 85 percent of Social Security benefits are included in income of high income taxpayers.

Accepted Answer

A) True 
 B)False

Question 12

The tax benefit rule applies when a taxpayer refunds amounts that were previously included in income.

Accepted Answer

A) True 
 B)False

Question 13

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.

Question 14

Terri and Mike are seeking a divorce. Terri and Mike own an art collection worth $357,000 that would belong to Terri. Mike offered to make annual payments of cash to Terri each year for five years if Terry allows Mike to take possession of the art collection. Mike insists however, that the annual payments must cease in the event of Terri's death. What amount of annual payment must Terri demand to make her indifferent after taxes between taking possession of the ($357,000) art versus collecting the cash payments? Assume that Terri has a marginal tax rate of 15 percent and Mike's tax rate is 35 percent and ignore the time value of money.

Accepted Answer

$420,000 over 5 year

Question 15

Interest income is earned in the year in which it is received by the taxpayer or credited to the bank account.

Accepted Answer

A) True 
 B)False

Question 16

The tax law includes a complex set of restrictions called the anti-frontloading rules to make it difficult for taxpayers to disguise property payments as alimony payments.

Accepted Answer

A) True 
 B)False

Question 17

For tax purposes, unearned income means income that has not yet been realized.

Accepted Answer

A) True 
 B)False

Question 18

Bobby and Sissy got married 2.5 years ago. Since that time, they have lived in Bobby's home. Sissy sold her previous home three years ago and excluded her entire gain ($80,000) at that time. Bobby and Sissy decided to move to a bigger home this year. As a result, they sold Bobby's home for $500,000 (original cost $150,000). How much of the gain from the sale is taxable?

Accepted Answer

The answer of Bobby and Sissy got married 2.5 years...

Question 19

Hal Gore won a $1 million prize for special contributions to environmental research. This prize is awarded for public achievement, and Hal directed the awarding organization to transfer $400,000 of the award to the Environmental Protection Agency. How much of the prize should Hal include in his gross income?

Accepted Answer

A)  $400,000 
B)  $600,000 
C)  $1 million 
D)  None of these because all prizes are excludible 
E)  None of these because prizes from charities are excludible 
A)  $400,000 
B)  $600,000 
C)  $1 million 
D)  None of these because all prizes are excludible 
E)  None of these because prizes from charities are excludible

Question 20

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)  All of these 
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)  All of these

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.

Brenda has $15,000 in U.S. Series EE saving bonds and she is considering whether to cash the bonds. Under what conditions can Brenda exclude the interest on the savings bonds from her gross income?

Mike received the following interest payments this year. What amount must Mike include in his gross income (for federal tax purposes)? General Motors \ 1,450 City of New York 900 State of New Jersey 1,200 U.S. Treasury 850

An employee may exclude up to a 40 percent employer-provided discount on services.

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?

Interest earned on a city of Denver bond is excluded from gross income (for federal tax purposes).

Dora made a gift of stock to her granddaughter. At the time of the gift, the stock was worth $15,000. Several months after the gift, a $500 dividend was declared on the stock and paid to Dora's granddaughter. What amount must Dora's granddaughter include in her gross income?

Ethan competed in the annual Austin Marathon this year and won a $25,000 prize for fastest wheelchair entrant. Ethan indicated that he would transfer the prize to the local hospital. How much of the prize should Hal include in his gross income?

Generally, 85 percent of Social Security benefits are included in income of high income taxpayers.

The tax benefit rule applies when a taxpayer refunds amounts that were previously included in income.

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?

Interest income is earned in the year in which it is received by the taxpayer or credited to the bank account.

The tax law includes a complex set of restrictions called the anti-frontloading rules to make it difficult for taxpayers to disguise property payments as alimony payments.

For tax purposes, unearned income means income that has not yet been realized.

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

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

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Investments

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

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Exam 5: Gross Income and Exclusions

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.

Brenda has $15,000 in U.S. Series EE saving bonds and she is considering whether to cash the bonds. Under what conditions can Brenda exclude the interest on the savings bonds from her gross income?

Mike received the following interest payments this year. What amount must Mike include in his gross income (for federal tax purposes)? General Motors \ 1,450 City of New York 900 State of New Jersey 1,200 U.S. Treasury 850

An employee may exclude up to a 40 percent employer-provided discount on services.

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?

Interest earned on a city of Denver bond is excluded from gross income (for federal tax purposes).

Dora made a gift of stock to her granddaughter. At the time of the gift, the stock was worth $15,000. Several months after the gift, a $500 dividend was declared on the stock and paid to Dora's granddaughter. What amount must Dora's granddaughter include in her gross income?

Ethan competed in the annual Austin Marathon this year and won a $25,000 prize for fastest wheelchair entrant. Ethan indicated that he would transfer the prize to the local hospital. How much of the prize should Hal include in his gross income?

Generally, 85 percent of Social Security benefits are included in income of high income taxpayers.

The tax benefit rule applies when a taxpayer refunds amounts that were previously included in income.

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?

Interest income is earned in the year in which it is received by the taxpayer or credited to the bank account.

The tax law includes a complex set of restrictions called the anti-frontloading rules to make it difficult for taxpayers to disguise property payments as alimony payments.

For tax purposes, unearned income means income that has not yet been realized.

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

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

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Investments

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Filters