Question 1

Match each statement with the correct term below.
-Child-support payment

Accepted Answer

A) The category of income that includes interest, dividends, and rents. 
B) Income from wages, salaries, and trade or businesses. 
C) Interest income resulting from making an interest-free gift loan of $200,000. 
D) A taxable amount received from a state plan to provide a substitute for an employee's earned income. 
E) A series of equal payments received over equal time periods.
F)A receipt of cash from a former spouse that is included in gross income.
G)A payment received from a former spouse that is not included in gross income.
H)A division of marital assets that does not result in any income recognition.
I)A sale of property in which at least one payment is received in a tax year after the year of sale
J)A method of accounting that must be used to recognize income from long-term construction contracts.
K)A debt instrument that has the interest paid at maturity rather than throughout the life of the debt. 
A) The category of income that includes interest, dividends, and rents. 
B) Income from wages, salaries, and trade or businesses. 
C) Interest income resulting from making an interest-free gift loan of $200,000. 
D) A taxable amount received from a state plan to provide a substitute for an employee's earned income. 
E) A series of equal payments received over equal time periods.
F)A receipt of cash from a former spouse that is included in gross income.
G)A payment received from a former spouse that is not included in gross income.
H)A division of marital assets that does not result in any income recognition.
I)A sale of property in which at least one payment is received in a tax year after the year of sale
J)A method of accounting that must be used to recognize income from long-term construction contracts.
K)A debt instrument that has the interest paid at maturity rather than throughout the life of the debt.

Question 2

Which of the following never generate taxable income?
I.Interest free loan from family member.
II.Interest free loan from employer.
III.Interest free loan under $10,000.
IV.Interest free loan over $100,000.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statements I and III are correct. 
C) Only statements I and II and III are correct. 
D) Only statement III is correct. 
E) Only statements II and III are correct. 
A) Only statement I is correct. 
B) Only statements I and III are correct. 
C) Only statements I and II and III are correct. 
D) Only statement III is correct. 
E) Only statements II and III are correct.

Question 3

Dunbar, a single taxpayer, purchased 300 shares of Sweetwater, Inc., stock on October 14, 2015, for $3,000. He sells the stock on August 22, 2018, for $4,000. Dunbar has no other capital asset transactions in 2018.
I.If Dunbar's taxable income without considering the stock sale is $93,000, the sale of the stock will increase his income tax liability by $220.
II.If Dunbar's taxable income without considering the stock sale is $13,000, the sale of the stock will not increase his income tax liability.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 4

Which of the following constitutes a realization?
I.Oak Ridge Coal Company's coal mine reserves were recently appraised at $5,750,000 more than the previous year's appraisal.
II.Lea's employer gives her (and all other salaried employees) a weekend in Chicago in recognition of their efforts to make this a successful year.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 5

Hilda, age 11, earns wages of $2,700 from her modeling. Since the funds are collected by Hilda's father and used for Hilda's living expenses, her father intends to include it in his gross income.
I.The Assignment of Income Doctrine prohibits the father from recognizing the $2,700.
II.Even if Hilda desired to gift the $2,700 to her father, Hilda must recognize the income she earned.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 6

Belina and Harry form the B&H Partnership in 2018. Belina contributes $15,000 for a 25% interest in the partnership. Harry contributes a building worth $45,000 for a 75% interest in the partnership. During 2018, B&H reports income of $12,000 from operations. Belina withdraws $6,000 and Harry withdraws $12,000 from the partnership. How much gross income will Belina and Harry report from their investment in B&H and what are their bases in the partnership at the end of 2018?

Accepted Answer

A partnership is a conduit entity. Belin

Question 7

Terry owns 100% of Terry Manufacturing, Inc, and has the corporation pay his son's college tuition. Terry must include the payments in his taxable income.

Accepted Answer

A) True 
 B)False

Question 8

Nora receives a salary of $55,000 during the current year. She sells some land that she held as an investment at a loss of $15,000 and some stock at a gain of $10,000. Nora's adjusted gross income is:

Accepted Answer

A) $50,000 
B) $52,000 
C) $55,000 
D) $62,000 
E) $65,000 
A) $50,000 
B) $52,000 
C) $55,000 
D) $62,000 
E) $65,000

Question 9

One type of imputed income that always escapes taxation is

Accepted Answer

A) Bargain purchases by employees. 
B) Value of growing one's own vegetables for personal consumption. 
C) Payment of personal expenses by a corporation in which stock is owned. 
D) Interest free loan from parents. 
A) Bargain purchases by employees. 
B) Value of growing one's own vegetables for personal consumption. 
C) Payment of personal expenses by a corporation in which stock is owned. 
D) Interest free loan from parents.

Question 10

Binney is a retired auto mechanic. He and his wife, Jennie, receive taxable pensions totaling $35,000, $8,000 of tax-exempt interest income and $6,000 of Social Security benefits during the current year. Assuming that they had no other items of income or deductions for adjusted gross income, Binney and Jennie's adjusted gross income is:

Accepted Answer

A) $35,000 
B) $36,700 
C) $38,000 
D) $39,700 
E) $40,100 
A) $35,000 
B) $36,700 
C) $38,000 
D) $39,700 
E) $40,100

Question 11

Benjamin has the following capital gains and losses for the current year:
What is Benjamin's net capital gain or loss for the year?
$\begin{array}{lr}
\text { Long-term capital loss } & \$(13,000) \
\text { Long-term capital gain } & 6,000 \
\text { Short-term capital loss } & (10,000) \
\text { Short-term capital gain } & 12,000
\end{array}$

Accepted Answer

A) Net long-term capital loss of $7,000. 
B) Net short-term capital gain of $2,000. 
C) Net long-term capital loss of $5,000. 
D) Net short-term capital gain of $1,000. 
E) Net long-term capital loss of $3,000. 
A) Net long-term capital loss of $7,000. 
B) Net short-term capital gain of $2,000. 
C) Net long-term capital loss of $5,000. 
D) Net short-term capital gain of $1,000. 
E) Net long-term capital loss of $3,000.

Question 12

Helena and Irwin are married taxpayers who file jointly. Their taxable income before considering capital gains and losses is $120,000. They have long-term capital gains of $8,000, short-term capital losses of $4,000, and short-term capital gains of $5,000. What are the tax effects of these events?
I.The short-term capital losses can offset only $3,000 of the short-term capital gains.
II.The net capital gains will add $1,420 to the couple's tax liability.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 13

Match each statement with the correct term below.
-Unemployment compensation

Accepted Answer

A) The category of income that includes interest, dividends, and rents. 
B) Income from wages, salaries, and trade or businesses. 
C) Interest income resulting from making an interest-free gift loan of $200,000. 
D) A taxable amount received from a state plan to provide a substitute for an employee's earned income. 
E) A series of equal payments received over equal time periods.
F)A receipt of cash from a former spouse that is included in gross income.
G)A payment received from a former spouse that is not included in gross income.
H)A division of marital assets that does not result in any income recognition.
I)A sale of property in which at least one payment is received in a tax year after the year of sale
J)A method of accounting that must be used to recognize income from long-term construction contracts.
K)A debt instrument that has the interest paid at maturity rather than throughout the life of the debt. 
A) The category of income that includes interest, dividends, and rents. 
B) Income from wages, salaries, and trade or businesses. 
C) Interest income resulting from making an interest-free gift loan of $200,000. 
D) A taxable amount received from a state plan to provide a substitute for an employee's earned income. 
E) A series of equal payments received over equal time periods.
F)A receipt of cash from a former spouse that is included in gross income.
G)A payment received from a former spouse that is not included in gross income.
H)A division of marital assets that does not result in any income recognition.
I)A sale of property in which at least one payment is received in a tax year after the year of sale
J)A method of accounting that must be used to recognize income from long-term construction contracts.
K)A debt instrument that has the interest paid at maturity rather than throughout the life of the debt.

Question 14

Sarah is single and retires in 2018. During 2018, Sarah's income consists of a $24,000 taxable pension and $10,000 in Social Security benefits.
a.How much of the Social Security benefits must be included in Sarah's 2018 gross income?
b.If Sarah also receives $7,000 in tax-exempt interest in 2018, how much of the Social Security benefits must be included in her 2018 gross income??

Accepted Answer

?
 a. Sarah will include @#LAT-DLM& of the Social

Question 15

On January 1, Sandi borrows $40,000 from G&H Accounting firm, her employer, to pay-off charge accounts and other personal loans. Sandi must repay the $40,000 loan at the end of 5 years. Because Sandi has been loyal to her job, G&H is not charging Sandi interest on the $40,000 loan. The applicable federal interest rate is 6%. If Sandi has total net investment income for the current year of $200:
I.Sandi has compensation income of $2,400.
II.Sandi has a nontaxable gift from her employer of $2,400.
III.G&H is allowed a deduction for $2,400 of compensation paid to SandI.
IV.There are no tax effects because Sandi's net investment income is less than $1,000.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Only statements I and III are correct. 
D) Only statements II and IV are correct. 
E) Only statements II and III are correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Only statements I and III are correct. 
D) Only statements II and IV are correct. 
E) Only statements II and III are correct.

Question 16

Stephen is a furniture salesman for Foster's Furniture Mart. Stephen purchases a bedroom suite from Foster's for $8,000. The sticker price is $11,000. Foster's policy is to "discount" all customer purchases for up to $1,000 off of the sticker price for purchases over $10,000. What is the tax treatment of Stephen's furniture purchase?
I.Stephen does not need to account for the furniture purchase since it is for his personal use.
II.Stephen has imputed income because of the nature of the furniture purchase.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 17

Sophi finds a chest inscribed "Captain Hook" that contains $500,000 of cash while fishing off the shore around New Orleans. The US Customs and the DEA denied knowledge of the cash, so Sophi keeps it.
I.Sophi will not recognize any gross income if the chest contained jewels valued at $500,000, rather than cash at the time of discovery.
II.Recognition is necessary because this is a treasure trove and it is comprised of cash.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 18

Jerry purchased an annuity contract at the beginning of 2004 for $144,000. The contract specified that he and his wife would receive $1,000 per month for life. Jerry receives his first payment on February 1, 2018 when he is 59 years old and his wife is 56 years old. What amount of gross income should Jerry and his wife report on their 2018 income tax return from this annuity contract?

Accepted Answer

A) $-0- 
B) $4,400 
C) $6,600 
D) $11,000 
A) $-0- 
B) $4,400 
C) $6,600 
D) $11,000

Question 19

Match each statement with the correct term below.
-Alimony

Accepted Answer

A) The category of income that includes interest, dividends, and rents. 
B) Income from wages, salaries, and trade or businesses. 
C) Interest income resulting from making an interest-free gift loan of $200,000. 
D) A taxable amount received from a state plan to provide a substitute for an employee's earned income. 
E) A series of equal payments received over equal time periods.
F)A receipt of cash from a former spouse that is included in gross income.
G)A payment received from a former spouse that is not included in gross income.
H)A division of marital assets that does not result in any income recognition.
I)A sale of property in which at least one payment is received in a tax year after the year of sale
J)A method of accounting that must be used to recognize income from long-term construction contracts.
K)A debt instrument that has the interest paid at maturity rather than throughout the life of the debt. 
A) The category of income that includes interest, dividends, and rents. 
B) Income from wages, salaries, and trade or businesses. 
C) Interest income resulting from making an interest-free gift loan of $200,000. 
D) A taxable amount received from a state plan to provide a substitute for an employee's earned income. 
E) A series of equal payments received over equal time periods.
F)A receipt of cash from a former spouse that is included in gross income.
G)A payment received from a former spouse that is not included in gross income.
H)A division of marital assets that does not result in any income recognition.
I)A sale of property in which at least one payment is received in a tax year after the year of sale
J)A method of accounting that must be used to recognize income from long-term construction contracts.
K)A debt instrument that has the interest paid at maturity rather than throughout the life of the debt.

Question 20

Ellie has the following capital gains and losses and qualified dividend income during the current year:
?
$\begin{array}{lr}
\text { Short-term capital loss } & \$(10,000) \
\text { Collectibles loss } & (4,000) \
\text { Long-term capital gain } & 5,000 \
\text { Qualified dividend income } & 10,000
\end{array}$

The effect of the above on the current year's taxable income is:

Accepted Answer

A) Long-term gain $3,000; short-term capital loss $10,000, 
B) Long-term capital gain $7,000; short-term capital loss $14,000. 
C) Collectibles loss $1,000; net short-term capital loss $5,000; qualified dividend income $10,000. 
D) Net short-term capital loss $9,000; qualified dividend income $10,000. 
E) Net capital loss $3,000, qualified dividend income $10,000. 
A) Long-term gain $3,000; short-term capital loss $10,000, 
B) Long-term capital gain $7,000; short-term capital loss $14,000. 
C) Collectibles loss $1,000; net short-term capital loss $5,000; qualified dividend income $10,000. 
D) Net short-term capital loss $9,000; qualified dividend income $10,000. 
E) Net capital loss $3,000, qualified dividend income $10,000.

Match each statement with the correct term below. -Child-support payment

Which of the following never generate taxable income? I.Interest free loan from family member. II.Interest free loan from employer. III.Interest free loan under $10,000. IV.Interest free loan over $100,000.

Terry owns 100% of Terry Manufacturing, Inc, and has the corporation pay his son's college tuition. Terry must include the payments in his taxable income.

Nora receives a salary of $55,000 during the current year. She sells some land that she held as an investment at a loss of $15,000 and some stock at a gain of $10,000. Nora's adjusted gross income is:

One type of imputed income that always escapes taxation is

Match each statement with the correct term below. -Unemployment compensation

Match each statement with the correct term below. -Alimony

Federal Income Taxation-An Overview

Income Tax Concepts

Income Exclusions

Introduction to Business Expenses

Business Expenses

Losses-Deductions and Limitations

Taxation of Individuals

Acquisitions of Property

Cost Recovery on Property: Depreciation, Depletion, and Amortization

Property Dispositions

Non-Recognition Transactions

Choice of Business Entity-General Tax and Nontax Factorsformation

Choice of Business Entity-Operations and Distributions

Choice of Business Entity-Other Considerations

Tax Research

Filters

Exam 3: Income Sources

Match each statement with the correct term below. -Child-support payment

Which of the following never generate taxable income? I.Interest free loan from family member. II.Interest free loan from employer. III.Interest free loan under $10,000. IV.Interest free loan over $100,000. ​

Terry owns 100% of Terry Manufacturing, Inc, and has the corporation pay his son's college tuition. Terry must include the payments in his taxable income.

Nora receives a salary of $55,000 during the current year. She sells some land that she held as an investment at a loss of $15,000 and some stock at a gain of $10,000. Nora's adjusted gross income is:

One type of imputed income that always escapes taxation is

Match each statement with the correct term below. -Unemployment compensation

Match each statement with the correct term below. -Alimony

Federal Income Taxation-An Overview

Income Tax Concepts

Income Exclusions

Introduction to Business Expenses

Business Expenses

Losses-Deductions and Limitations

Taxation of Individuals

Acquisitions of Property

Cost Recovery on Property: Depreciation, Depletion, and Amortization

Property Dispositions

Non-Recognition Transactions

Choice of Business Entity-General Tax and Nontax Factorsformation

Choice of Business Entity-Operations and Distributions

Choice of Business Entity-Other Considerations

Tax Research

Filters

Which of the following never generate taxable income? I.Interest free loan from family member. II.Interest free loan from employer. III.Interest free loan under $10,000. IV.Interest free loan over $100,000.