Tax Final (McGowan)

Gross income includes: A) all income from whatever source derived unless excluded by law. B) excluded income. C) deferred income. D) all realized income. E) All of the choices are correct.

A) all income from whatever source derived unless excluded by law.

Which of the following statements regarding tax deductions is false? A) Taxpayers are not entitled to any deductions unless specific provisions in the tax code allow the deductions. B) Deductions can be labeled as deductions above the line or deductions below the line. C) From AGI deductions tend to be associated with business activities while for AGI deductions tend to be associated with personal activities. D) The standard deduction is a from AGI deduction.

C) From AGI deductions tend to be associated with business activities while for AGI deductions tend to be associated with personal activities.

Hillary is a cash-basis calendar-year taxpayer. During the last week of December she received a letter containing a $5,000 check for services rendered. Which of the following is a true statement? A) Hillary is taxed on the $5,000 of service income in the year she cashes the check. B) Hillary is taxed on the $5,000 of service income in the year the check was mailed. C) Hillary is taxed on the $5,000 of service income in the year she receives the check. D) Hillary is taxed on the $5,000 of service income in the year she provides the services. E) None of the choices are correct.

C) Hillary is taxed on the $5,000 of service income in the year she receives the check.

Sally is a cash basis taxpayer and a member of the Valley Barter club. This year Sally provided 100 hours of sewing services to the barter club in exchange for two football playoff tickets. Which of the following is a true statement? A) Sally need not recognize any gross income unless she sells the football tickets. B) Sally's exchange does not result in taxable income. C) Sally is taxed on the value of the football tickets even if she cannot attend the game. D) Sally is taxed on the value of her sewing services only if she is a professional seamstress.

C) Sally is taxed on the value of the football tickets even if she cannot attend the game concept=taxed on the value of items given to you

Which of the following statements regarding tax credits is true? A) Tax credits reduce taxable income dollar for dollar. B) Tax credits provide a greater tax benefit the greater the taxpayer's marginal tax rate. C) Tax credits reduce taxes payable dollar for dollar. D) None of these statements is true.

C) Tax credits reduce taxes payable dollar for dollar

This year Barney purchased 500 shares of Bell common stock for $20 per share. At year-end the Bell shares were only worth $2 per share. What amount can Barney deduct as a loss this year? A) $10,000 B) $9,000 C) $1,000 D) Barney can deduct $10,000 only if he includes $1,000 in his taxable income E) None of the choices are correct - Barney is not entitled to a loss deduction.

E) None of the choices are correct - Barney is not entitled to a loss deduction. concept= can't deduct until he sells it

Joanna received $60,000 compensation from her employer, the value of her stock in ABC company appreciated by $5,000 during the year (but she did not sell any of the stock), she received $30,000 of life insurance proceeds from the death of her husband. What is the amount of Joanna's gross income from these items? A) $60,000. B) $65,000. C) $95,000. D) $90,000.

A) $60,000. concept=Insurance proceeds are not taxable, expenses generated to incur taxable income is not deductible

Which of the following is not an itemized deduction? A) Alimony paid. B) Medical expenses. C) Real estate taxes. D) Charitable contributions.

A) Alimony paid. concept= alimony is no longer a deduction

Identify the rule that states that income has been realized when a taxpayer receives the income and there are no restrictions on the taxpayer's use of the income (e.g., no obligation to repay the amount): A) Claim of right. B) Constructive receipt. C) Return of capital principle. D) Wherewithal to pay. E) None of the choices are correct.

A) Claim of right

Dave is a plumber who uses the cash method of accounting. This year Dave requested that his clients make their checks payable to his son, Steve. This year Steve received checks in the amount of $62,000 for Dave's plumbing services. Which of the following is a true statement? A) Dave is taxed on $62,000 of plumbing income this year. B) Steve is taxed on $62,000 of plumbing income this year. C) Steve is taxed on $62,000 of income from gifts received this year. D) Dave may deduct the $62,000 received by Steve. E) None of the choices are correct.

A) Dave is taxed on $62,000 of plumbing income this year. concept= can't assign income to someone else

Which of the following series of inequalities is generally most accurate? A) Gross income ≥ adjusted gross income ≥ taxable income B) Adjusted gross income ≥ gross income ≥ taxable income C) Adjusted gross income ≥ taxable income ≥ gross income D) Gross income ≥ taxable income ≥ adjusted gross income

A) Gross income ≥ adjusted gross income ≥ taxable income concept=tax form

Which of the following statements regarding for AGI tax deductions is true? A) Taxpayers subtract for AGI deductions from gross income to determine AGI. B) A taxpayer may deduct for AGI deductions only if the deductions exceed the taxpayer's standard deduction amount. C) The deduction for qualified business income is a for AGI deduction. D) A taxpayer may deduct for AGI deductions only if the deductions exceed the taxpayer's itemized deductions.

A) Taxpayers subtract for AGI deductions from gross income to determine AGI.

Jamison's gross tax liability is $7,000. Jamison had $2,000 of available credits and he had $4,000 of taxes withheld by his employer. What is Jamison's taxes due (or taxes refunded) with his tax return? A) $5,000 taxes due. B) $1,000 taxes due. C) $1,000 tax refund. D) $3,000 taxes due.

B) $1,000 taxes due. 7000-2000-4000

Which of the following statements regarding dependents is false? A) A taxpayer may be allowed to claim another as a dependent even if the taxpayer has no family relationship with the other person. B) To qualify as a dependent of another, an individual must be a resident of the United States. C) An individual who qualifies as a dependent of another taxpayer may not claim any dependents. D) An individual cannot qualify as a dependent of another as a qualifying relative taxpayer if the individual's gross income exceeds a certain amount.

B) To qualify as a dependent of another, an individual must be a resident of the United States. - false because your parents can be overseas and you can claim them as dependents concept= qualifying child- relationship- son, daughter, step, brother, sister or steps, NOT cousins age-under 19, under 24 and full time student, or permanently disabled. residence-lives with taxpayer more than 1/2 the year, exception= education support- does not provide more than 1/2 support, scholarships excluded qualifying relative= relationship-descendant, sibling, son or daughter of tp's brother or sister, not cousins, aunt, uncle, inlaw, unrelated person who lives with them entire year support-tp must pay >1/2 living expenses gross income- <4,150

14) Madison's gross tax liability is $9,000. Madison had $3,000 of tax credits available and she had $8,000 of taxes withheld by her employer. What is Madison's taxes due (or taxes refunded) with her tax return? A) $0 taxes due and $0 tax refund. B) $6,000 taxes due. C) $2,000 tax refund. D) $1,000 taxes due.

C) $2,000 tax refund. 9000-3000-8000

George purchased a life annuity for $3,200 that will provide him $80 monthly payments for as long as he lives. Based on IRS tables, George's life expectancy is 100 months. How much of the first $80 payment will George include in his gross income? A) $80 B) $72 C) $48 D) $32 E) None of the choices are correct.

C) $48 Fran purchased an annuity that provides $12,000 quarterly payments for the next 10 years. The annuity was purchased at a cost of $300,000. How much of the first quarterly payment will Fran include in her gross income? A) $7,500 B) $4,500 (300,000 /12,000 = C) $12,000 D) $32,400 E) None of the choices are correct.(80 * 100 = 8000)(3200 / 8,000 = 40% excluded, 60% included)($80 * .60 = $48)

Lebron received $50,000 of compensation from his employer and he received $400 of interest from a municipal bond. What is the amount of Lebron's gross income from these items? A) $0. B) $400. C) $50,000. D) $50,400.

C) $50,000. concept=municipal interest is NOT taxed

Which of the following shows the correct relationship among standard deduction amounts for the respective filing statuses? A) Single > Head of Household > Married Filing Jointly B) Married Filing Jointly > Married Filing Separately > Head of Household C) Married Filing Jointly > Head of Household > Single D) Head of Household > Married Filing Separately > Married Filing Jointly

C) Married Filing Jointly > Head of Household > Single concept=24,000 married filing jointly, 18,000 head of household, 12,00 single

Which of the following statements is true? A) Income character determines the tax year in which the income is taxed. B) Income character depends on the taxpayer's filing status. C) Qualified dividend income is taxed at a lower rate than an equal amount of ordinary income. D) A taxpayer selling a capital asset at a gain recognizes ordinary income.

C) Qualified dividend income is taxed at a lower rate than an equal amount of ordinary income.

Jack and Jill are married. This year Jack earned $72,000 and Jill earned $80,000 and they received $4,000 of interest income from a joint savings account. How much gross income would Jack report if he files married-filing-separate from Jill? A) $72,000 if they reside in a common law state. B) $74,000 if they reside in a community property law state. C) $76,000 if they reside in a common law state. D) $78,000 if they reside in a community property law state. E) None of the choices are correct.D) $78,000 if they reside in a community property law state.

D) $78,000 if they reside in a community property law state. concept= community prop law: (72,000+80,000/2)+(4,000/2)=78,000 common law: 74,000-->72k+(4k/2)

All of the following are for AGI deductions except: A) Contributions to qualified retirement accounts B) Rental and royalty expenses. C) Business expenses for a self-employed taxpayer. D) Charitable contributions.

D) Charitable contributions.

Which of the following is NOT a from AGI deduction? A) Standard deduction. B) Itemized deduction. C) Deduction for qualified business income. D) None of these. All of these are from AGI deductions.

D) None of these. All of these are from AGI deductions.

All of the following represents a type or character of income except: A) Tax exempt. B) Capital. C) Qualified dividend. D) Normal.

D) Normal.

Identify the rule that determines whether a taxpayer must include in income a refund of an amount deducted in a previous year: A) Tax refund rule. B) Constructive receipt. C) Return of capital principle. D) Tax benefit rule. E) None of the choices are correct.

D) Tax benefit rule

Kevin provided services to several clients this year who paid with different types of property. Which of the following payments is not included in Kevin's gross income? A) Cash. B) Shares of stock listed on the New York Stock Exchange. C) A used car. D) Gold coins. E) All of these are included in gross income.

E) All of these are included in gross income.