Question 1

Unemployment benefits are excluded from gross income.

Accepted Answer

A) True 
 B)False  False

Question 2

Nate is a partner in a partnership that received $5,000 of interest income this year. Nate's share of the interest is $1,000, and he should report this income on his individual return as:

Accepted Answer

A)  business income 
B)  income from a partnership 
C)  interest income 
D)  dividend income because the partnership intends to organize next year as a limited liability company 
E)  All of these 
A)  business income 
B)  income from a partnership 
C)  interest income 
D)  dividend income because the partnership intends to organize next year as a limited liability company 
E)  All of these C

Question 3

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

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 D

Question 4

Alex is 63 years old and retired. This year Alex won $212,200 in the state lottery. Alex also received $20,000 from an annuity he purchased eight years ago. He purchased the annuity, to be paid annually for 15 years, for $157,500. Alex received $10,000 in Social Security benefits for the year. Calculate Alex's gross income.

Accepted Answer

$230,200 =

Question 5

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 6

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 7

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

Accepted Answer

A) True 
 B)False

Question 8

Fran purchased an annuity that provides $12,000 quarterly payments for the next 10 years. The annuity was purchased at a cost of $300,000. How much of the first quarterly payment will Fran include in her gross income?

Accepted Answer

A)  $7,500 
B)  $4,500 
C)  $12,000 
D)  $32,400 
E)  All of these 
A)  $7,500 
B)  $4,500 
C)  $12,000 
D)  $32,400 
E)  All of these

Question 9

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 these 
A)  Tax basis of the property 
B)  Selling expenses 
C)  Amount realized 
D)  Tax basis of the property and Selling expenses 
E)  All of these

Question 10

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 11

Which of the following is a description of how the annuity exclusion ratio is calculated for an annuity paid over a fixed period?

Accepted Answer

A)  The expected return is divided by the number of payments. 
B)  The original investment is divided by the prevailing interest rate. 
C)  The original investment is divided by the number of payments. 
D)  The expected return is divided by the prevailing interest rate. 
E)  None of these 
A)  The expected return is divided by the number of payments. 
B)  The original investment is divided by the prevailing interest rate. 
C)  The original investment is divided by the number of payments. 
D)  The expected return is divided by the prevailing interest rate. 
E)  None of these

Question 12

Identify the rule that determines whether a taxpayer must include in income a refund of an amount deducted in a previous year:

Accepted Answer

A)  Tax refund rule 
B)  Constructive receipt 
C)  Return of capital principle 
D)  Tax benefit rule 
E)  None of these 
A)  Tax refund rule 
B)  Constructive receipt 
C)  Return of capital principle 
D)  Tax benefit rule 
E)  None of these

Question 13

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 14

Ophra is a cash basis taxpayer who is employed in the publishing industry. This year her employer informed her that because of her outstanding performance she is entitled to a free world cruise. Ophra asked her employer to issue the cruise tickets to her parents, and he complied with this request. Identify the principle that will determine whether Ophra or her parents are taxed on the value of the cruise tickets:

Accepted Answer

A)  Assignment of income 
B)  Constructive receipt 
C)  Return of capital principle 
D)  Wherewithal to pay 
E)  All of these 
A)  Assignment of income 
B)  Constructive receipt 
C)  Return of capital principle 
D)  Wherewithal to pay 
E)  All of these

Question 15

A taxpayer generally includes in gross income the amount of debt forgiven by a lender.

Accepted Answer

A) True 
 B)False

Question 16

This year Henry realized a gain on the sale of an antique car that he inherited from his uncle. The buyer has promised to pay Henry in installment payments over the next few years. Identify the principle that will determine when Henry should be taxed on the gain from the sale:

Accepted Answer

A)  Assignment of income 
B)  Constructive receipt 
C)  Return of capital principle 
D)  Wherewithal to pay 
E)  All of these 
A)  Assignment of income 
B)  Constructive receipt 
C)  Return of capital principle 
D)  Wherewithal to pay 
E)  All of these

Question 17

Which of the following statements about alimony payments is true?

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 these 
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 these

Question 18

NeNe is an accountant and U.S. citizen, who has accepted a permanent position in Madrid, Spain for a Spanish financial services company. This year, NeNe spent the entire year working in Madrid. NeNe's employer paid $40,000 of her Madrid housing expenses this year. What amount of the $40,000 housing payments may NeNe exclude?

Accepted Answer

A)  NeNe can exclude all of the housing payment because she worked more than 330 days overseas 
B)  15,872 
C)  24,128 
D)  13,888 
E)  None of her salary can be excluded from gross income. 
A)  NeNe can exclude all of the housing payment because she worked more than 330 days overseas 
B)  15,872 
C)  24,128 
D)  13,888 
E)  None of her salary can be excluded from gross income.

Question 19

To provide relief from double taxation, Congress allows a foreign-unearned income exclusion for interest and dividends earned in foreign countries.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

Unemployment benefits are excluded from gross income.

Nate is a partner in a partnership that received $5,000 of interest income this year. Nate's share of the interest is $1,000, and he should report this income on his individual return as:

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

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

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.

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

Fran purchased an annuity that provides $12,000 quarterly payments for the next 10 years. The annuity was purchased at a cost of $300,000. How much of the first quarterly payment will Fran include in her gross income?

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 is a description of how the annuity exclusion ratio is calculated for an annuity paid over a fixed period?

Identify the rule that determines whether a taxpayer must include in income a refund of an amount deducted in a previous year:

A taxpayer generally includes in gross income the amount of debt forgiven by a lender.

This year Henry realized a gain on the sale of an antique car that he inherited from his uncle. The buyer has promised to pay Henry in installment payments over the next few years. Identify the principle that will determine when Henry should be taxed on the gain from the sale:

Which of the following statements about alimony payments is true?

To provide relief from double taxation, Congress allows a foreign-unearned income exclusion for interest and dividends earned in foreign countries.

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

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

Unemployment benefits are excluded from gross income.

Nate is a partner in a partnership that received $5,000 of interest income this year. Nate's share of the interest is $1,000, and he should report this income on his individual return as:

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

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

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.

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

Fran purchased an annuity that provides $12,000 quarterly payments for the next 10 years. The annuity was purchased at a cost of $300,000. How much of the first quarterly payment will Fran include in her gross income?

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 is a description of how the annuity exclusion ratio is calculated for an annuity paid over a fixed period?

Identify the rule that determines whether a taxpayer must include in income a refund of an amount deducted in a previous year:

A taxpayer generally includes in gross income the amount of debt forgiven by a lender.

This year Henry realized a gain on the sale of an antique car that he inherited from his uncle. The buyer has promised to pay Henry in installment payments over the next few years. Identify the principle that will determine when Henry should be taxed on the gain from the sale:

Which of the following statements about alimony payments is true?

To provide relief from double taxation, Congress allows a foreign-unearned income exclusion for interest and dividends earned in foreign countries.

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

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