Question 1

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 2

This year Joseph joined the board of directors. Besides his director's fees, Joseph received the following employee benefits: $\begin{array}{lr}
\text { Salary } & \$ 204,000 \
\text { Contributions to qualified pension plan } & 25,000 \
\text { Qualified health insurance premiums } & 8,000 \
\text { Stock bonus } & 20,000 \
\text { Annual director's fee } & 15,000 \
\text { Group-term life insurance premiums (face }=\$ 40,000) & 1,800
\end{array}$ 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 =

Question 3

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)  $80 
B)  $72 
C)  $48 
D)  $32 
E)  None of these 
A)  $80 
B)  $72 
C)  $48 
D)  $32 
E)  None of these

Question 4

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 5

Charles and Camilla are getting divorced. Under the terms of the decree Charles will pay Camilla $50,000 in cash in each of the next five years (or until Camilla's death or remarriage). In addition, Charles will transfer a castle worth $2,000,000 to Camilla and pay $12,000 per year to support their son, Clyde, until he turns 19 years old. What amount (if any) is included in Camilla's gross income this year?

Accepted Answer

A)  $2,062,000 
B)  $12,000 
C)  $50,000 
D)  $2,050,000 
E)  None of the payments are included in gross income 
A)  $2,062,000 
B)  $12,000 
C)  $50,000 
D)  $2,050,000 
E)  None of the payments are included in gross income

Question 6

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 income earned will Justin report on his tax return for this year?

Accepted Answer

$96,500 = [1/2 × ($6

Question 7

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

Question 8

Loretta received $6,200 from disability insurance that she purchased directly this year. Loretta must include all $6,200 in her gross income.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Kathryn is employed by Acme and they have been very pleased with her performance this year. In December Kathryn was granted an extra week off with pay (pay for the week totaled $2,000). In addition, Kathryn was given tickets to a football bowl game worth $800 (Kathryn didn't use the tickets - she hates football). At year-end Kathryn was allowed to order new office furniture and Acme told her to take the old office furniture home. The office furniture was originally purchased for $7,000, but it was fully depreciated and only worth about $1,000. Determine the amount Kathryn should include in her gross income.

Accepted Answer

$2,000 + $

Question 11

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 12

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 13

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

Question 14

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 & assume that there are 365 days in this year)

Accepted Answer

The answer of Robert will be working overseas on a...

Question 15

Jim received a $500 refund of state income taxes this year. Jim will not need to include the $500 in his gross income this year because he did not deduct state income taxes last year.

Accepted Answer

A) True 
 B)False

Question 16

U.S. citizens generally are subject to tax on all income whether it is generated in the United States or in foreign countries.

Accepted Answer

A) True 
 B)False

Question 17

Dave is a plumber who uses the cash method of accounting. This year Dave requested that his clients make their checks payable to his son, Steve. This year Steve received checks in the amount of $62,000 for Dave's plumbing services. Which of the following is a true statement?

Accepted Answer

A)  Dave is taxed on $62,000 of plumbing income this year. 
B)  Steve is taxed on $62,000 of plumbing income this year. 
C)  Steve is taxed on $62,000 of income from gifts received this year. 
D)  Dave may deduct the $62,000 received by Steve. 
E)  All of these are true 
A)  Dave is taxed on $62,000 of plumbing income this year. 
B)  Steve is taxed on $62,000 of plumbing income this year. 
C)  Steve is taxed on $62,000 of income from gifts received this year. 
D)  Dave may deduct the $62,000 received by Steve. 
E)  All of these are true

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

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 20

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

$121,500 = [1/2 × ($

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.

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?

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?

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?

Loretta received $6,200 from disability insurance that she purchased directly this year. Loretta must include all $6,200 in her gross income.

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

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.

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?

Jim received a $500 refund of state income taxes this year. Jim will not need to include the $500 in his gross income this year because he did not deduct state income taxes last year.

U.S. citizens generally are subject to tax on all income whether it is generated in the United States or in foreign countries.

Dave is a plumber who uses the cash method of accounting. This year Dave requested that his clients make their checks payable to his son, Steve. This year Steve received checks in the amount of $62,000 for Dave's plumbing services. Which of the following is a true statement?

The principle of realization for tax purposes is very different from realization as it is understood for financial reporting 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?

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

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 of the Cfa Institute

Filters

Exam 5: Gross Income and Exclusions

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.

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?

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?

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?

Loretta received $6,200 from disability insurance that she purchased directly this year. Loretta must include all $6,200 in her gross income.

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

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.

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?

Jim received a $500 refund of state income taxes this year. Jim will not need to include the $500 in his gross income this year because he did not deduct state income taxes last year.

U.S. citizens generally are subject to tax on all income whether it is generated in the United States or in foreign countries.

Dave is a plumber who uses the cash method of accounting. This year Dave requested that his clients make their checks payable to his son, Steve. This year Steve received checks in the amount of $62,000 for Dave's plumbing services. Which of the following is a true statement?

The principle of realization for tax purposes is very different from realization as it is understood for financial reporting 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?

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

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 of the Cfa Institute

Filters