Question 1

Under the cash method of accounting,income is reported in the year the taxpayer actually or constructively receives the income.

Accepted Answer

A) True 
 B)False  True

Question 2

With some exceptions,amounts withdrawn from a pension plan prior to the normal starting date are subject to a ten percent nondeductible penalty.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

Question 3

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 C

Question 4

Sheryl is a single taxpayer with a taxable pension of $200,000,taxable interest and dividends of $600,000,capital gains of $400,000 and Social Security benefits of $30,000.What is the amount of her taxable Social Security benefits?

Accepted Answer

A)   $0
B)   $30,000
C)   $25,500
D)   $15,000

Question 5

Under the tax concept of income,all realized income is recognized and subject to tax.

Accepted Answer

A) True 
 B)False

Question 6

Norah's Music Lessons Inc.is a calendar-year taxpayer using the accrual method of accounting.On October 1 of this year,the corporation received $1,200 for a one-year contract beginning on that date to provide 10 lessons.The company provided 6 lessons this year under the contract.How much should the corporation include in income this year with respect to this contract?

Accepted Answer

A)   $480
B)   $360
C)   $720
D)   $1,200

Question 7

Jan purchased an antique desk at auction.For two years,the desk sat in Jan's garage until she decided to restore it.This year,while cleaning and restoring the desk,Jan discovered $1,500 in a hidden compartment inside one drawer.With respect to the $1,500,Jan must

Accepted Answer

A)   report nothing.
B)   amend her previous tax return and report the $1,500.
C)   report only $750 due to the statute of limitations.
D)   report $1,500 on this year's tax return.

Question 8

Earnings of a minor child are taxed to the child regardless of the state's property law system.

Accepted Answer

A) True 
 B)False

Question 9

A taxpayer had the following income and losses in the current year:

What is the taxpayer's adjusted gross income?

Accepted Answer

A)   $57,500
B)   $59,500
C)   $62,500
D)   $64,500

Question 10

Parents often wish to shift income to young children in order to lower the family tax burden.Tax policies and provisions that limit that practice include all of the following except

Accepted Answer

A)   the claim of right doctrine.
B)   the kiddie tax.
C)   the assignment of income doctrine.
D)   the imposition of the gift tax.

Question 11

"Gross income" is a key term in the tax law and is defined in IRC Sec.61.However,gross income is not reported on Form 1040.

Accepted Answer

A) True 
 B)False

Question 12

Under the terms of a divorce agreement dated January 1,2017,Edmond was to pay his wife Donna $3,000 per month in alimony and $500 per month in child support.Payments began on January 1,2017.In addition,Donna received the family residence with a cost basis of $210,000 and a fair market value of $260,000.
a.What is the amount that Donna must include in income for the twelve-month period ended December 31,2017?
b.What is the basis in the home which Donna received as a result of the divorce?

Accepted Answer

The answer of Under the terms of a divorce agreement...

Question 13

Alimony received is taxable to the recipient while child support payments are not.

Accepted Answer

A) True 
 B)False

Question 14

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 15

Which of the following criteria is not required to be met under the tax concept of income?

Accepted Answer

A)   There must be economic benefit.
B)   Income must be realized.
C)   Income must be recognized.
D)   Cash must be received.

Question 16

Tom and Heidi,husband and wife,file separate returns.Tom and Heidi live in a common law state.Tom's salary is $82,000 and Heidi's salary is $80,000.Heidi receives dividend income of $7,000 from stock inherited from her parents.Tom receives interest income of $5,000 from bonds purchased with his salary after marriage.Tom and Heidi receive $12,000 dividend income from stock they purchased jointly.Tom's income would be

Accepted Answer

A)   $92,000.
B)   $93,000.
C)   $94,000.
D)   $96,500.

Question 17

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 18

Except as otherwise provided,gross income means all income from whatever source derived.

Accepted Answer

A) True 
 B)False

Question 19

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 20

Gwen's marginal tax bracket is 25%.Gwen pays alimony of $24,000 per year.Gwen's after tax cost for the $24,000 payment is

Accepted Answer

A)   $0.
B)   $6,000.
C)   $18,000.
D)   $24,000.

Exam 3: Gross Income: Inclusions

Under the cash method of accounting,income is reported in the year the taxpayer actually or constructively receives the income.

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

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

Sheryl is a single taxpayer with a taxable pension of $200,000,taxable interest and dividends of $600,000,capital gains of $400,000 and Social Security benefits of $30,000.What is the amount of her taxable Social Security benefits?

Under the tax concept of income,all realized income is recognized and subject to tax.

Jan purchased an antique desk at auction.For two years,the desk sat in Jan's garage until she decided to restore it.This year,while cleaning and restoring the desk,Jan discovered $1,500 in a hidden compartment inside one drawer.With respect to the $1,500,Jan must

Earnings of a minor child are taxed to the child regardless of the state's property law system.

A taxpayer had the following income and losses in the current year: What is the taxpayer's adjusted gross income?

Parents often wish to shift income to young children in order to lower the family tax burden.Tax policies and provisions that limit that practice include all of the following except

"Gross income" is a key term in the tax law and is defined in IRC Sec.61.However,gross income is not reported on Form 1040.

Alimony received is taxable to the recipient while child support payments are not.

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?

Which of the following criteria is not required to be met under the tax concept of income?

Except as otherwise provided,gross income means all income from whatever source derived.

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

Gwen's marginal tax bracket is 25%.Gwen pays alimony of $24,000 per year.Gwen's after tax cost for the $24,000 payment is