Question 1

Anna received $15,000 from life insurance paid upon the death of her grandmother. Anna can exclude the entire amount of the life insurance from her gross income.

Accepted Answer

A) True 
 B)False

Question 2

Robert will be working overseas on a permanent assignment for an international company beginning on March 1 of this year (306 days this year). His salary is $11,000 per month while Robert is overseas, but only $9,200 per month otherwise. What is the minimum amount of Robert's salary that he must include in gross income this year? (Round your final answer to the nearest whole dollar amount & assume that there are 365 days in this year.)

Accepted Answer

$43,475
Explanation: The maximum foreign

Question 3

Trevor received a gift of $25,000 in cash from his rich uncle. Trevor must include $15,000 of this gift in his gross income this year.

Accepted Answer

A) True 
 B)False

Question 4

A below-market loan (e.g., from an employer to an employee) is a common example of a transaction that generates taxable imputed income.

Accepted Answer

A) True 
 B)False

Question 5

The principle of realization for tax purposes is very different from realization as it is understood for financial reporting purposes.

Accepted Answer

A) True 
 B)False

Question 6

Fred must include in gross income a $7,500 payment received from his neighbor to compensate Fred for the emotional distress he suffered when his neighbor accidentally ran over his dog.

Accepted Answer

A) True 
 B)False

Question 7

Interest earned on a city of Denver bond is excluded from gross income (for federal tax purposes).

Accepted Answer

A) True 
 B)False

Question 8

Graham has accepted an offer to do graduate work in the chemistry department at State University. The chemistry department offered Graham a $5,000 tuition reduction and $3,500 toward the cost of room and meals. Under the terms of the scholarship Graham must work in the chemistry labs during the summer as a research assistant. What amount must Graham include in his gross income?

Accepted Answer

A)  $8,500 
B)  $5,000 
C)  $3,500 
D)  $2,500 
E)  Zero - none of the above benefits is included in gross income 
A)  $8,500 
B)  $5,000 
C)  $3,500 
D)  $2,500 
E)  Zero - none of the above benefits is included in gross income

Question 9

Ms. Fresh bought 1,000 shares of Ibis Corporation stock for $5,000 on January 15, 2011. On December 31, 2015 she sold all 1,000 shares of her Ibis stock for $4,500. Based on a hot tip from her friend, she bought 1,000 shares of Ibis stock on January 23, 2016 for $3,000. What is Ms. Fresh's recognized loss on her 2015 sale and what is her basis in her 1,000 shares purchased in 2016?

Accepted Answer

A)  $-0- LTCL and $3,500 basis 
B)  $200 LTCL and $3,300 basis 
C)  $300 LTCL and $3,200 basis 
D)  $400 LTCL and $3,100 basis 
E)  $500 LTCL and $3,000 basis 
A)  $-0- LTCL and $3,500 basis 
B)  $200 LTCL and $3,300 basis 
C)  $300 LTCL and $3,200 basis 
D)  $400 LTCL and $3,100 basis 
E)  $500 LTCL and $3,000 basis

Question 10

The standard retirement benefit an employee will receive under a defined benefit plan depends on the number of years of service the employee provides, but does not consider the amount of the employee's compensation near retirement.

Accepted Answer

A) True 
 B)False

Question 11

Shauna received a distribution from her 401(k) account this year. In which of the following situations will Shauna be subject to an early distribution penalty?

Accepted Answer

A)  Shauna is 60 years of age but not yet retired when she receives the distribution. 
B)  Shauna is 58 years of age but not yet retired when she receives the distribution. 
C)  Shauna is 56 years of age and retired when she receives the distribution. 
D)  Shauna is 69 years of age but not yet retired when she receives the distribution. 
A)  Shauna is 60 years of age but not yet retired when she receives the distribution. 
B)  Shauna is 58 years of age but not yet retired when she receives the distribution. 
C)  Shauna is 56 years of age and retired when she receives the distribution. 
D)  Shauna is 69 years of age but not yet retired when she receives the distribution.

Question 12

Opal deducted $2,400 of state income taxes on her tax return last year. This year she received a state income tax refund of $170. What amount of the refund, if any, should Opal include in her gross income if last year her total itemized deductions exceeded the standard deduction by $350?

Accepted Answer

A)  $2,050 
B)  $350 
C)  $180 
D)  $170 
E)  None of the above - refunds of state income taxes are not included in gross income. 
A)  $2,050 
B)  $350 
C)  $180 
D)  $170 
E)  None of the above - refunds of state income taxes are not included in gross income.

Question 13

Cyrus is a cash method taxpayer who reports on a calendar-year. Last year Cyrus received salary of $88,000 and at year-end his employer announced that Cyrus would receive an additional year-end bonus of $10,000 in cash and a new TV worth $2,000. Cyrus didn't receive his bonus check until January of this year and the TV didn't arrive until March of this year. Determine the amount Cyrus should include in his gross income for last year.

Accepted Answer

$88,000
Explanation: Under con

Question 14

Shauna received a $100,000 distribution from her 401(k) account this year. Assuming Shauna's marginal tax rate is 25%, what is the total amount of tax and penalty Shauna will be required to pay if she receives the distribution on her 59th birthday and she has not yet retired?

Accepted Answer

A)  $0. 
B)  $10,000. 
C)  $25,000. 
D)  $35,000. 
E)  None of the above. 
A)  $0. 
B)  $10,000. 
C)  $25,000. 
D)  $35,000. 
E)  None of the above.

Question 15

Identify the rule that states that income has been realized when a taxpayer receives the income and there are no restrictions on the taxpayer's use of the income (e.g., no obligation to repay the amount):

Accepted Answer

A)  Claim of right 
B)  Constructive receipt 
C)  Return of capital principle 
D)  Wherewithal to pay 
E)  None of the above 
A)  Claim of right 
B)  Constructive receipt 
C)  Return of capital principle 
D)  Wherewithal to pay 
E)  None of the above

Question 16

Bad Brad received 20 NQOs (each option gives him the right to purchase 30 shares of stock for $10 per share) from his employer. At the time he started working the stock price was $11 per share. Now that the share price is $25 per share, he exercises all of the options. Two years later Bad Brad sells the stock for $27 per share, what is Bad Brad's basis in his stock for purposes of calculating the gain or loss?

Accepted Answer

A)  $6,000. 
B)  $9,000. 
C)  $15,000. 
D)  $16,200. 
A)  $6,000. 
B)  $9,000. 
C)  $15,000. 
D)  $16,200.

Question 17

Which of the following is not a necessary condition for income to be included in gross income?

Accepted Answer

A)  income must be realized 
B)  income must be paid in cash 
C)  income cannot be excluded by law 
D)  income must be made available to a taxpayer on the cash basis 
E)  All of the above 
A)  income must be realized 
B)  income must be paid in cash 
C)  income cannot be excluded by law 
D)  income must be made available to a taxpayer on the cash basis 
E)  All of the above

Question 18

When selling stocks, which method of calculating basis provides the greatest opportunity for minimizing gains or increasing losses?

Accepted Answer

A)  LIFO 
B)  FIFO 
C)  Weighted average 
D)  Specific identification 
E)  None of the above 
A)  LIFO 
B)  FIFO 
C)  Weighted average 
D)  Specific identification 
E)  None of the above

Question 19

This year Zach was injured in an auto accident. As a result he received the following payments. Zach received $18,000 of disability pay. Zach has disability insurance provided by his employer as a nontaxable fringe benefit. Zach's employer paid $4,300 in disability premiums for Zach this year.
Zach's hospital bills totaled $4,500 and were paid by his health insurance. Zach has health insurance provided by his employer as a nontaxable fringe benefit. Zach's employer paid $6,250 in health insurance premiums for Zach this year.
What amount must Zach include in his gross income?

Accepted Answer

A)  $22,500 
B)  $18,000 
C)  $4,500 
D)  $10,550 
E)  Zero - none of the above benefits is included in gross income 
A)  $22,500 
B)  $18,000 
C)  $4,500 
D)  $10,550 
E)  Zero - none of the above benefits is included in gross income

Question 20

Riley participates in his employer's 401(k) plan. He retired in 2016 at age 75. When must Riley receive his distribution pertaining to 2016 to avoid minimum distribution penalties?

Accepted Answer

A)  April 1, 2016 
B)  April 1, 2017 
C)  December 31, 2016 
D)  December 31, 2017 
A)  April 1, 2016 
B)  April 1, 2017 
C)  December 31, 2016 
D)  December 31, 2017

Anna received $15,000 from life insurance paid upon the death of her grandmother. Anna can exclude the entire amount of the life insurance from her gross income.

Trevor received a gift of $25,000 in cash from his rich uncle. Trevor must include $15,000 of this gift in his gross income this year.

A below-market loan (e.g., from an employer to an employee) is a common example of a transaction that generates taxable imputed income.

The principle of realization for tax purposes is very different from realization as it is understood for financial reporting purposes.

Fred must include in gross income a $7,500 payment received from his neighbor to compensate Fred for the emotional distress he suffered when his neighbor accidentally ran over his dog.

Interest earned on a city of Denver bond is excluded from gross income (for federal tax purposes).

The standard retirement benefit an employee will receive under a defined benefit plan depends on the number of years of service the employee provides, but does not consider the amount of the employee's compensation near retirement.

Shauna received a distribution from her 401(k) account this year. In which of the following situations will Shauna be subject to an early distribution penalty?

Opal deducted $2,400 of state income taxes on her tax return last year. This year she received a state income tax refund of $170. What amount of the refund, if any, should Opal include in her gross income if last year her total itemized deductions exceeded the standard deduction by $350?

Shauna received a $100,000 distribution from her 401(k) account this year. Assuming Shauna's marginal tax rate is 25%, what is the total amount of tax and penalty Shauna will be required to pay if she receives the distribution on her 59^th birthday and she has not yet retired?

Identify the rule that states that income has been realized when a taxpayer receives the income and there are no restrictions on the taxpayer's use of the income (e.g., no obligation to repay the amount):

Which of the following is not a necessary condition for income to be included in gross income?

When selling stocks, which method of calculating basis provides the greatest opportunity for minimizing gains or increasing losses?

Riley participates in his employer's 401(k) plan. He retired in 2016 at age 75. When must Riley receive his distribution pertaining to 2016 to avoid minimum distribution penalties?

An Introduction to Tax

Tax Compliance , the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Individual for Agi Deductions

Individual From Agi Deductions

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Entities Overview

Corporate Formations and Operations

Corporate Nonliquidating and Liquidating Distributions

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S: Corporations

Filters

Exam 5: Gross Income and Exclusions

Anna received $15,000 from life insurance paid upon the death of her grandmother. Anna can exclude the entire amount of the life insurance from her gross income.

Trevor received a gift of $25,000 in cash from his rich uncle. Trevor must include $15,000 of this gift in his gross income this year.

A below-market loan (e.g., from an employer to an employee) is a common example of a transaction that generates taxable imputed income.

The principle of realization for tax purposes is very different from realization as it is understood for financial reporting purposes.

Fred must include in gross income a $7,500 payment received from his neighbor to compensate Fred for the emotional distress he suffered when his neighbor accidentally ran over his dog.

Interest earned on a city of Denver bond is excluded from gross income (for federal tax purposes).

The standard retirement benefit an employee will receive under a defined benefit plan depends on the number of years of service the employee provides, but does not consider the amount of the employee's compensation near retirement.

Shauna received a distribution from her 401(k) account this year. In which of the following situations will Shauna be subject to an early distribution penalty?

Opal deducted $2,400 of state income taxes on her tax return last year. This year she received a state income tax refund of $170. What amount of the refund, if any, should Opal include in her gross income if last year her total itemized deductions exceeded the standard deduction by $350?

Shauna received a $100,000 distribution from her 401(k) account this year. Assuming Shauna's marginal tax rate is 25%, what is the total amount of tax and penalty Shauna will be required to pay if she receives the distribution on her 59th birthday and she has not yet retired?

Identify the rule that states that income has been realized when a taxpayer receives the income and there are no restrictions on the taxpayer's use of the income (e.g., no obligation to repay the amount):

Which of the following is not a necessary condition for income to be included in gross income?

When selling stocks, which method of calculating basis provides the greatest opportunity for minimizing gains or increasing losses?

Riley participates in his employer's 401(k) plan. He retired in 2016 at age 75. When must Riley receive his distribution pertaining to 2016 to avoid minimum distribution penalties?

An Introduction to Tax

Tax Compliance , the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Individual for Agi Deductions

Individual From Agi Deductions

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Entities Overview

Corporate Formations and Operations

Corporate Nonliquidating and Liquidating Distributions

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S: Corporations

Filters

Shauna received a $100,000 distribution from her 401(k) account this year. Assuming Shauna's marginal tax rate is 25%, what is the total amount of tax and penalty Shauna will be required to pay if she receives the distribution on her 59^th birthday and she has not yet retired?