Acct 122

Multiple Choice Question Mario had $18,000 of student loans discharged in the current year. After the discharge, Mario had $8,000 in assets and no remaining liabilities. How much of Mario's student loan debt forgiven must be included in gross income? Multiple choice question. $10,000 $0 $18,000 $8,000

$0

Chad has received the following income and benefits during the current year: $65,000 salary, $4,800 employer-provided health insurance, $1,500 municipal bond interest, $2,000 dividend income, $500 from a partnership, and a $10,000 judgment for lost wages due to an age discrimination lawsuit. What amounts should Chad include in his gross income? (Check all that apply.) Multiple select question. $1,500 municipal bond interest $10,000 judgment $2,000 dividend income $4,800 health insurance $500 partnership income $65,000 salary Need help? Review these concep

$10,000 judgment $2,000 dividend income $500 partnership income $65,000 salary

The term used when one former spouse is required to provide financial support to the other spouse pursuant to a legal separation or divorce is _______ .

Blank 1: alimony

For all divorce agreements executed after December 31, 2018, ______ payments are excluded from gross income of the recipient and _____ (deductible/nondeductible) for the spouse making the payment.

Blank 1: alimony Blank 2: nondeductible,

The taxpayer who earns income from services must recognize the income, and the income from property is taxed to the person who owns the property _____, ______, ____under the doctrine.

Blank 1: assignment Blank 2: of Blank 3: income

Nonrecognition provisions refer to specific types of income that taxpayers realize but are allowed to permanently _____ from gross income or temporarily ____ until a later period.

Blank 1: exclude or excluded Blank 2: defer, delay, postpone, or deferred

When an individual transfers property to another taxpayer during their life, without receiving or expecting to receive value in return, the property transferred is a(n) ____ and is (taxable/nontaxable) to the person receiving the property.

Blank 1: gift or gifts Blank 2: nontaxable, no

In general, when a taxpayer's debt is discharged by a lender, the taxpayer's gross income will (include / exclude) the amount forgiven.

Blank 1: include

For below-market-loans, the discounted interest rate is treated as interest _______ to the lender and interest _____ to the borrower.

Blank 1: income or revenue Blank 2: expense

Interest on ______ bonds is excluded from federal income taxation. (Enter only one word per blank.)

Blank 1: municipal,

In general, life insurance proceeds are (taxable/nontaxable) to the beneficiary of the policy.

Blank 1: nontaxable

Income from ____ takes different forms, such as dividends, interest, rents, royalties, and annuities.

Blank 1: property, investments, properties,

Under the cash method, taxpayers recognize income in the period they receive it, rather than when they actually earn it.

Blank 1: receive, Blank 2: earn

Up to 85% of _______ , ______ benefits, in retirement, may be taxable for taxpayers with moderate to high taxable income.

Blank 1: social or social security Blank 2: security

In personal injury cases, any damages awarded due to physical, injury are exempt from taxation. (Enter only one word per blank.)

Blank 1physical

Which one of the following types of income is NOT unearned revenue generated from owning property? Multiple choice question. Earnings from services rendered Interest income from a certificate of deposit Gain on the sale of land Dividends received from corporate stock

Earnings from services rendered

Which one of the following types of income is NOT unearned revenue generated from owning property? Multiple choice question. Gain on the sale of land Interest income from a certificate of deposit Earnings from services rendered Dividends received from corporate stock

Earnings from services rendered

True or false: Scholarships received by college students qualify as gifts and are, therefore, nontaxable. The actual use of the money (tuition, fees, housing, meals, and any other expenses) does not affect the taxable status of the scholarship. True false question.True/False

FALSE Reason: Scholarships that pay for tuition, fees, books, supplies, and other equipment required by the student's courses are excluded from the gross income. Housing is taxable.

True or false: Income and deductions from a partnership or S corporation are taxed on the owners' tax returns rather than the entity tax return. True false question. True/False

True Reason: Partnership and S corporation entities are "flow through" entities. The income and deductions flow through to the owners.

True or false: Punitive damages are generally fully taxable to the recipient. True false question.TrueFalse

True Reason: Punitive damages are taxable because their purpose is to punish the harm-doer rather than compensate the taxpayer.

Which of the following terms is used to refer to income from property? Multiple choice question. Deferred income Exempt income Unearned income Earned income

Unearned income

Which of the following items is income from services? Multiple choice question. Interest income Royalty income Wage income Dividend income

Wage income

Multiple Choice Question Court-ordered cash payments pursuant to a divorce or legal separation which provide financial support to an ex-spouse and do not continue after the death of the ex-spouse are referred to as _____. Multiple choice question. child support payments punitive damages alimony property settlements

alimony

A gift ______. Multiple choice question. is included in the gross income of the person receiving the gift and subject to income tax is included in the gross income of the person giving the gift and subject to income tax may be subject to "gift tax" which is paid by the person giving the gift may be subject to "gift tax" which is paid by the person receiving the gift

may be subject to "gift tax" which is paid by the person giving the gift Reason: The person receiving a gift is never responsible for paying a gift tax. The gift giver may be responsible for a gift tax, depending on the value of the gift.

Multiple Choice Question An inheritance _________. Multiple choice question. is included in the gross income of the person receiving it is included in gross income on the final tax return of the person who died may be subject to the federal estate tax which is paid by the person receiving the inheritance may be subject to the federal estate tax which is paid by the estate of the person who died

may be subject to the federal estate tax which is paid by the estate of the person who died

Interest income on _______ bonds is excluded from federal taxation. Multiple choice question. both municipal and federal government federal government municipal corporate

municipal

Court-ordered cash payments pursuant to a divorce or legal separation which provide financial support to an ex-spouse and do not continue after the death of the ex-spouse are referred to as Multiple choice question. alimony. property settlements. child support payments. punitive damages.

alimony

Court-ordered cash payments pursuant to a divorce or legal separation which provide financial support to an ex-spouse and do not continue after the death of the ex-spouse are referred to as _____. Multiple choice question. property settlements child support payments punitive damages alimony

alimony

Ken is 63 years old and unmarried. He retired at age 55 when he sold his business, Understock.com. Though Ken is retired, he is still very active. Ken reported the following financial information this year. Assume Ken files as a single taxpayer. Ken won $1,500 in an illegal game of poker (the game was played in Utah, where gambling is illegal). Ken sold 1,300 shares of stock for $32 a share. He inherited the stock two years ago. His tax basis (or investment) in the stock was $31 per share. Ken received $28,000 from an annuity he purchased eight years ago. He purchased the annuity, to be paid annually for 20 years, for $235,200. Ken received $13,750 in disability benefits for the year. He purchased the disability insurance policy last year. Ken decided to go back to school to learn about European history. He received a $800 cash scholarship to attend. He used $450 to pay for his books and tuition, and he applied the rest toward his new car payment. Ken's son, Mike, instructed his employer to make half of his final paycheck of the year payable to Ken as a gift from Mike to Ken. Ken received the check on December 30 in the amount of $1,550. Ken received a $760 refund of the $3,900 in state income taxes his employer withheld from his pay last year. Ken claimed $12,900 in itemized deductions last year (the standard deduction for a single filer was $12,550). Ken received $33,000 of interest from corporate bonds and money market accounts.

Gross Income:

Which of the following statements is INCORRECT regarding gross income? Multiple choice question. Specific types of income may be excluded from gross income by Congress. Some types of income may be temporarily deferred from gross income to be included in a later year. Income is only included in gross income when spelled out in specific tax provisions. Exclusions and deferrals are a result of specific Congressional action and narrowly defined.

Income is only included in gross income when spelled out in specific tax provisions.

Which of the following types of income are generated from property ownership? (Check all that apply.) Multiple select question. Interest earned on U.S. Treasury bonds Salary earned by an accountant Gain from the sale of a building Wages earned by an electrician Rental income from lessees Dividends received on corporate stock

Interest earned on U.S. Treasury bonds Gain from the sale of a building Rental income from lessees Dividends received on corporate stock

Chad has received the following income and benefits during the current year: $65,000 salary, $4,800 employer-provided health insurance, $1,500 municipal bond interest, $2,000 dividend income, $500 from a partnership, and a $10,000 judgment for lost wages due to an age discrimination lawsuit. What amounts should Chad include in his gross income? (Check all that apply.)

$10,000 judgment $2,000 dividend income $65,000 salary $500 partnership income

Question Mode Multiple Select Question Select all that apply Mary has received the following income and fringe benefits during the current year: a $73,000 salary; $600 premiums paid by the employer in employer-provided disability insurance; $5,000 in workers' compensation; $1,200 in corporate bond interest; a $23,000 car won on a game show; and a $1,200 health insurance reimbursement for medical expenses paid during the year. Which of these amounts should Mary include in her gross income? (Check all that apply.) Multiple select question. $23,000 car won on a game show $73,000 salary $1,200 health insurance reimbursement $5,000 workers' compensation $600 disability premiums $1,200 corporate bond interest

$23,000 car won on a game show $73,000 salary $1,200 corporate bond interest

Frick and Frack are equal partners in F&F Industries. The company generated net income of $60,000 during the year and distributed $7,000 cash to both Frick and Frack. How much income should Frack report on his individual income tax return due to the partnership interest? Multiple choice question. $3,500 $37,000 $7,000 $30,000

$30,000 Reason: Distributions to partners are not taxable. Only the portion of the net income allocable to the partner is taxable.

Sam traded a parcel of land for a tractor and a car. He had purchased the land five years earlier for $16,000. The market value of the car and tractor is $20,000. What is the amount of gross income resulting from this transaction? Multiple choice question. $20,000 $16,000 $4,000 $0

$4,000

Sandy earned a salary of $50,000 last year. Her parents gave her a car valued at $23,000 for her birthday. In addition, she earned $1,200 in interest income on a savings account and inherited $75,000 from her grandmother's estate. What is the amount of Sandy's gross income for the year? Multiple choice question. $51,200 $125,000 $50,000 $123,000 $126,500 $124,200

$51,200 Reason: The salary and interest are the only amounts included in gross income.

Arnie was the beneficiary of his wife's life insurance policy. He received $100,000 in June from the policy after his wife's death. He also sold some land that he had purchased a couple of years earlier. He sold the land for $6,000. He only paid $3,500 for the land when he bought it. Arnie is self-employed and earned a profit in his business of $55,000 (ignoring the self-employment tax deduction). What is the amount of Arnie's gross income for the current year? Multiple choice question. $57,500 $157,500 $161,000 $61,000

$57,500 Reason: Only the gain on the sale is taxable, and life insurance proceeds are not taxable [$55,000 + ($6,000-$3,500) = $57,500].

Multiple Choice Question Andrew earned $5,000 in wages while working a part-time job during the current year. He also received a scholarship for $12,000. He used $9,000 for tuition and $800 for books. The remaining $2,200 went to help cover the cost of housing. During the summer, Andrew's uncle died and Andrew inherited $30,000. What is the amount of Andrew's gross income for the current year? Multiple choice question. $14,800 $44,800 $35,000 $7,200 $36,200 $17,000

$7,200 Reason: An inheritance is not taxable, but the housing portion of the scholarship is taxable.

Brenda received a $15,000 college scholarship for the current year. She used the scholarship to pay the following fees: tuition $9,000, lab fees $60, parking fees $120, books $750, housing $4,000, and a meal plan $1,070. What can she exclude from gross income? (Check all that apply.) Multiple select question. $9,000 tuition $4,000 housing $60 lab fees $1,070 meals $750 books $120 parking fees

$9,000 tuition $60 lab fees $750 books

The highest percentage of Social Security benefits that may be taxed is ___%, and only for moderate to high income taxpayers.

85

Which of the following types of imputed income is NOT included in the gross income and is not taxable to the person receiving the benefit? Multiple choice question. A bargain purchase between a father and his son An employer's $12,000 loan to an employee with no interest on the note Employee discounts of 30% on services

A bargain purchase between a father and his son Reason: A bargain purchase between family members is generally deemed to be a gift, thus nontaxable to the recipient.

Income from property is referred to as (earned/unearned) unearned

Blank 1 unearned ,

Daniels, Edwards, and Findley are equal partners in DEF Industries. The company generated net income of $180,000 during the year and distributed $20,000 cash each of the partners. Edwards will report $____ in taxable income from the partnership.

Blank 1: 60,000

Which of the following payments to a taxpayer should be included in gross income? (Check all that apply.) Multiple select question. Compensatory damages awarded for lost wages due to injuries sustained in a fall at the grocery store Compensatory damages for lost wages awarded in a sex discrimination lawsuit Punitive damages awarded after an accident at work where the taxpayer sustained a non-physical injury Emotional distress damages awarded due to slander of the taxpayer's reputation Emotional distress damages awarded due to injuries from a car accident

Compensatory damages for lost wages awarded in a sex discrimination lawsuit Punitive damages awarded after an accident at work where the taxpayer sustained a non-physical injury Emotional distress damages awarded due to slander of the taxpayer's reputation

Which one of the following types of taxable income is NOT considered to be service income? Multiple choice question. Business income Dividend income Unemployment compensation Salary income

Dividend income

Action Sport is an S corporation owned equally by three shareholders. During the current year, Action Sport generated taxable income of $60,000. What is the tax treatment, if any, of the $60,000 income? Multiple choice question. Each shareholder will report $20,000 in taxable income. S corporations are tax-exempt entities, so there is no tax liability resulting from Action Sport's operations. Each shareholder will report the portion of income that he or she receives in cash, and Action Sport will pay tax on the remaining income. Action Sports will report and pay tax on $60,000.

Each shareholder will report $20,000 in taxable income.

Action Sport is an S corporation owned equally by three shareholders. During the current year, Action Sport generated taxable income of $60,000. What is the tax treatment, if any, of the $60,000 income? Multiple choice question. S corporations are tax-exempt entities, so there is no tax liability resulting from Action Sport's operations. Action Sports will report and pay tax on $60,000. Each shareholder will report the portion of income that he or she receives in cash, and Action Sport will pay tax on the remaining income. Each shareholder will report $20,000 in taxable income.

Each shareholder will report $20,000 in taxable income.

True or false: Gross income only includes income received in cash because cash is a measurable change in wealth. True false question. True/False

False Reason: Gross income includes income realized in any form - money, property, or services.

True or false: In general, prizes awarded to taxpayers are excluded from gross income. True false question. True/False

False Reason: Prizes and awards are taxable unless they meet very specific exceptions.

True or false: Darlene owns stock in several different companies. When she received a dividend check from her Avatar stock, she endorsed the checks and deposited the money in her daughter's checking account. Consequently, her daughter will be assessed the tax on the dividends.

False Reason: The assignment of income doctrine states that the owner of income-producing property must pay tax on the income from the property.

Which of the following types of income are generated from property ownership? (Check all that apply.) Multiple select question. Gain from the sale of a building Wages earned by an electrician Rental income from lessees Dividends received on corporate stock Interest earned on U.S. Treasury bonds Salary earned by an accountant

Gain from the sale of a building Rental income from lessees Dividends received on corporate stock Interest earned on U.S. Treasury bonds

Question Mode Multiple Choice Question Abby sold a parcel of land for $18,000. She paid a real estate agent a commission of $1,200 for assisting with the sale. Abby had purchased the land several years earlier for $14,500. What is the gain on the sale of the land? Multiple choice question. Gain of $18,000 Gain of $16,800 Gain of $2,300 Gain of $3,500

Gain of $2,300 Reason: $18,000 - $1,200 - $14,500 = $2,300

Which of the following cash receipts are taxable to the recipient? (Check all that apply.) Multiple select question. Gambling winnings Loan proceeds Awards Prizes

Gambling winnings Awards Prizes

Which of the following types of cash receipts is NOT taxable to the recipient? Multiple choice question. Gambling winnings Lottery winnings Raffle prizes Gift from a friend

Gift from a friend

Bart sold a parcel of land for $21,000. He paid a real estate agent a commission of $1,500 for assisting with the sale. Bart had purchased the land several years earlier for $20,000. What is the gain or loss on the sale of the land? Multiple choice question. Gain of $1,000 Loss of $2,500 Loss of $500 Gain of $21,000 Need help? Review these concept r

Loss of $500 Reason: $21,000 - $1,500 - $20,000 = ($500)

Question Mode Multiple Choice Question Which one of the following is NOT an advantage of the cash method for reporting income? Multiple choice question. Taxpayers have some control over when income is received and expenses are paid which assists in tax planning. Taxpayers are able to deduct expenses in the period incurred, which may be before they actually pay them. The cash method generally simplifies the computation of income. Taxpayers recognize income in the period they receive it, giving them the wherewithal to pay the tax.

Taxpayers are able to deduct expenses in the period incurred, which may be before they actually pay them. Reason: This is an advantage of the accrual method of reporting income.

Which one of the following is NOT an advantage of the cash method for reporting income? Multiple choice question. The cash method generally simplifies the computation of income. Taxpayers have some control over when income is received and expenses are paid which assists in tax planning. Taxpayers are able to deduct expenses in the period incurred, which may be before they actually pay them. Taxpayers recognize income in the period they receive it, giving them the wherewithal to pay the tax.

Taxpayers are able to deduct expenses in the period incurred, which may be before they actually pay them. Reason: This is an advantage of the accrual method of reporting income.

Which of the following statements are correct? (wrong choicesz.) 1.A current year insurance reimbursement of prior year medical expenses is recognized even if the expenses were NOT deducted in the prior year. 2.A taxpayer must recognize cash received in exchange for services rendered, but NOT property or services if they were received instead of cash.

Taxpayers who exchange or trade goods or services with each other must recognize the increase in value of the goods or services as income. If a taxpayer receives a state tax refund for a tax year where she deducted the state tax paid, she must report the refund as gross income. When taxpayers sell non-depreciable assets, they may exclude the original cost of those assets from gross income.

Question Mode Multiple Choice Question Which of the following statements is INCORRECT regarding workers' compensation payments? Multiple choice question. The payments are nontaxable because they are due to a physical injury. The payments are included in gross income because they are a replacement of wages. The payments are received due to work-related physical injury. Workers' compensation payments have a different tax treatment from unemployment compensation paymen

The payments are included in gross income because they are a replacement of wages.

Which of the following statements are CORRECT when describing "Workers' Compensation?" (Choose all that apply.) Multiple select question. Workers' compensation benefits are not taxable to the recipient because the payments result from a physical injury. Workers' compensation benefits are taxable to the recipient because this insurance was provided tax-free by the employer. Both "worker's compensation" and "unemployment compensation" are taxable to the recipient. Workers' compensation benefits are paid to employees who have been injured in a work-related situation. Workers' compensation is another term for "unemployment compensation."

Workers' compensation benefits are not taxable to the recipient because the payments result from a physical injury. Workers' compensation benefits are paid to employees who have been injured in a work-related situation.

Bobby received a $3,500 scholarship for the semester. He used $3,000 to pay tuition to the community college, and the remaining $500 was paid toward textbooks. How much of the scholarship must be included in gross income? Multiple choice question. $0 $500 $3,500 $3,000

`$0

Question Mode Multiple Select Question Select all that apply Life insurance proceeds may be included in gross income when ________. (Check all that apply.) Multiple select question. a life insurance policy is transferred to another party for valuable consideration the proceeds of the policy are paid to the beneficiary in one lump sum the beneficiary of the life insurance policy is NOT related to the insured proceeds are paid over time and a portion represents taxable interest payments

a life insurance policy is transferred to another party for valuable consideration proceeds are paid over time and a portion represents taxable interest payments

Sec. 61 of the Internal Revenue Code defines ________ income as "all income, from whatever source derived." Multiple choice question. realized earned gross taxable

gross

For a divorce agreement entered into BEFORE January 1, 2019, alimony is ______ Multiple choice question. excluded from the gross income of the person receiving it and non-deductible by the person paying it excluded from the gross income of the person receiving it but deductible by the person paying it included in the gross income of the person receiving it and deductible by the person paying it included in the gross income of the person receiving it but not deductible by the person paying it Need help? Review these concept resources.

included in the gross income of the person receiving it and deductible by the person paying it