Exam 3: Gross Income: Inclusions and Exclusions

Caroline, who files as head of household, received $9,000 of social security benefits. Her AGI before the social security benefits was $27,000. She also received $200 of tax- exempt interest. What is the amount of taxable social security benefits?

Almost all individuals use the cash receipts and disbursements method of accounting.

Life insurance proceeds because of the death of the insured are fully excludable from the gross income of the recipient if the payment is made:

A stock dividend in which a shareholder has the option to receive cash is not taxable.

An example of nontaxable income is:

For tax purposes, income is recognized if the transaction meets three conditions: economic benefit, occurrence and completion, and not exempt from tax.

Imputed interest rules apply to term loans or demand loans in which the interest rate is less than the Applicable Federal Rate (AFR). Which of the following transactions does not fall under these rules? Assume in all situations that interest is below the AFR.

When an individual's marginal ordinary income tax rate is less than 25%, the tax rate on qualified dividends is:

Name three items that are exempt from income under the umbrella of compensation for injuries or sickness.

If the process of a transaction begins and ends with an economic benefit for the taxpayer, he or she must report it in income even though the income is specifically exempt from tax.

The exclusion for dependent care assistance plans cannot exceed __________ for a taxpayer who is married but filing as "married filing separately".

Joel purchased $125,000 of A and D Corporation's newly issued bonds for $114,500. The bonds carry an interest rate of 8% and mature in 5 years. What is the initial OID on these bonds?

Discounts provided to employees for food by a restaurant owner are not taxable if the discounts do not exceed the gross profit percentage of the business.

Taxpayers are not required to "impute interest" on a deferred payment contract for which no interest, or a low rate of interest, is stated.

A taxpayer does not have to report part of an original issue discount (OID) as income every year.

A taxpayer received a 1099-G for 2015 showing $350 of state income tax refund that he received during the year from 2014 state taxes paid. Does the taxpayer have to report the state income tax refund of $350 in 2015?

What is the tax liability for a single individual who has taxable income of $115,500, that includes a taxable qualified dividend of $2,000? All answers should be rounded to the nearest dollar.

Name three types of nontaxable income (do not include items that are exempt under the umbrella of compensation for injuries or sickness).

The amount of savings bond interest exempt from tax is phased out completely when an individual is married and his or her modified AGI reaches:

Felix, a single taxpayer, claimed $180 of state tax as an itemized deduction on his 2014 tax return. The total itemized deductions on his tax return were $6,250. In 2015, he received a $25 refund from the state. What is the amount Felix has to report on his 2015 tax return?