Question 1

Under both the accounting and tax law concepts of income,income must be "realized."

Accepted Answer

A) True 
 B)False

Question 2

Adanya's marginal tax rate is 39.6% and she is trying to decide whether to invest in tax-exempt bonds which pay 5% interest or taxable bonds paying 7% interest.The bonds have equivalent risk.Which of the bonds would yield the highest amount of income after taxes?

Accepted Answer

The taxable bonds yield 4.23%

Question 3

In addition to Social Security benefits of $8,000,Mr.and Mrs.Wells have adjusted gross income of $32,000 and tax-exempt interest of $1,000.They will file a joint return.The taxable portion of their Social Security benefits will be

Accepted Answer

A)  $0. 
B)  $2,500. 
C)  $4,000. 
D)  $8,000. 
A)  $0. 
B)  $2,500. 
C)  $4,000. 
D)  $8,000.

Question 4

CT Computer Corporation,an accrual-basis taxpayer,sells service contracts on the computers it sells.At the beginning of January of this year,CT Corporation sold contracts with service to begin immediately:
 
The amount of income CT Corporation must report for this year is

Accepted Answer

A)  $200. 
B)  $1,000. 
C)  $1,680. 
D)  $5,000. 
A)  $200. 
B)  $1,000. 
C)  $1,680. 
D)  $5,000.

Question 5

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 6

Internal Revenue Code Section 61 provides an inclusive list of all possible items taxed under the Code.

Accepted Answer

A) True 
 B)False

Question 7

Julia,age 57,purchases an annuity for $33,600.Julia will receive $400 per month for the rest of her life.The expected return multiple is 20.0.At age 88,the amount that Julia may exclude from income is

Accepted Answer

A)  $0. 
B)  $1,680. 
C)  $3,120. 
D)  $4,800. 
A)  $0. 
B)  $1,680. 
C)  $3,120. 
D)  $4,800.

Question 8

Marcia and Dave are separated and negotiating a divorce agreement.They live in a common law state and have two children who will remain with Marcia.Dave is willing to transfer the jointly owned home to Marcia.He wishes to keep the couple's jointly owned boat.Dave will either transfer securities to Marcia ($100,000 adjusted basis,$150,000 fair market value) or will pay her $30,000 for 5 years with interest of 8%.What issues should Marcia and Dave consider when formulating their divorce agreement?

Accepted Answer

Marcia and Dave should consider the tax

Question 9

Under the accrual method of accounting,income is considered earned when all the events have occurred which fix the right to receive the income and when the amount of income can be determined with reasonable accuracy.

Accepted Answer

A) True 
 B)False

Question 10

Jing,who is single,paid educational expenses of $16,000 in 2017.He redeemed Series EE bonds and received principal of $8,000 and interest of $3,000.Jing has other adjusted gross income of $82,150.With respect to the $3,000 of bond interest,Jing must include in taxable income

Accepted Answer

A)  $0. 
B)  $1,400. 
C)  $1,600. 
D)  $3,000. 
A)  $0. 
B)  $1,400. 
C)  $1,600. 
D)  $3,000.

Question 11

Under the economist's definition,unrealized gains,as well as gifts and inheritances,are income.

Accepted Answer

A) True 
 B)False

Question 12

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 13

Emma is the sole shareholder in Pacific Corporation and has owned the stock for five years.The basis in her stock is $50,000.Pacific distributes $35,000 to Emma.Accumulated earnings and profits at the beginning of the year equal $25,000 and current earnings and profits equal $5,000.
Required:
a.What are the tax consequences of this information?
b.What are the tax consequences of this information if,instead of distributing $35,000 to Emma,Pacific distributes $100,000 to Emma?

Accepted Answer

a.Emma reports $30,000 of taxable divide

Question 14

Ms.Marple's books and records for 2017 reflect the following information:
 
What is the amount Ms.Marple should include in her gross income in 2017?

Accepted Answer

A)  $66,000 
B)  $67,000 
C)  $68,000 
D)  $65,000 
A)  $66,000 
B)  $67,000 
C)  $68,000 
D)  $65,000

Question 15

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 16

Amy's employer provides her with several fringe benefits.Which of the following are included in her taxable income?

Accepted Answer

A)  year-end bonus check 
B)  group term life insurance premium paid by employer for $40,000 coverage for Amy 
C)  employee discount 
D)  employer's contribution to retirement plan on Amy's behalf 
A)  year-end bonus check 
B)  group term life insurance premium paid by employer for $40,000 coverage for Amy 
C)  employee discount 
D)  employer's contribution to retirement plan on Amy's behalf

Question 17

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.

Question 18

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 19

Gross income may be realized when a taxpayer receives economic benefit even if no cash is received.

Accepted Answer

A) True 
 B)False

Question 20

Marisa and Kurt divorced in 2015.Under the terms of the divorce agreement,Marisa was to pay Kurt $110,000 in 2015 and $60,000 each year following until Kurt's death or remarriage.What must Kurt report on his tax return for 2017 regarding these transactions?

Accepted Answer

First,Kurt must report $60,000

Under both the accounting and tax law concepts of income,income must be "realized."

Adanya's marginal tax rate is 39.6% and she is trying to decide whether to invest in tax-exempt bonds which pay 5% interest or taxable bonds paying 7% interest.The bonds have equivalent risk.Which of the bonds would yield the highest amount of income after taxes?

In addition to Social Security benefits of $8,000,Mr.and Mrs.Wells have adjusted gross income of $32,000 and tax-exempt interest of $1,000.They will file a joint return.The taxable portion of their Social Security benefits will be

CT Computer Corporation,an accrual-basis taxpayer,sells service contracts on the computers it sells.At the beginning of January of this year,CT Corporation sold contracts with service to begin immediately: The amount of income CT Corporation must report for this year is

The term "Social Security benefits" does not include

Internal Revenue Code Section 61 provides an inclusive list of all possible items taxed under the Code.

Julia,age 57,purchases an annuity for $33,600.Julia will receive $400 per month for the rest of her life.The expected return multiple is 20.0.At age 88,the amount that Julia may exclude from income is

Under the accrual method of accounting,income is considered earned when all the events have occurred which fix the right to receive the income and when the amount of income can be determined with reasonable accuracy.

Jing,who is single,paid educational expenses of $16,000 in 2017.He redeemed Series EE bonds and received principal of $8,000 and interest of $3,000.Jing has other adjusted gross income of $82,150.With respect to the $3,000 of bond interest,Jing must include in taxable income

Under the economist's definition,unrealized gains,as well as gifts and inheritances,are income.

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

Ms.Marple's books and records for 2017 reflect the following information: What is the amount Ms.Marple should include in her gross income in 2017?

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

Amy's employer provides her with several fringe benefits.Which of the following are included in her taxable income?

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

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.

Gross income may be realized when a taxpayer receives economic benefit even if no cash is received.

Marisa and Kurt divorced in 2015.Under the terms of the divorce agreement,Marisa was to pay Kurt $110,000 in 2015 and $60,000 each year following until Kurt's death or remarriage.What must Kurt report on his tax return for 2017 regarding these transactions?

An Introduction to Taxation

Determination of Tax

Gross Income: Exclusions

Property Transactions: Capital Gains and Losses

Deductions and Losses

Itemized Deductions

Losses and Bad Debts

Employee Expenses and Deferred Compensation

Depreciation, cost Recovery, amortization, and Depletion

Accounting Periods and Methods

Property Transactions: Nontaxable Exchanges

Property Transactions: Sec1231 and Recapture

Special Tax Computation Methods, tax Credits, and Payment of Tax

Tax Research

Corporations

Partnerships and S Corporations

Taxes and Investment Planning

Filters

Exam 3: Gross Income: Inclusions

Under both the accounting and tax law concepts of income,income must be "realized."

Adanya's marginal tax rate is 39.6% and she is trying to decide whether to invest in tax-exempt bonds which pay 5% interest or taxable bonds paying 7% interest.The bonds have equivalent risk.Which of the bonds would yield the highest amount of income after taxes?

In addition to Social Security benefits of $8,000,Mr.and Mrs.Wells have adjusted gross income of $32,000 and tax-exempt interest of $1,000.They will file a joint return.The taxable portion of their Social Security benefits will be

CT Computer Corporation,an accrual-basis taxpayer,sells service contracts on the computers it sells.At the beginning of January of this year,CT Corporation sold contracts with service to begin immediately: The amount of income CT Corporation must report for this year is

The term "Social Security benefits" does not include

Internal Revenue Code Section 61 provides an inclusive list of all possible items taxed under the Code.

Julia,age 57,purchases an annuity for $33,600.Julia will receive $400 per month for the rest of her life.The expected return multiple is 20.0.At age 88,the amount that Julia may exclude from income is

Under the accrual method of accounting,income is considered earned when all the events have occurred which fix the right to receive the income and when the amount of income can be determined with reasonable accuracy.

Jing,who is single,paid educational expenses of $16,000 in 2017.He redeemed Series EE bonds and received principal of $8,000 and interest of $3,000.Jing has other adjusted gross income of $82,150.With respect to the $3,000 of bond interest,Jing must include in taxable income

Under the economist's definition,unrealized gains,as well as gifts and inheritances,are income.

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

Ms.Marple's books and records for 2017 reflect the following information: What is the amount Ms.Marple should include in her gross income in 2017?

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

Amy's employer provides her with several fringe benefits.Which of the following are included in her taxable income?

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

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.

Gross income may be realized when a taxpayer receives economic benefit even if no cash is received.

Marisa and Kurt divorced in 2015.Under the terms of the divorce agreement,Marisa was to pay Kurt $110,000 in 2015 and $60,000 each year following until Kurt's death or remarriage.What must Kurt report on his tax return for 2017 regarding these transactions?

An Introduction to Taxation

Determination of Tax

Gross Income: Exclusions

Property Transactions: Capital Gains and Losses

Deductions and Losses

Itemized Deductions

Losses and Bad Debts

Employee Expenses and Deferred Compensation

Depreciation, cost Recovery, amortization, and Depletion

Accounting Periods and Methods

Property Transactions: Nontaxable Exchanges

Property Transactions: Sec1231 and Recapture

Special Tax Computation Methods, tax Credits, and Payment of Tax

Tax Research

Corporations

Partnerships and S Corporations

Taxes and Investment Planning

Filters