Exam 3: Gross Income: Inclusions

In community property states,income is generally taxed to the spouse who earned it.

With respect to alimony and property settlements in a divorce or separation,all of the following are true with the exception of

Carla redeemed EE bonds which qualify for the educational exclusion.The redemption consisted of $14,000 principal and $6,000 interest.The net qualifying educational expenses are $10,000.Her AGI is below the threshold for phase-out of the exclusion.The taxable interest is

Frank and Marion,husband and wife,file separate returns.Frank and Marion live in a common law state.Frank's salary is $42,000 and Marion's salary is $46,000.Marion receives dividend income of $4,000 from stock inherited from her parents.Frank receives interest income of $1,000 from bonds purchased with his salary after marriage.Frank and Marion receive $3,200 dividend income from stock they purchased jointly.Marion's income would be

If a taxpayer's method of accounting does not clearly reflect income,the IRS may specify a different accounting method which must be used by the taxpayer.

Mark purchased 2,000 shares of Darcy Corporation for $13,200.This year,Darcy declared a 10% nontaxable stock dividend,and Mark received 200 shares.After the dividend Mark's per share basis will be

A cash-basis taxpayer can defer income recognition by refusing to accept payment.

Which of the following constitutes constructive receipt in 2017? a.A check received on December 29,2017.The check was postdated January 5,2018. b.A check received on January 4,2018.It had been mailed on December 29,2017. c.A rent check,received on December 31,2017,by the manager of an apartment complex.The manager normally collects rent for the owner who is out of town. d.A salary check received at 5:30 p.m.on December 31,2017,after all banks are closed. e.A paycheck received on December 26,2017.The check was not honored by the bank because the employer's account did not have sufficient funds.

The portion of a taxpayer's wages that are garnished by court order and forwarded to pay a delinquent bank loan are not taxable income to the taxpayer.

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?

Alimony is

Speak Corporation,a calendar-year,accrual-basis taxpayer,sell packages of foreign langauge lessons to individuals planning to work overseas.In December 2017,it sold and received payment for $600,000 of 24-month lesson packages to be provided evenly through 2018 and 2019.Speak Corporation will recognize the $600,000 of income

Homer Corporation's office building was destroyed by fire.Homer collected insurance of $250,000,which equaled the building's basis,and $150,000 for profits lost during the time the company was rebuilding the office building.What is the amount taxable this year?

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?

A taxpayer may not avoid responsibility for payment of income taxes by assigning the income to a third party.

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.

Unemployment compensation is exempt from federal income tax.

XYZ Corporation declares a 10 percent stock dividend distributable to all shareholders.There is only the one class of stock outstanding,and shareholders do not have any choices with respect to the distribution.Carol had owned 100 shares of stock,and she received 10 new shares as a result of the stock dividend.The stock is trading at $25 per share as of the distribution.Carol will recognize $250 of dividend income.

Under the terms of their divorce agreement executed in August of this year,Clint transferred Beta,Inc.stock to his former wife,Rosa,as a property settlement.At the time of the transfer,the stock had a basis to Clint of $55,000 and a fair market value of $68,000.Rosa subsequently sold the stock for $75,000.What is the tax consequence of first the stock transfer and then the stock sale to Rosa?

An electrician completes a rewiring job and is paid $1,000 by the customer in November.The customer has a small fire in his house and sues the electrician for the repayment of the $1,000 fee plus damages in December.The electrician reaches a settlement with the customer in the following February and refunds the $1,000 fee.How should the electrician treat these events when he files his tax return in April?