Question 1

An electrician completes a rewiring job and is paid $1,000 by the customer in November.The customer has a small fire in his house and sues the electrician for the repayment of the $1,000 fee plus damages in December.The electrician reaches a settlement with the customer in the following February and refunds the $1,000 fee.How should the electrician treat these events when he files his tax return in April?

Accepted Answer

A) No income will be reported. 
B) The income will be reported for the year of receipt,and a tax deduction will be claimed on the tax return for the year of repayment. 
C) The income will be reported for the year of receipt,and then an amended return will be filed in the following year to claim the refund. 
D) Both the income and the deduction will be reported on the same tax return (for the year of receipt).

Question 2

Gregory receives 100 shares of stock from his employer as a year-end bonus.The fair market value of the stock is included in Gregory's income for the year.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is not included in gross income when received?

Accepted Answer

A) interest received on bank accounts 
B) royalties paid to an author 
C) amounts received to cancel or modify a lease 
D) refundable security deposit

Question 4

Reva is a single taxpayer with a taxable pension of $24,000,tax-exempt interest of $8,000,and Social Security benefits of $10,000.What is the amount of her taxable Social Security benefits?

Accepted Answer

A) $5,000 
B) $8,500 
C) $7,050 
D) $10,000

Question 5

James and Colleen have reached an agreement with Kelsey in which she will give birth to a baby and then give the baby to James and Colleen.In return,James and Colleen will pay Kelsey $40,000 cash and pay for her medical expenses.What tax issues should Kelsey consider?

Accepted Answer

The answer of James and Colleen have reached an agreement...

Question 6

Buzz is a successful college basketball coach.In April 2016,he signed a contract to coach at Mountain State University.In April 2017,Buzz accepted a position as head basketball coach at Beach University.The terms of his contract with Mountain State require that Buzz repay the university $150,000 he received in 2016.Discuss the tax issues encountered by Buzz and your recommendation for their treatment.

Accepted Answer

The answer of Buzz is a successful college basketball coach.In...

Question 7

Leigh inherited $65,000 of City of New York bonds in January 2017.In March 2017,she received $4,000 of interest on the bonds.In July 2017,she sold the bonds at a $10,000 gain.Leigh also redeemed Series E U.S.Savings bonds in October 2017 that she had purchased several years ago and received accumulated interest of $2,600.In December 2017,she received $800 of interest on City of Paris,France,bonds.What amount,if any,of gross income must Leigh report?

Accepted Answer

The answer of Leigh inherited $65,000 of City of New...

Question 8

Jacob,who is single,paid educational expenses of $16,000 in 2017.He redeemed Series EE bonds and received principal of $8,000 and interest of $3,000.Jacob has other adjusted gross income of $82,150.The $3,000 exclusion must be reduced by

Accepted Answer

A) $0. 
B) $1,400. 
C) $1,600. 
D) $3,000.

Question 9

Mr.& Mrs.Tsayong are both over 66 years of age and are filing a joint return.Their income this year consisted of the following:  They did not have any adjustments to income.What amount of Mr.& Mrs.Tsayongs Social Security benefits is taxable this year?

Accepted Answer

A) $0 
B) $4,500 
C) $10,000 
D) $20,000

Question 10

Jing,who is single,paid educational expenses of $16,000 in 2017.He redeemed Series EE bonds and received principal of $8,000 and interest of $3,000.Jing has other adjusted gross income of $82,150.With respect to the $3,000 of bond interest,Jing must include in taxable income

Accepted Answer

A) $0. 
B) $1,400. 
C) $1,600. 
D) $3,000.

Question 11

A cash-basis taxpayer can defer income recognition by refusing to accept payment.

Accepted Answer

A) True 
 B)False

Question 12

The requirements for a payment to be considered as alimony include all of the following except

Accepted Answer

A) be made in cash or property. 
B) be made pursuant to a divorce,separation or a written agreement between the spouses. 
C) terminate at the death of the payee. 
D) not be designated as being other than alimony.

Question 13

Thomas purchased an annuity for $20,000 that will pay him $500 per month for ten years.What amount should Thomas include in his income each year?

Accepted Answer

A) $0 
B) $2,000 
C) $4,000 
D) $6,000

Question 14

Improvements to leased property made by a lessee are includible in the lessor's gross income only if made in lieu of rent or if rent is reduced because of the improvements.

Accepted Answer

A) True 
 B)False

Question 15

Becky wins a car and furniture on a television game show.The fair market value of these items is taxable to Becky.

Accepted Answer

A) True 
 B)False

Question 16

In 2017,Richard,a single taxpayer,has adjusted gross income of $40,200.His AGI includes $4,000 of qualified dividends.Richard has no dependents and does not itemize deductions.What is his 2017 federal income tax?

Accepted Answer

A) $3,404 
B) $4,011 
C) $4,611 
D) $4,004

Question 17

With some exceptions,amounts withdrawn from a pension plan prior to the normal starting date are subject to a ten percent nondeductible penalty.

Accepted Answer

A) True 
 B)False

Question 18

In December 2017,Max,a cash-basis taxpayer,rents an apartment to Kadeem.Max receives both the first and last months' rent totaling $1,800 plus a security deposit of $400.The amount of income reported by Max as taxable in 2017 is

Accepted Answer

A) $400. 
B) $1,300. 
C) $1,800. 
D) $2,200.

Question 19

Which of the following advance payments cannot qualify for income tax deferral?

Accepted Answer

A) advance collection for services 
B) advance collection for merchandise 
C) advance collection of rent without associated services 
D) advance collection of rent with associated services

Question 20

AAA Corporation distributes an automobile to Alexandria,a shareholder,in lieu of a cash dividend.Alexandria must report the value of the automobile as dividend income.

Accepted Answer

A) True 
 B)False

Exam 19: Gross Income: Inclusions

Gregory receives 100 shares of stock from his employer as a year-end bonus.The fair market value of the stock is included in Gregory's income for the year.

Which of the following is not included in gross income when received?

Reva is a single taxpayer with a taxable pension of $24,000,tax-exempt interest of $8,000,and Social Security benefits of $10,000.What is the amount of her taxable Social Security benefits?

James and Colleen have reached an agreement with Kelsey in which she will give birth to a baby and then give the baby to James and Colleen.In return,James and Colleen will pay Kelsey $40,000 cash and pay for her medical expenses.What tax issues should Kelsey consider?

Jacob,who is single,paid educational expenses of $16,000 in 2017.He redeemed Series EE bonds and received principal of $8,000 and interest of $3,000.Jacob has other adjusted gross income of $82,150.The $3,000 exclusion must be reduced by

Mr.& Mrs.Tsayong are both over 66 years of age and are filing a joint return.Their income this year consisted of the following: They did not have any adjustments to income.What amount of Mr.& Mrs.Tsayongs Social Security benefits is taxable this year?

Jing,who is single,paid educational expenses of $16,000 in 2017.He redeemed Series EE bonds and received principal of $8,000 and interest of $3,000.Jing has other adjusted gross income of $82,150.With respect to the $3,000 of bond interest,Jing must include in taxable income

A cash-basis taxpayer can defer income recognition by refusing to accept payment.

The requirements for a payment to be considered as alimony include all of the following except

Thomas purchased an annuity for $20,000 that will pay him $500 per month for ten years.What amount should Thomas include in his income each year?

Improvements to leased property made by a lessee are includible in the lessor's gross income only if made in lieu of rent or if rent is reduced because of the improvements.

Becky wins a car and furniture on a television game show.The fair market value of these items is taxable to Becky.

In 2017,Richard,a single taxpayer,has adjusted gross income of $40,200.His AGI includes $4,000 of qualified dividends.Richard has no dependents and does not itemize deductions.What is his 2017 federal income tax?

With some exceptions,amounts withdrawn from a pension plan prior to the normal starting date are subject to a ten percent nondeductible penalty.

In December 2017,Max,a cash-basis taxpayer,rents an apartment to Kadeem.Max receives both the first and last months' rent totaling $1,800 plus a security deposit of $400.The amount of income reported by Max as taxable in 2017 is

Which of the following advance payments cannot qualify for income tax deferral?

AAA Corporation distributes an automobile to Alexandria,a shareholder,in lieu of a cash dividend.Alexandria must report the value of the automobile as dividend income.