Question 1

Sarah, a majority shareholder in Teal, Inc., made a $200,000 interest-free loan to the corporation. Sarah is not an employee of the corporation.

Accepted Answer

A)  Sarah must recognize imputed interest expense and the corporation must recognize imputed interest income. 
B)  Sarah must recognize imputed interest income and the corporation must recognize imputed interest expense. 
C)  Sarah must recognize imputed dividend income and the corporation may recognize imputed interest expense. 
D)  Neither Sarah's nor the corporation's gross income is affected by the loans because no interest was charged. 
E)  None of these. 
A)  Sarah must recognize imputed interest expense and the corporation must recognize imputed interest income. 
B)  Sarah must recognize imputed interest income and the corporation must recognize imputed interest expense. 
C)  Sarah must recognize imputed dividend income and the corporation may recognize imputed interest expense. 
D)  Neither Sarah's nor the corporation's gross income is affected by the loans because no interest was charged. 
E)  None of these.

Question 2

Paula transfers stock to her former spouse, Fred. The transfer is pursuant to a divorce agreement. Paula's cost of the stock was $75,000 and its fair market value on the date of the transfer is $95,000. Fred later sells the stock for $100,000. Fred's recognized gain from the sale of the stock is $5,000.

Accepted Answer

A) True 
 B)False

Question 3

Lois, who is single, received $9,000 of Social Security benefits. She also received $25,000 from dividends, interest, and her employer's pension plan. If Lois sells a capital asset that produces a $1,000 recognized loss, Lois's taxable income will decrease by more than $1,000.

Accepted Answer

A) True 
 B)False

Question 4

Daniel purchased a bond on July 1, 2018, at par of $10,000 plus accrued interest of $300. On December 31, 2018, Daniel collected the $600 interest for the year. On January 1, 2019, Daniel sold the bond for $10,200.

Accepted Answer

A)  Daniel must recognize $300 interest income for 2018 and a $200 gain on the sale of the bond in 2019. 
B)  Daniel must recognize $600 interest income for 2018 and a $200 gain on the sale of the bond in 2019. 
C)  Daniel must recognize $600 interest income for 2018 and a $100 loss on the sale of the bond in 2019. 
D)  Daniel must recognize $300 interest income for 2018 and a $100 loss on the sale of the bond in 2019. 
E)  None of these. 
A)  Daniel must recognize $300 interest income for 2018 and a $200 gain on the sale of the bond in 2019. 
B)  Daniel must recognize $600 interest income for 2018 and a $200 gain on the sale of the bond in 2019. 
C)  Daniel must recognize $600 interest income for 2018 and a $100 loss on the sale of the bond in 2019. 
D)  Daniel must recognize $300 interest income for 2018 and a $100 loss on the sale of the bond in 2019. 
E)  None of these.

Question 5

Which of the following is not a requirement for an alimony deduction?

Accepted Answer

A)  The payments must be in cash. 
B)  The payments must cease upon the death of the payee. 
C)  The payments must extend over at least three years. 
D)  The payor and payee must not live in the same household at the time of the payments. 
E)  All of these are requirements for an alimony deduction. 
A)  The payments must be in cash. 
B)  The payments must cease upon the death of the payee. 
C)  The payments must extend over at least three years. 
D)  The payor and payee must not live in the same household at the time of the payments. 
E)  All of these are requirements for an alimony deduction.

Sarah, a majority shareholder in Teal, Inc., made a $200,000 interest-free loan to the corporation. Sarah is not an employee of the corporation.

Lois, who is single, received $9,000 of Social Security benefits. She also received $25,000 from dividends, interest, and her employer's pension plan. If Lois sells a capital asset that produces a $1,000 recognized loss, Lois's taxable income will decrease by more than $1,000.

Daniel purchased a bond on July 1, 2018, at par of $10,000 plus accrued interest of $300. On December 31, 2018, Daniel collected the $600 interest for the year. On January 1, 2019, Daniel sold the bond for $10,200.

Which of the following is not a requirement for an alimony deduction?

An Introduction to Taxation and Understanding the Federal Tax Law

Working with the Tax Law

Computing the Tax

Gross Income: Exclusions

Deductions and Losses: In General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges

Property Transactions: Capital Gains and Losses, Section 1231, and Recapture Provisions

Taxing Business Income

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

S Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

Filters

Exam 4: Gross Income: Concepts and Inclusions

Sarah, a majority shareholder in Teal, Inc., made a $200,000 interest-free loan to the corporation. Sarah is not an employee of the corporation.

Lois, who is single, received $9,000 of Social Security benefits. She also received $25,000 from dividends, interest, and her employer's pension plan. If Lois sells a capital asset that produces a $1,000 recognized loss, Lois's taxable income will decrease by more than $1,000.

Daniel purchased a bond on July 1, 2018, at par of $10,000 plus accrued interest of $300. On December 31, 2018, Daniel collected the $600 interest for the year. On January 1, 2019, Daniel sold the bond for $10,200.

Which of the following is not a requirement for an alimony deduction?

An Introduction to Taxation and Understanding the Federal Tax Law

Working with the Tax Law

Computing the Tax

Gross Income: Exclusions

Deductions and Losses: In General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges

Property Transactions: Capital Gains and Losses, Section 1231, and Recapture Provisions

Taxing Business Income

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

S Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

Filters