Question 1

Indicate whether each of the items listed below would be (a) included in gross income or (b) excluded from gross income for the 2019 tax year.
-Inheritances

Accepted Answer

A) Included 
B) Excluded

Question 2

Molly and Steve are married and live in Texas. Molly earns a salary of $50,000 and Steve owns a rental property that gives him $35,000 of income. If they filed separate tax returns, what amount of income would Steve report?

Accepted Answer

A) $35,000 
B) $85,000 
C) $42,500 
D) $60,000 
E) None of these

Question 3

Arthur, age 19, is a full-time student at Gordon College and is a candidate for a bachelor's degree. During 2019, he received the following amounts: $$\begin{array} { l r } 
\text { Tuition scholarship } & \$ 2,400 \
\text { Loan from college financial aid office } & \$ 1,000 \
\text { Cash support from parents } & \$ 2,000 \
\text { Ordinary cash dividend } & \$ 200 \
\text { Cash prize awarded in contest } & \$ 300
\end{array}$$ What is his adjusted gross income for 2019?

Accepted Answer

A) $300 
B) $500 
C) $2,300 
D) $2,500 
E) None of these

Question 4

Noncash items received as income must be included in income at their fair market value.

Accepted Answer

A) True 
 B)False

Question 5

Seymore named his wife, Penelope, the beneficiary of a $100,000 insurance policy on his life. The policy provided that, upon his death, the proceeds would be paid at a rate of $4,000 per year plus interest over a 25-year period. Seymore died June 25 of last year, and in the current year Penelope received a payment of $5,200 from the insurance company. What amount should she include in her gross income for the current year?

Accepted Answer

A) $200 
B) $1,200 
C) $4,000 
D) $5,200 
E) None of these

Question 6

Curt's tax client, Terry, is employed at a large company that offers health care flexible spending accounts to its employees. Terry must decide at the beginning of the year whether he wants to put as much as $2,700 of his salary into the medical flexible spending account. Terry has excellent insurance through the company and is very healthy. He does not expect to have any medical expenses during the year. Terry does not itemize deductions. Should Curt recommend that Terry put the maximum in his health care flexible spending account? Why or why not?

Accepted Answer

The answer of Curt's tax client, Terry, is employed at...

Question 7

Basketball superstar Steph Curry's outstanding player award is not includible in income, since the award is in recognition of his outstanding performance.

Accepted Answer

A) True 
 B)False

Question 8

Indicate whether each of the items listed below would be (a) included in gross income or (b) excluded from gross income for the 2019 tax year.
-Reimbursement of hospital expenses from a health insurance plan

Accepted Answer

A) Included 
B) Excluded

Question 9

Steve and Laura were divorced in 2012. Laura pays Steve alimony of $1,200 a month. The payment amount was agreed upon in the decree of divorce. To save money, Steve and Laura still live together. Are the alimony payments that Steve receives in 2019 included in his income?

Accepted Answer

A) Yes, the payments meet all alimony payment requirements. 
B) Yes, alimony is always taxable. 
C) No, only some of it is tax-exempt because Laura pays Steve too much alimony. 
D) No, since Steve and Laura still live together, the payments are not considered alimony. 
E) Yes, alimony payments are not tax-exempt.

Question 10

Under the terms of a property settlement executed during the current year, Cindy transferred a house worth $350,000 to her ex-husband, Carl. The property has a tax basis to Cindy of $300,000.
a.How much taxable gain or loss must be recognized by Cindy at the time of the transfer?
b.What is Carl's tax basis in the property he received from Cindy?

Accepted Answer

The answer of Under the terms of a property settlement...

Question 11

Cash allowances for meals or lodging generally must be included in the employee's income.

Accepted Answer

A) True 
 B)False

Question 12

Bob is a machinist in a remote Alaskan crab-freezing plant. The plant is accessible only by boat or airplane and has no available lodging for rent. Bob's employer provides him with lodging at the plant and pays for all of his electricity, gas, and other utilities, valued at $700 per month. Is the value of the lodging taxable to Bob? Explain.

Accepted Answer

The answer of Bob is a machinist in a remote...

Question 13

Indicate whether each of the items listed below would be (a) included in gross income or (b) excluded from gross income for the 2019 tax year.
-Child support payments

Accepted Answer

A) Included 
B) Excluded

Question 14

Geoff is a company president who has had a very good year at work. The owner of the company is pleased and gives him a gift of $50,000 at the end of the year. The owner writes "gift" in the memo section of the check. How much of the gift is taxable to Geoff?

Accepted Answer

The answer of Geoff is a company president who has...

Question 15

Charlie is a single taxpayer with income of $107,000 which includes $22,500 of interest income. Contributions to Coverdell educational savings accounts are phased out between $95,000 and $110,000. What is the maximum contribution Charlie can make to an educational savings account?

Accepted Answer

A) $400 
B) $1,600 
C) $2,000 
D) $2,500 
E) $0

Question 16

Toni and Beyonze are married and file jointly. During 2018, they paid tuition for their daughter's college in the amount of $23,000. If their AGI was $142,000, what is the amount of tuition deduction they are eligible for?

Accepted Answer

A) $0 
B) $2,000 
C) $4,000 
D) $23,000 
E) None of these

Question 17

For divorces after 1984 but before 2019, which of the following statements about alimony payments is not correct?

Accepted Answer

A) The payments must be in cash and must be received by the spouse (or former spouse). 
B) Divorced or legally separated parties can be members of the same household at the time the payments are made. 
C) The payor must have no liability to make payments for any period following the death of the spouse receiving the payments. 
D) The payments must not be designated in the written agreement as anything other than alimony.

Question 18

Craig, a single taxpayer, received the following items in 2019: dividends of $450, wages of $32,000, child support from his ex-spouse of $400 per month, a new television worth $1,200 from a door prize at a conference he attended, a gift of $3,000 from Craig's parents, and $200 of interest on bonds issued by the State of Arizona. Craig put $4,000 of his wages into his employer's dependent care flexible spending account (the $4,000 has not been deducted from the $32,000 of wages listed previously). He also receives a reimbursement of $270 per month to pay for public transportation passes each month (the monthly reimbursement of $270 has not been deducted from the $32,000 of wages). Based on the above, what is Craig's gross income in 2019?

Accepted Answer

The answer of Craig, a single taxpayer, received the following...

Question 19

Robert works for American Motors. American Motors pays a $1,200 premium on Robert's health insurance in 2019. Robert has an operation on his big toe in 2019 that cost $7,200. The insurance company paid for $6,800 of it. Which one of the following is true for 2019?

Accepted Answer

A) Robert must claim the $1,200 premium paid by his employer as income. 
B) Robert must claim the $6,800 paid by the insurance company for the operation as income. 
C) Robert must claim the $1,200 premium and the $6,800 insurance payment as income. 
D) None of these events are taxable on his 2019 return.

Question 20

Interest on US Treasury Bonds is not taxable.

Accepted Answer

A) True 
 B)False

Exam 2: Gross Income and Exclusions

Indicate whether each of the items listed below would be (a) included in gross income or (b) excluded from gross income for the 2019 tax year. -Inheritances

Molly and Steve are married and live in Texas. Molly earns a salary of $50,000 and Steve owns a rental property that gives him $35,000 of income. If they filed separate tax returns, what amount of income would Steve report?

Noncash items received as income must be included in income at their fair market value.

Basketball superstar Steph Curry's outstanding player award is not includible in income, since the award is in recognition of his outstanding performance.

Indicate whether each of the items listed below would be (a) included in gross income or (b) excluded from gross income for the 2019 tax year. -Reimbursement of hospital expenses from a health insurance plan

Steve and Laura were divorced in 2012. Laura pays Steve alimony of $1,200 a month. The payment amount was agreed upon in the decree of divorce. To save money, Steve and Laura still live together. Are the alimony payments that Steve receives in 2019 included in his income?

Cash allowances for meals or lodging generally must be included in the employee's income.

Indicate whether each of the items listed below would be (a) included in gross income or (b) excluded from gross income for the 2019 tax year. -Child support payments

Geoff is a company president who has had a very good year at work. The owner of the company is pleased and gives him a gift of $50,000 at the end of the year. The owner writes "gift" in the memo section of the check. How much of the gift is taxable to Geoff?

Charlie is a single taxpayer with income of $107,000 which includes $22,500 of interest income. Contributions to Coverdell educational savings accounts are phased out between $95,000 and $110,000. What is the maximum contribution Charlie can make to an educational savings account?

Toni and Beyonze are married and file jointly. During 2018, they paid tuition for their daughter's college in the amount of $23,000. If their AGI was $142,000, what is the amount of tuition deduction they are eligible for?

For divorces after 1984 but before 2019, which of the following statements about alimony payments is not correct?

Robert works for American Motors. American Motors pays a $1,200 premium on Robert's health insurance in 2019. Robert has an operation on his big toe in 2019 that cost $7,200. The insurance company paid for $6,800 of it. Which one of the following is true for 2019?

Interest on US Treasury Bonds is not taxable.