Question 1

Benefits covered by Section 132 which may be excluded from an employee's gross income do not include

Accepted Answer

A) employee's use of an employer-owned health club. 
B) membership fees in professional organizations. 
C) employer-provided vehicle for personal use. 
D) hotel employee's use of a vacant hotel room. 
A) employee's use of an employer-owned health club. 
B) membership fees in professional organizations. 
C) employer-provided vehicle for personal use. 
D) hotel employee's use of a vacant hotel room.

Question 2

Which of the following is not excluded from income?

Accepted Answer

A) public assistance payments 
B) fair market value of prize won on a game show 
C) gifts and inheritances 
D) life insurance proceeds paid by reason of death 
A) public assistance payments 
B) fair market value of prize won on a game show 
C) gifts and inheritances 
D) life insurance proceeds paid by reason of death

Question 3

Adam purchased stock in 2006 for $100,000.He is considering selling it in 2017.It is currently worth $2,100,000 so he would realize a $2,000,000 gain.Adam is in the top tax bracket.Determine the taxes due under the following independent situations (ignore any additional Medicare taxes on investment income):
(a)Adam sells the stock,and no special circumstances apply.
(b)The stock is qualified small business corporation stock.
(c)The stock is qualified small business corporation stock.Within 60 days Adam invests $2,500,000 in new qualifying small business corporation stock.
(d)The stock is qualified small business corporation stock.Within 60 days Adam invests $2,000,000 in new qualifying small business corporation stock.

Accepted Answer

(a)$2,000,000 × 20% = $400,000 tax due.

Question 4

Richard is a key employee of Winn Corporation.The corporation provides Richard with $120,000 of group-term life insurance coverage.Only company executives receive life insurance coverage.The premium attributable to the coverage is $1,600.The uniform one-month group-term premium is one dollar per $1,000 of coverage.How much must Richard include in income due to the policy?

Accepted Answer

A) $0 
B) $840 
C) $1,440 
D) $1,600 
A) $0 
B) $840 
C) $1,440 
D) $1,600

Question 5

Dividends on life insurance policies are generally excludible income because they are considered a return of premium.

Accepted Answer

A) True 
 B)False

Question 6

Sam received a scholarship for room and board.This scholarship is excludible from income.

Accepted Answer

A) True 
 B)False

Question 7

For a taxpayer who is not insolvent nor under bankruptcy proceedings,the discharge of debt is generally

Accepted Answer

A) taxable. 
B) nontaxable. 
C) partially taxable. 
D) None of the above. 
A) taxable. 
B) nontaxable. 
C) partially taxable. 
D) None of the above.

Question 8

Cafeteria plans are valuable to employers because

Accepted Answer

A) they allow employees to eat their meals quickly and stay on the premises to be available for work. 
B) they allow employers to avoid paying for benefits that are not needed or desired by employees. 
C) they allow employers to provide benefits for higher income employees only. 
D) None of the above. 
A) they allow employees to eat their meals quickly and stay on the premises to be available for work. 
B) they allow employers to avoid paying for benefits that are not needed or desired by employees. 
C) they allow employers to provide benefits for higher income employees only. 
D) None of the above.

Question 9

The fair value of lodging cannot be excluded from gross income unless the employee is required to accept the lodging as a condition of employment.

Accepted Answer

A) True 
 B)False

Question 10

Any distribution from a qualified tuition plan not used for qualified higher education expenses is both included in income and subject to a 10% penalty.

Accepted Answer

A) True 
 B)False

Question 11

Jeremy,an American citizen,earned $200,000 during 2017 while employed in Switzerland.Jeremy is entitled to the maximum foreign-earned income exclusion.Jeremy also incurred $40,000 of deductible expenses attributable to the foreign-earned income.Jeremy may deduct how much in expenses?

Accepted Answer

A) $0 
B) $20,420 
C) $19,580 
D) $40,000 
A) $0 
B) $20,420 
C) $19,580 
D) $40,000

Question 12

Ahmad's employer pays $10,000 in tuition this year for Ahmad to attend a graduate business program.How much of the employer-provided tuition is taxable to Ahmad?

Accepted Answer

A) $0 
B) $4,750 
C) $5,250 
D) $10,000 
A) $0 
B) $4,750 
C) $5,250 
D) $10,000

Question 13

Meals may be excluded from an employee's gross income provided they are furnished on the employer's business premises and are for the convenience of the employee.

Accepted Answer

A) True 
 B)False

Question 14

Punitive damages are taxable unless they are awarded for physical injuries.

Accepted Answer

A) True 
 B)False

Question 15

Tonya's employer pays the full premium on a disability income policy from an insurance company on behalf of all employees.After a skiing accident,Tonya was out of work for three months and collected $2,000 per month ($6,000 total)of disability benefits from this policy.In addition,Tonya received another $1,000 per month ($3,000 total)from a disability policy she had purchased herself.Tonya had paid a total of $1,300 in premiums on her policy.How much of the $9,000 total received is taxable?

Accepted Answer

A) $9,000 
B) $6,000 
C) $7,700 
D) $3,000 
A) $9,000 
B) $6,000 
C) $7,700 
D) $3,000

Question 16

Rick chose the following fringe benefits under his employer's cafeteria plan.Which of his chosen benefits will be taxable?

Accepted Answer

A) $150 cash per pay period 
B) medical insurance on his family 
C) dental insurance 
D) group term life insurance coverage of $20,000 
A) $150 cash per pay period 
B) medical insurance on his family 
C) dental insurance 
D) group term life insurance coverage of $20,000

Question 17

Many exclusions exist due to the benevolence of Congress or as a result of the government's attempts to encourage particular social behavior.

Accepted Answer

A) True 
 B)False

Question 18

The value of health,accident,and disability insurance premiums paid by an employer are generally not included in an employee's gross income.

Accepted Answer

A) True 
 B)False

Question 19

In September of 2017,Michelle sold shares of qualified small business stock for $1,000,000 that had a basis of $200,000.She had held the stock for 17 months.Forty-five days after the sale she purchased other qualified small business stock for $1,100,000.What is the basis in the new stock she purchased?

Accepted Answer

A) $200,000 
B) $300,000 
C) $800,000 
D) $1,100,000 
A) $200,000 
B) $300,000 
C) $800,000 
D) $1,100,000

Question 20

Brad suffers from congestive heart failure and has been admitted to a nursing home where he is expected to spend the remainder of his life.His doctor has certified him as chronically ill.In 2017,Brad receives $320 per day from his life insurance policy for 100 days ($32,000)as accelerated death benefits.Brad's nursing home care costs $300 per day ($30,000 for the 100 days of care).Brad will be allowed to exclude

Accepted Answer

A) $0. 
B) $30,000. 
C) $32,000. 
D) $2,000. 
A) $0. 
B) $30,000. 
C) $32,000. 
D) $2,000.

Exam 20: Gross Income: Exclusions

Benefits covered by Section 132 which may be excluded from an employee's gross income do not include

Which of the following is not excluded from income?

Dividends on life insurance policies are generally excludible income because they are considered a return of premium.

Sam received a scholarship for room and board.This scholarship is excludible from income.

For a taxpayer who is not insolvent nor under bankruptcy proceedings,the discharge of debt is generally

Cafeteria plans are valuable to employers because

The fair value of lodging cannot be excluded from gross income unless the employee is required to accept the lodging as a condition of employment.

Any distribution from a qualified tuition plan not used for qualified higher education expenses is both included in income and subject to a 10% penalty.

Jeremy,an American citizen,earned $200,000 during 2017 while employed in Switzerland.Jeremy is entitled to the maximum foreign-earned income exclusion.Jeremy also incurred $40,000 of deductible expenses attributable to the foreign-earned income.Jeremy may deduct how much in expenses?

Ahmad's employer pays $10,000 in tuition this year for Ahmad to attend a graduate business program.How much of the employer-provided tuition is taxable to Ahmad?

Meals may be excluded from an employee's gross income provided they are furnished on the employer's business premises and are for the convenience of the employee.

Punitive damages are taxable unless they are awarded for physical injuries.

Rick chose the following fringe benefits under his employer's cafeteria plan.Which of his chosen benefits will be taxable?

Many exclusions exist due to the benevolence of Congress or as a result of the government's attempts to encourage particular social behavior.

The value of health,accident,and disability insurance premiums paid by an employer are generally not included in an employee's gross income.

Tax Research

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