Question 1

Tax-exempt interest includes the following items, except:

Accepted Answer

A)  interest on bonds issued by the local government to build a convention center. 
B)  interest on bonds issued by any state. 
C)  interest on bonds issued by the District of Columbia. 
D) interest on municipal bonds.

Question 2

Employers can reimburse employees for up to _________________ per year of educational assistance, whether or not job-related.

Accepted Answer

A)  $5,250 
B)  $5,150 
C)  $5,000 
D) $5,520

Question 3

When filing their tax returns, almost all individuals use:

Accepted Answer

A)  The accrual method. 
B)  The cash receipts and disbursements method. 
C)  The recognition method. 
D) The accounting method.

Question 4

Payments under written dependent care assistance plans are tax-free, except that the exclusion for a single person cannot exceed his or her earned income and cannot exceed _________________.

Accepted Answer

A)  $5,000 
B)  $2,500 
C)  $5,150 
D) $5,250

Question 5

Income may be realized in the form of:

Accepted Answer

A)  Property. 
B)  Cash. 
C)  Services. 
D) All of these.

Question 6

Constructive receipt means the taxpayer has:

Accepted Answer

A)  Earned the income. 
B)  Accrued the income. 
C)  Control of the income for his or her use. 
D) Earned the income and Accrued the income.

Question 7

If Alex, an attorney, agrees to provide legal services to a friend in exchange for the friend agreeing to fix his car, Alex and his friend will have to report income on this transaction at fair market value.

Accepted Answer

A) True 
 B)False

Question 8

The taxability of social security benefits depends on the "provisional income" and filing status of the taxpayer.

Accepted Answer

A) True 
 B)False

Question 9

If Raphael, a roofer, decides to fix the roof of his neighbor, Angela, in exchange for Angela providing bookkeeping services for his business, then ____________ must report income on the tax return.

Accepted Answer

A)  Raphael 
B)  Raphael and Angela 
C)  Angela 
D) Either Raphael or Angela

Question 10

Describe the various situations where a taxpayer must file a Schedule B (Forms 1040A or 1040) when receiving interest income.

Accepted Answer

The answer of Describe the various situations where a taxpayer...

Question 11

For purposes of computing the amount of savings bond interest exempt from tax, Modified AGI is adjusted gross income plus:

Accepted Answer

A)  deduction for student loan interest. 
B)  deduction for moving expenses. 
C)  itemized deductions. 
D) standard deduction.

Question 12

When a taxpayer reports income when received, this is called the ________ method.

Accepted Answer

A)  Accrual basis of accounting 
B)  Cash receipts and disbursements 
C)  Deferred 
D) Income tax progressive

Question 13

A taxpayer must file a Schedule B (Forms 1040A or 1040) if he or she has received taxable interest of $1,550.

Accepted Answer

A) True 
 B)False

Question 14

If Lucas, an accountant, agrees to provide tax services to a neighbor in exchange for the neighbor agreeing to fix his pool, Lucas but not his neighbor will have to report income on this transaction at fair market value.

Accepted Answer

A) True 
 B)False

Question 15

An individual with an original issue discount (OID) instrument must report annually a portion of the OID as:

Accepted Answer

A)  Interest income. 
B)  Qualified dividend income. 
C)  Capital gains. 
D) Miscellaneous income.

Question 16

A de minimis benefit is one whose value is so small that keeping track of which employees received the benefit is administratively impractical.

Accepted Answer

A) True 
 B)False

Question 17

Receipt of property or services will trigger income recognition.

Accepted Answer

A) True 
 B)False

Question 18

What are cafeteria plans?

Accepted Answer

The answer of What are cafeteria plans?...

Question 19

Under the cash receipts and disbursements method, the taxpayer reports income in the year:

Accepted Answer

A)  Income is received. 
B)  Income is accrued. 
C)  Income is earned. 
D) Income is negotiated.

Question 20

Working condition fringes include:

Accepted Answer

A)  Professional organization dues paid by the employer. 
B)  Bonus earned by the employee. 
C)  The use of an employer-provided vehicle for business purposes. 
D) Professional organization dues paid by the employer and the use of an employer-provided vehicle for business purposes.

Exam 3: Gross Income: Inclusions and Exclusions

Tax-exempt interest includes the following items, except:

Employers can reimburse employees for up to _________________ per year of educational assistance, whether or not job-related.

When filing their tax returns, almost all individuals use:

Payments under written dependent care assistance plans are tax-free, except that the exclusion for a single person cannot exceed his or her earned income and cannot exceed _________________.

Income may be realized in the form of:

Constructive receipt means the taxpayer has:

If Alex, an attorney, agrees to provide legal services to a friend in exchange for the friend agreeing to fix his car, Alex and his friend will have to report income on this transaction at fair market value.

The taxability of social security benefits depends on the "provisional income" and filing status of the taxpayer.

If Raphael, a roofer, decides to fix the roof of his neighbor, Angela, in exchange for Angela providing bookkeeping services for his business, then ____________ must report income on the tax return.

Describe the various situations where a taxpayer must file a Schedule B (Forms 1040A or 1040) when receiving interest income.

For purposes of computing the amount of savings bond interest exempt from tax, Modified AGI is adjusted gross income plus:

When a taxpayer reports income when received, this is called the ________ method.

A taxpayer must file a Schedule B (Forms 1040A or 1040) if he or she has received taxable interest of $1,550.

If Lucas, an accountant, agrees to provide tax services to a neighbor in exchange for the neighbor agreeing to fix his pool, Lucas but not his neighbor will have to report income on this transaction at fair market value.

An individual with an original issue discount (OID) instrument must report annually a portion of the OID as:

A de minimis benefit is one whose value is so small that keeping track of which employees received the benefit is administratively impractical.

Receipt of property or services will trigger income recognition.

What are cafeteria plans?

Under the cash receipts and disbursements method, the taxpayer reports income in the year:

Working condition fringes include: