Question 1

Gwen's marginal tax bracket is 25%.Gwen pays alimony of $24,000 per year.Gwen's after tax cost for the $24,000 payment is

Accepted Answer

A) $0. 
B) $6,000. 
C) $18,000. 
D) $24,000. 
A) $0. 
B) $6,000. 
C) $18,000. 
D) $24,000.

Question 2

Kevin is a single person who earns $70,000 in salary for 2017 and has other income from a variety of investments,as follows:
   Kevin received tax refunds when he filed his 2016 tax returns in April 2017.His federal refund was $600 and his state refund was $300.Kevin deducted his state taxes paid in 2016 as an itemized deduction on his 2016 return.Due to changes in circumstances,Kevin is not itemizing deductions on his 2017 return.
Compute Kevin's taxable income for 2017.

Accepted Answer

@#IMG-DLM& 
The interest from the munici

Question 3

One of the requirements that must be met in order to defer recognition of income for advance payments for goods is

Accepted Answer

A) the taxpayer's method of accounting for the sale for tax purposes is the same as the method used for financial reporting purposes. 
B) the goods are on the taxpayer's premises on the last day of the tax year. 
C) the goods are produced in the United States. 
D) the amount received is more than the taxpayer's cost of the goods. 
A) the taxpayer's method of accounting for the sale for tax purposes is the same as the method used for financial reporting purposes. 
B) the goods are on the taxpayer's premises on the last day of the tax year. 
C) the goods are produced in the United States. 
D) the amount received is more than the taxpayer's cost of the goods.

Question 4

Todd and Hillary,husband and wife,file separate returns.Todd and Hillary live in a community property state that considers separate property income to be community income.Todd's salary is $82,000 and Hillary's salary is $80,000.Hillary receives dividend income of $7,000 from stock inherited from her parents.Todd receives interest income of $5,000 from bonds purchased with his salary after marriage.Todd and Hillary receive $10,000 dividend income from stock they purchased jointly.Todd's income would be

Accepted Answer

A) $92,000. 
B) $93,000. 
C) $94,500. 
D) $97,000. 
A) $92,000. 
B) $93,000. 
C) $94,500. 
D) $97,000.

Question 5

Betty is a single retiree who receives Social Security benefits of $12,000,tax-exempt interest of $4,000 and a taxable pension.Determine the amount of taxable Social Security benefits assuming her annual pension is
a.$10,000.
b.$20,000.
c.$50,000.

Accepted Answer

The answer of Betty is a single retiree who receives...

Question 6

The term "Social Security benefits" does not include

Accepted Answer

A) supplementary Medicare benefits. 
B) tier-one railroad retirement benefits. 
C) disability benefits received under Social Security. 
D) retirement benefits received under Social Security. 
A) supplementary Medicare benefits. 
B) tier-one railroad retirement benefits. 
C) disability benefits received under Social Security. 
D) retirement benefits received under Social Security.

Question 7

While using a metal detector at the beach during spring break,Toni uncovered some rare coins with a current fair market value of $9,000.What are her tax consequences regarding this find?

Accepted Answer

A) Because it was a "find" she only reports half of the FMV as income. 
B) She reports the entire FMV as income. 
C) Since she "found" the coins,she does not have to report any amount of income until she sells the coins. 
D) Under the discovery rules in the tax law,she will never report any amount as taxable since the value is under $10,000. 
A) Because it was a "find" she only reports half of the FMV as income. 
B) She reports the entire FMV as income. 
C) Since she "found" the coins,she does not have to report any amount of income until she sells the coins. 
D) Under the discovery rules in the tax law,she will never report any amount as taxable since the value is under $10,000.

Question 8

Tom and Heidi,husband and wife,file separate returns.Tom and Heidi live in a common law state.Tom's salary is $82,000 and Heidi's salary is $80,000.Heidi receives dividend income of $7,000 from stock inherited from her parents.Tom receives interest income of $5,000 from bonds purchased with his salary after marriage.Tom and Heidi receive $12,000 dividend income from stock they purchased jointly.Tom's income would be

Accepted Answer

A) $92,000. 
B) $93,000. 
C) $94,000. 
D) $96,500. 
A) $92,000. 
B) $93,000. 
C) $94,000. 
D) $96,500.

Question 9

Parents often wish to shift income to young children in order to lower the family tax burden.Tax policies and provisions that limit that practice include all of the following except

Accepted Answer

A) the claim of right doctrine. 
B) the kiddie tax. 
C) the assignment of income doctrine. 
D) the imposition of the gift tax. 
A) the claim of right doctrine. 
B) the kiddie tax. 
C) the assignment of income doctrine. 
D) the imposition of the gift tax.

Question 10

Julia owns 1,000 shares of Orange Corporation.This year,Orange declared a 10% stock dividend.There was no option for shareholders to receive cash.When Julia received 100 shares of Orange stock,it had a fair market value of $50 a share.How much income does Julia have from the dividend?

Accepted Answer

A) $0 
B) $50 
C) $5,000 
D) $50,000 
A) $0 
B) $50 
C) $5,000 
D) $50,000

Question 11

Which of the following criteria is not required to be met under the tax concept of income?

Accepted Answer

A) There must be economic benefit. 
B) Income must be realized. 
C) Income must be recognized. 
D) Cash must be received. 
A) There must be economic benefit. 
B) Income must be realized. 
C) Income must be recognized. 
D) Cash must be received.

Question 12

Except as otherwise provided,gross income means all income from whatever source derived.

Accepted Answer

A) True 
 B)False

Question 13

The recipient of a taxable stock dividend includes the value of the stock received in gross income and that amount becomes the basis for the stock received.

Accepted Answer

A) True 
 B)False

Question 14

On April 1,2017,Martha,age 67,begins receiving payments of $3,000 monthly from her employer's qualified retirement plan.She had contributed $90,000 to the plan in after-tax dollars.The anticipated number of payments is 210.Using the simplified method,how much of the payments are taxable in 2017?

Accepted Answer

$90,000 / 210 = $429.57 monthl

Question 15

Ms.Walter,age 70,is thinking about going back to work part-time.She knows that the wages may affect the taxability of her Social Security benefits.What is the maximum percentage of Social Security benefits that could become taxable?

Accepted Answer

A) 0% 
B) 50% 
C) 85% 
D) 100% 
A) 0% 
B) 50% 
C) 85% 
D) 100%

Question 16

A check received after banking hours is considered constructively received by the payee even though the check cannot be converted to cash.

Accepted Answer

A) True 
 B)False

Question 17

Gross income is limited to amounts received in the form of cash.

Accepted Answer

A) True 
 B)False

Question 18

For a cash-basis taxpayer,security deposits received on rental property are taxable to the landlord upon receipt.

Accepted Answer

A) True 
 B)False

Question 19

Under the terms of a divorce agreement dated January 1,2017,Edmond was to pay his wife Donna $3,000 per month in alimony and $500 per month in child support.Payments began on January 1,2017.In addition,Donna received the family residence with a cost basis of $210,000 and a fair market value of $260,000.
a.What is the amount that Donna must include in income for the twelve-month period ended December 31,2017?
b.What is the basis in the home which Donna received as a result of the divorce?

Accepted Answer

a.Alimony,which is taxable to Donna and

Question 20

Daniel plans to invest $20,000 in either a corporate bond paying 5% or a tax-exempt bond with a 4% interest rate.The bonds have an equivalent level of risk.Daniel has a 33% marginal tax rate and wants to maximize his after-tax earnings.Daniel should

Accepted Answer

A) invest in the corporate bond due to its higher stated interest rate. 
B) invest in the tax-exempt bond since its yield is more than the after-tax return on the corporate bond. 
C) invest in the corporate bond because its after-tax earnings are more than the return on the tax-exempt bond. 
D) allocate his money equally between the two investments. 
A) invest in the corporate bond due to its higher stated interest rate. 
B) invest in the tax-exempt bond since its yield is more than the after-tax return on the corporate bond. 
C) invest in the corporate bond because its after-tax earnings are more than the return on the tax-exempt bond. 
D) allocate his money equally between the two investments.

Exam 19: Gross Income: Inclusions

Gwen's marginal tax bracket is 25%.Gwen pays alimony of $24,000 per year.Gwen's after tax cost for the $24,000 payment is

One of the requirements that must be met in order to defer recognition of income for advance payments for goods is

Betty is a single retiree who receives Social Security benefits of $12,000,tax-exempt interest of $4,000 and a taxable pension.Determine the amount of taxable Social Security benefits assuming her annual pension is a.$10,000. b.$20,000. c.$50,000.

The term "Social Security benefits" does not include

While using a metal detector at the beach during spring break,Toni uncovered some rare coins with a current fair market value of $9,000.What are her tax consequences regarding this find?

Parents often wish to shift income to young children in order to lower the family tax burden.Tax policies and provisions that limit that practice include all of the following except

Julia owns 1,000 shares of Orange Corporation.This year,Orange declared a 10% stock dividend.There was no option for shareholders to receive cash.When Julia received 100 shares of Orange stock,it had a fair market value of $50 a share.How much income does Julia have from the dividend?

Which of the following criteria is not required to be met under the tax concept of income?

Except as otherwise provided,gross income means all income from whatever source derived.

The recipient of a taxable stock dividend includes the value of the stock received in gross income and that amount becomes the basis for the stock received.

On April 1,2017,Martha,age 67,begins receiving payments of $3,000 monthly from her employer's qualified retirement plan.She had contributed $90,000 to the plan in after-tax dollars.The anticipated number of payments is 210.Using the simplified method,how much of the payments are taxable in 2017?

Ms.Walter,age 70,is thinking about going back to work part-time.She knows that the wages may affect the taxability of her Social Security benefits.What is the maximum percentage of Social Security benefits that could become taxable?

A check received after banking hours is considered constructively received by the payee even though the check cannot be converted to cash.

Gross income is limited to amounts received in the form of cash.

For a cash-basis taxpayer,security deposits received on rental property are taxable to the landlord upon receipt.

Daniel plans to invest $20,000 in either a corporate bond paying 5% or a tax-exempt bond with a 4% interest rate.The bonds have an equivalent level of risk.Daniel has a 33% marginal tax rate and wants to maximize his after-tax earnings.Daniel should

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