Tax Chapter 5

Chester incurred $14500 in hospital and medical bills during the current year. His health insurance policy reimbursed hum $11600 toward those expenses. What amount should be included in Chester's gross income?

$0

Jamarcus injured his hand playing softball one weekend. The injury prevented him from being able to work. Luckily for Jamarcus, he had purchased a disability policy for himself easier in the year. Jamarcus received $1300 in disability benefits while he was away from work. Jamarcus should include _____ in gross income.

$0

Mary has received the following income and fringe benefits during the current year: a $73,000 salary; $600 in employer-provided disability premiums; $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?

$1,200 corporate bond interest $73,000 salary

Jamarcus injured his hand playing softball one weekend. The injury prevented him from being able to work. Luckily for Jamarcus, his employer provides disability insurance as a nontaxable fringe benefit to all employees. Jamarcus received $1,300 in disability benefits while he was away from work. Jamarcus should include $_________ in gross income.

$1,300 Since the employer paid the disability premiums, the benefits received are taxable

Frick and Frack are equal partners in F&F Industries. The company generated net income of $60000 during the year and distributed $7000 cash to both Frick and Frack. How much income should Frack report on his individual income tax return due to the partnership interest?

$30,000

Brenda received $15000 college scholarship for the current year. She used the scholarship to pay the following fees: tuition $9000, lab fees $60, parking fees $120, books $750, housing $4000, and a meal plan $1070. What can can she exclude from gross income?

$9000 tuition, $60 lab fees, $750 books

Under the realization principle, what must occur for income to be realized?

- a taxpayer must engage in a transaction with another party - the transaction must result in a measurable change in property rights

Which of the following fringe benefits are excluded from taxation in 2018?

- group term life insurance under $50,000 - dependent care benefits - medical insurance

Under which of the following circumstances might life insurance proceeds be included in gross income?

- when a life insurance policy is cashed out by the insured before death and the proceeds exceed the premiums paid - when a life insurance policy is transferred to another party for valuable consideration

Which one of the following choices states that income is realized if a taxpayer receives income and there are no restrictions on the taxpayer's use of the income? a. Claim of right doctrine b. Business purpose doctrine c. Income recognition doctrine d. Assignment if income doctrine

A

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

A

Jerry receives an annuity payment of $2,500 per month. Jerry purchased the 20-yer annuity for $250,000. What is the amount of the annuity that represents a return of capital and is, therefore, nontaxable? a. 41.67% or $12,500 per year b. 100% or $30,000 per year c. 10% or $3,000 per year d. 12% or $3,600 per year

A $250,000/(20x2500x12)=0.4167

Which of the following represents economic benefits to a taxpayer? a. Cash received for completing a job b. Interest income on investments c. Cash received from a bank loan d. A computer received in exchange for services rendered

A/B/D

Which of the following cash receipts are taxable to the recipient? a. Gambling winnings b. Prizes c. Child support d. Loan Proceeds e. Awards

A/B/E

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 judgement for lost wages due to an age discrimination lawsuit. What amounts should Chad include in his gross income? a. $2,000 dividend income b. $500 partnership income c. $4,800 health insurance d. $1,500 municipal bond interest e. $10,000 judgement f. $65,000 salary

A/B/E/F

Choose the type of investments that generate tax-exempt income: a. Educational savings plan b. U.S. Savings Bonds c. Municipal bonds d. Certificate of Deposit e. Life insurance policy

A/C/E

In which of the following situations has constructive receipt occurred in the earlier year? a. Arnold earned interest of $300 on his savings account, but did not withdraw the funds until the following year b. Andrew worked the last two weeks of the year, but he will not be paid for those hours until Jan 4 c. Alex was out of town on Dec 31 and, therefore, unable to pick up his final paycheck. He picked it up on Jan 2 d. Ashley's last paycheck of the year was dated Dec. 30. She was unable to cash the check because the employer had insufficient funds e. Amber received a year-end bonus check dated Dec 28, but she did not cash the check until Jan. 3

A/C/E

Which of the following choices are characteristics of Coverdell Educational Savings Accounts? a. The maximum yearly contributions to the account are limited to $2,000 for each beneficiary b. The maximum yearly contributions to the account are limited to $2,000 per taxpayer ($4,000 for mfj) c. Reasonable room and board costs are included in qualified higher education expenses d. Expenses for higher education, such as tuition and books, are NOT qualified educational expenses for this type of account e. The contribution limit is available to all taxpayers and is NOT subject to any phase out for higher levels of AGI f. The distributions can be made for qualified education expenses from kindergarten through 12th grade g. Earnings on the account are NOT taxable if used for qualified educational expenses

A/C/F/G

Chester incurred $14,500 in hospital and medical bills during the current year. His health insurance policy reimbursed him $11,600 toward those expenses. What amount should be included in Chester's gross income? a. $2,900 b. $11,600 c. $0 d. $14,500

C

What are the tax consequences for a taxpayer who dies before recovering his investment in an annuity contract? a. One-half of the annuity payment is taxable on the taxpayer's final income tax return b. The entire amount of the annuity received in the year of death is nontaxable on the taxpayer's final income tax return c. The amount of the unrecovered investment is deducted on the taxpayer's final income tax return d. The entire amount of the annuity received in the year of death is taxable on the taxpayer's final income tax return

C

Which of the following statements is CORRECT regarding the recognition of income? a. Income is realized for the return of the capital received in a sales transaction b. Income is realized when a taxpayer receives a refund of an amount that was not deducted in a prior period c. Income may be in the form of cash, property, or services in a transaction

C

Which of the following statements is NOT correct regarding alimony? a. Alimony is deductible for AGI for the person paying it b. Alimony payments must be made in cash c. Alimony is another term for child support d. Alimony is included in gross income of the person receiving it

C

Which of the following types of interest income is excluded from federal taxation? a. Federal government bonds b. Corporate bonds c. Municipal bonds

C

Income from services, including business income, is referred to as _______ income.

Earned

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.

Exclude/Defer

T or F: Gross income only includes income received in cash because cash is a measurable change in wealth.

False

Up to 85% of _____ benefits, in retirement, may ne taxable for taxpayers with moderate to high taxable income.

Social Security

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

Social Security

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

Social/Security

Which of the following choices describe exclusions and deferrals for tax purposes?

These provisions are the result of specific congressional action. These provisions are narrowly defined. These provisions are often granted in order to subsidize or encourage particular behaviors.

Under the realization principle, income is realized when (1) a taxpayer engages in a _____ with another party, and (2) the _____ results in a _____ change in property rights.

Transaction, transaction, measurable

T or F: Income and deductions generated within a partnership or S corporations that are subject to various tax treatments retain their character when they flow-through to the owners rather than being reclassified as ordinary income or loss.

True

T or F: Punitive damaged are fully taxable to the recipient.

True

Income from property is referred to as _______ income.

Unearned

Gross income means all income from ____________ ____________ ______________.

Whatever source derived

Gross income means all income from _______ _________ __________

Whatever/Source/ Derived

Beginning in 2019, in the case of a divorced couple, __________ payments are excluded from gross income of the recipient and ___________ for the payer.

alimony, nondeductible

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

alimony

A _____________ is an investment that pays a stream of equal payments over time.

annuity

Income received as a result of services provided by the taxpayer, including business income, is referred to as _______________ income.

earned

Nonrecognition provisions refer to a specific type of income that taxpayers realize but are allowed to permanently _________ from gross income of temporarily __________ until a later period.

exclude, defer

true or false: In general, prizes awarded to taxpayers are excluded from gross income

false

Taxpayers receiving indirect economic benefits, such as bargain purchases or below market loans, are said to have _____________ income which may be taxable.

imputed

Interest in _________ bonds is excluded from federal income taxation.

municipal

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

property

When a taxpayer includes an economic benefit in gross income, he is said to have _____________ the income.

recognized

Constructive Receipt Doctrine

taxpayers realize and recognize income when it is actually received or was available to them

true or false: Income and deductions generated within a partnership or S corporation that are subject to various tax treatments (qualified dividends, capital gains, ect.) retain their character when they flow-through to the owners rather than bing reclassified as ordinary income or loss

true

Which of the following types of cash receipts is not taxable to the recipient?

Gift from a friend

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 _____ and is not included in the _____ (income/property) by the person receiving the property.

Gift, nontaxable

When an individual transfers property to another taxpayer during their life, w/o receiving or expecting to receive value in return, the property transferred is a(n) ________ and is __________ (taxable/nontaxable) to the person receiving the property.

Gift; Nontaxable

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

Income/Expense

In general, when a taxpayer's debt is discharged by a lender, the taxpayer's gross income will _____ the amount forgiven.

Increase

Bart sold a parcel of land for $21000. He paid a real estate agent a commission of $1500 for assisting with the sale. Bart had purchased the land several years earlier for $20000, What is the amount realized on the sale of the land?

$19500

Single taxpayers meeting certain home ownership and use requirements can permanently exclude up to _____ of the realized gain on the sale of their principal residence.

$250,000

Single taxpayers meeting certain home ownership and use requirements can permanently exclude up to __________ of the realized gain on the sale of their principal residence.

$250,000

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?

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

During the current year, Sam received interest income from the following investments: $400 from State of Wyoming bonds, $200 from Ford Motor Co, $50 from City of Laramie bonds, $100 from US Treasury bonds. How much of the interest received will be included in gross income/

$300

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 the tractor is $20,000. What is the amount of gross income resulting from this transaction?

$4,000

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.

$60,000

Andrea owed $12000 on a medical bill to University Hospital. The hospital agreed to discharge the debt due to Andrea's financial situation. Immediately prior to the discharge of the debt, Andrea's debts exceeded her assets by $5000. How much of the debt forgiveness will Andrea need to include in her gross income?

$7000

Which of the following represent economic benefits to a taxpayer?

- a computer received in exchange for services rendered - interest income on investments - cash received for completing a job

Which of the following choices does not describe an annuity? a. It is a lump sum payment that is usually received by the beneficiary of a life insurance policy b. It is a means of generating a fixed income stream during retirement c. It is an investment that pays a stream of equal payments over time

A

The earnings on a Section _____ plan are not taxable to the beneficiary if the distributions from the account are used to pay qualified higher education expenses.

529

The highest percentage of social security benefits that may be taxed is __________ , and only for moderate to high income taxpayers.

85%

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? a. $4,000 b. $20,000 c. $0 d. $16,000

A

Which of the following choices does NOT describe an annuity? a. It is a lump sum payment that is usually received by the beneficiary of a life insurance policy b. It is a means of generating a fixed income stream during retirement c. It is an investment that pays a stream of equal payments over time

A

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 amount realized on the sale of the land? a. $19,500 b. $21,000 c. $1,000 d. ($500)

A Amount realized= Sales proceeds - selling expenses

Which of the following types of imputed income are NOT included in gross income (i.e. are NOT taxable)? a. A bargain purchase between a father and his son b. An employer's $12,000 loan to an employee with no interest on the note c. Employee discounts of 25% on services

A A bargain purchase between family members is generally deemed to be a gift, thus nontaxable to the recipient

Which of the following statements is correct concerning a gift?

A gift may be subject to "gift tax" which is paid by the person giving the gift.

Which of the following choices describe exclusions and deferrals for tax purposes? a. These provisions are narrowly defined b. These provisions are the result of specific congressional action c. These provision reduce the tax liability dollar for dollar d. These provisions are often granted in order to subsidize or encourage particular behaviors e. These provisions are generally deducted from AGI and reduce taxable income

A/B/D

Which of the following choices are characteristics of qualified tuition programs, also known as Section 529 plans? a. Earning on the account are not taxable if used for qualified higher education expenses b. The distributions can be made for qualified education expenses from kindergarten through 12th grade c. Distribution made to the beneficiary for purposed other than education will incur taxation and a penalty on the earnings of the plan d. The maximum yearly contributions to the account are limited to $2000 for each beneficiary e. Distributions to contributors are not subject to income tax, but they do incur a 10% penalty

A, B, C

Choose the types of investments that generate taxable income. a. Corporate bonds b. US Savings Bonds c. Educational savings plan d. Certificate of Deposits e. Municipal bonds

A, B, D

Under the realization principle, what must occur for income to be realized? a. A taxpayer must engage in a transaction with another party b. A taxpayer must receive cash to realize income c. The transaction must result in a measurable change in property rights d. A measurable change in wealth must occur, regardless of whether a transaction takes place

A, C

What are the advantages of the realization principle for defining gross income? a. It provides an objective measure of the value of the transaction b. It allows the taxpayer to exclude the transaction from gross income c. It provides the taxpayer with the opportunity to shift income to a related taxpayer who is in a lower tax bracket d. It provides the taxpayer with the wherewithal to pay when cash is received in the transaction

A, D

Cha has received the following income and benefits during the current year: $65000 salary, $4800 employer-provided health insurance, $1500 municipal bond interest, $2000 dividend income, $500 from a partnership, and a $10000 judgment for lost wages due to an age discrimination lawsuit. What amounts should Chad include in his gross income? a. $10000 judgment b. $4800 health insurance c. $1500 municipal bond interest d. $65000 salary e. $2000 dividend income f. $500 partnership income

A, D, E, F

Which of the following statements are correct when describing "Workers' Compensation?" a. Workers compensation benefits are not taxable to the recipient because the payments result from a physical injury b. Workers' compensation benefits are taxable to the recipient because this insurance was provided tax-free by the employer c. Both "worker's compensation" and "unemployment compensation" are taxable to the recipient d. Workers' compensation is another term for "unemployment compensation" e. Workers' compensation benefits are paid to employees who have been injured in a work-related situation

A, E

Certain types of investments may be tax-advantaged when used to help fund higher education. The growth in value and earnings from the investment are nontaxable if the proceeds are used to pay for qualifying educational expenditures. Which of the following types of investments qualify for this treatment? a. Section 529 plans b. U.S. Series EE bonds c. Coverdell savings account d. Municipal bonds e. Roth IRA plans

A/B/C

Which of the following situations will result in an award being excluded from gross income? a. When the award is a non cash item valued at less than $400, and given for either safety or years of service by an employee b. When the award has a charitable component, such as a television giveaway, where guests are given needed items c. When the award is given during the holidays, such as a Christmas cash bonus, since the intent of the award is to be a gift d. When the award is given for scientific, literary, or charitable achievement and meets certain other requirements

A/D

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? a. $60 lab fee b. $4,000 housing c. $120 parking fees d. $1,070 meals e. $9,000 tuition f. $750 books

A/E/F

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 ________.

Alimony

In the case of a divorced couple, _____ payments are included in the gross income of the recipient and deductible _____ AGI for the payor.

Alimony/ For

The _______ ____ __________ doctrine holds that 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,

Assignment/Of/Income

Allison won't $3,200 betting on a long-shot in the Kentucky Derby. Unfortunately, she lost her lucky streak and ended up losing $5,000 on her next (and last) trip to the racetrack. Allison heard that she will be able to deduct her gambling losses, so she is feeling a little better. How much of Allison's losses will she be able to deduct? a. $0- Gambling is not a business venture, so she will not deduct any of her losses b. $3,200- She can only deduct the losses to the extent of her winnings c. $5,000- She can deduct the full amount if she has documentation that verifies the losses

B

How are the proceeds from a life insurance policy treated if the policy is cashed in early for its surrender value when there is no chronic or terminal illness present? a. The excess of the cash surrender value over the premiums is deducted from the taxpayer's gross income b. The excess of the cash surrender value over the premiums is included from the taxpayer's gross income c. The proceeds from the policy are excluded from the taxpayer's gross income d. The proceeds from the policy are fully included in the taxpayer's gross income

B

What is the typical tax treatment for income from labor such as salaries, wages, and fees? a. It is nontaxable b. It is taxable c. It is tax-deferred d. It is tax-exempt

B

Which of the following fringe benefits provided by an employer is NOT excluded from gross income? a. Medical insurance b. Group life insurance coverage in excess of $50,000 c. Qualified transportation expenses d. De minimis (or small) benefits

B

Which of the following options is NOT available to taxpayers who have worked outside the United States and meet the requirements necessary to receive tax relief on their foreign earnings? a. Income exclusion for foreign-earned income b. Tax deduction for foreign-earned income c. Tax deduction for foreign taxes paid d. tax credit for foreign taxes paid

B

Which of the following statements is correct concerning a gift? a. A gift may be subject to "gift tax" which is paid by the person receiving the gift b. A gift may be subject to "gift tax" which is paid by the person giving the gift c. A gift is included in the gross income of the person receiving the gift and subject to income tax d. A gift is included in the gross income of the person giving the gift and subject to income tax

B

Which of the following statements is correct regarding the recognition of income? a. Income is realized when a taxpayer receives a refund of an amount that was not deducted in a prior period b. Income may be in the form of cash, property, or services received in a transaction c. Income is realized for the return of capital received in a sales transaction

B

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

B

Which of the following types of imputed income are not included in the gross income and are not taxable to the person receiving the benefit? a. An employer's $12000 loan to an employee with no interest on the note b. A bargain purchase between a father and his son c. Employee discounts of 25% on services

B

Which of the following statements are characteristics of alimony in a divorce decree entered into before 2019? a. Alimony can include property divisions between ex-spouses in a divorce agreement b. Alimony is included in the gross income of the person receiving it c. Alimony payments can not continue after the death of the recipient d. Alimony is deductible for AGI for the person paying it e. Alimony is not deductible to the person paying it f. Alimony may not be paid to a spouse who is still living with the payor as long as there is a separation agreement in place g. Alimony must be paid in cash

B, C, D, G

Under the realization principle, what must occur for income to be realized? a. A taxpayer must receive cash to realize income b. A taxpayer must engage in a transaction with another party c. A measurable change in wealth must occur, regardless of whether a transaction takes place d. The transaction must result in a measurable change in property rights

B/D

Choose the types of investments that generate taxable income: a. Educational savings plan b. Corporate bonds c. Municipal bonds d. U.S. Savings Bonds e. Certificate of Deposits

B/D/E

Mary has received the following income and fringe benefits during the current year: a $73,000 salary; $600 in employer-provided disability premiums; $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? a. $1,200 health insurance reimbursement b. $1,200 corporate bond interest c. $5,000 workers' compensation d. $600 disability premiums e. $73,000 salary

B/E

During the current year, Sam received interest income from the following investments: $400 from State of Wyoming bonds, $200 from Ford Motor Co., $50 from City of Laramie bonds, $100 from U.S. Treasury bonds. How much of the interest received will be included in gross income? a. $200 b. $700 c. $300 d. $600

C The State of Wyoming and City of Laramie bonds are not taxable.

Mary has received the following income and fringe benefits during the current year: a $73000 salary, $600 premiums paid by the employer-provided disability insurance, $5000 in workers' compensation, $1200 health insurance reimbursement for medical expenses paid during the year. Which of these amounts should Mary include in her gross income? a. $5000 workers' compensation b. $600 disability premiums c. $1200 corporate bond interest d. $73000 salary e. $1200 health insurance reimbursement

C, D

What are the advantages of the realization principle for defining gross income? a. It allows the taxpayer to exclude the transaction from gross income b. It provides the taxpayer with the opportunity to shift income to a related taxpayer who is in a lower tax bracket c. It provides the taxpayer with the wherewithal to pay when cash is received in the transaction d. It provides an objective measure of the value of the transaction

C/D

Which of the following statements are CORRECT when describing "Workers' Compensation?" a. Both "worker's compensation" and "unemployment compensation" are taxable to the recipient b. Workers' compensation is another term for "unemployment compensation" c. Workers' compensation benefits are not taxable to the recipient because the payments result from a physical injury d. Workers' compensation benefits are paid to employees who have been inured in a work-related situation e. Workers' compensation benefits are taxable to the recipient because this insurance was provided tax-free by the employer

C/D

Which of the following rules must be met for a taxpayer to be able to exclude the gain on the sale of a personal residence? a. The taxpayer must NOT have used the gain exclusion provision in the five years prior to the sale b. The taxpayer may use the exclusion on a vacation home or second home if NOT used for the principal residence c. The exclusion is $500,000 for taxpayers who are married filing jointly d. The taxpayer must have owned the residence for at least two years of the five year period prior to the sale e. The taxpayer must have used the property as a personal residence for a total of two or more years during the five year period prior to the sale

C/D/E

Which of the following types of income are generated from property ownership? a. Wages earned by an electrician b. Salary earned by an accountant c. Gain from the sale of a building d. Rental income from lessees e. Dividends received on corporate stock f. Interest earned on U.S. Treasury bonds

C/D/E/F

In general, when a taxpayer cashes out a life insurance policy before death, taxable income may result. However, if the taxpayer is _________ ill, the portion of the income required for long-term care is excluded from gross income. If the taxpayer is ________ ill, the proceeds are NOT taxable.

Chronically/ Terminally

Ann and Andy live in a state where all of the income earned from the services of Ann are included only in her gross income. They live in a state with a _____ system.

Common law

_____ is deemed to occur when the income has been credited to the taxpayer;s account or when the income is unconditionally available to the taxpayer, the taxpayer is aware of the availability and there are no restrictions on the income.

Constructive Receipt

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? a. Gain of $3,500 b. Gain of $16,800 c. Gain of $18,000 d. Gain of $2,300

D

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 he inherited $30,000. What is the amount of Andrew's gross income for the current year? a. $14,800 b. $35,000 c. $44,800 d. $7,200 e. $36,200 f. $17,000

D

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? a. $3,500 b. $500 c. $3,000 d. $0

D

Janice and Jarrod are married and live in a community property state. Janice is NOT employed outside the home, and Jarrod earns a salary of $98,000. During the year, they earned $2,000 on investments that are owned jointly. The investments were made after they were married, with money earned by Jarrod. How is the gross income treated for federal income tax purposes? a. Jarrod is deemed to have earned $99,000 and Janice is deemed to have earned $1,000 b. Jarrod is deemd to have earned $98,000 and Janice is deemed to have earned $2,000 c. Jarrod is deemd to have earned $100,000 and Janice has no income d. Jarrod is deemd to have earned $50,000 and Janice is deemed to have earned $50,000

D

Which of the following fringe benefits provided by an employer is not excluded from gross income? a. Qualified transportation expenses b. Medical insurance c. De minimis (or small) benefits d. Group life insurance coverage in excess of $50,000

D

Which of the following situations satisfies the ownership test for excluding the gain on a personal residence? a. The taxpayer must have owned the residence for the two years prior to the sale b. The taxpayer must have owned the residence for more than 12 months c. The taxpayer must have owned the residence for five consecutive years prior to the sale d. The taxpayer must have owned the residence for two or more years during the past five-year period ending on the date of sale

D

Which of the following statements is correct concerning a gift? a. A gift is included in the gross income of the person giving the gift b. A gift is included in the gross income of the person receiving the gift c. A gift may be subject to "gift tax" which is paid by the person receiving the gift d. A gift may be subject to "gift tax" which is paid by the person giving the gift

D

Which of the following statements is not correct regarding alimony for divorce decrees before 1/1/19? a. Alimony is not deductible for AGI for the person paying it b. Alimony payments must be made in cash c. Alimony is included in gross income of the person receiving it d. Alimony is another term for child support

D

Which of the following types of cash receipts is NOT taxable to the recipient? a. Lottery winnings b. Gambling winnings c. Raffle prizes d. Gift from a friend

D

In order to exclude the maximum amount of foreign-earned income form U.S. taxation, the following conditions must be met. a. The taxpayer must have lived in the country for at least 6 months in the current year b. The Taxpayer must NOT be a U.S. citizen c. The taxpayer must be an employee of the U.S. government on a temporary assignment in the foreign country d. The taxpayer must be considered a "resident" of the foreign country e. The taxpayer must have resided in the foreign country for 330 days in a consecutive 12-month period

D/E

Which of the following choices are characteristics of qualified tuition programs, also known as Section 529 plans? a. The distributions can be made for qualified education expenses from kindergarten through 12th grade b. The maximum yearly contributions to the account are limited to $2,000 for each beneficiary c. Distributions to contributors are NOT subject to income tax, but they do incur a 10% penalty d. Earnings on the account are NOT taxable if used for qualifying higher education expenses e. Distributions made to the beneficiary for purposes other than education will incur taxation and a penalty on the earnings of the plan

D/E

Rather than claiming the foreign-earned income exclusion, taxpayers may claim a foreign tax _______ or a foreign tax ________ for income taxes paid to other countries.

Deduction/ Credit

In general, when a taxpayer's debt is discharged by a lender, the taxpayer's gross income will _____ the amount forgiven.

Include

Taxpayers who realize an economic benefit must ______ the benefit in gross income unless it is specifically ______ by the tax code.

Include/ Excluded

Janice and Jarrod are married and live in a community property state. Janice is not employed outside the home, and Jarrod earns a salary of $98000. During the year, they earned $2000 on investments that are owned jointly. The investments were made after they were married, with money earned by Jarrod. How is the gross income treated for federal income tax purposes?

Janice is deemed to have earned $50000 and Jarrod is deemed to have earned $50000

If a taxpayer cashes out a life insurance policy before death due to a chronic illness, she may exclude from income the amount used to pay for her ______- ________ _________.

Long/Term/Care

Bart sold a parcel of land for $21000. He paid a real estate agent a commission for $1500 fir assisting with the sale. Bart had purchased the land several years earlier fro $20000. What is the gain or loss on the sale of the land>

Loss of $500

Interest on _____ bonds is excluded from federal income taxation.

Municipal

Any reimbursement a taxpayer receives from a medical or accident insurance policy for medical expenses paid by the taxpayer during the current year are _____ for the taxpayer.

Nontaxable

In general, life insurance proceeds are ________ to the beneficiary of the policy.

Nontaxable

In personal injury cases, any damages awarded due to _______ injury are exempt from taxation.

Physical

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

Property

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

Property

How are the proceeds from a life insurance policy treated if the policy is cashed in early for its surrender value when there is no chronic or terminal illness present?

The excess of the cash surrender value over the premiums paid is included in the taxpayer's gross income

Andrews, Badin, and Carr formed a partnership, ABC. During Year 2, the partnership sold some land that was held for investment and generated a long-term capital gain. How will this income be reported on the partners' individual tax returns?

The income will retain its character and be reported as a long-term capital gain

When is a discharge of indebtedness not included in gross income?

When the taxpayer is insolvent before and after the debt forgiveness

Which of the following statements is correct concerning a gift?

a gift may be subject to a "gift tax" which is paid by the person giving the gift

The ________________ doctrine states that income has been realized if a taxpayer receives income and there are no restrictions on the taxpayers use of the income.

claim of right

____________ is deemed to occur when the income has been credited to the taxpayer's account or when the income is unconditionally available to the taxpayer, the taxpayer is aware of the availability and there are no restrictions on the income.

constructive receipt

_______ is defined in Sec.61 of the Internal Revenue Code as "all income, from whatever source derived".

gross income

Assignment of Income Doctrine

holds that a taxpayer who earns income from services must recognize the income as theirs

Tax Benefit Rule

if a refund is made for an expenditure deducted in a previous year, then the refund is included in gross income to the extent that a prior deduction produced a tax benefit

Claim of Right Doctrine

income has been realized if a taxpayer receives income and there are no restrictions on the taxpayers use of the income

Which of the following statements is correct regarding the recognition of income?

income may be in the form of cash, property, or services received in a transaction

Form of Receipt Doctrine

indicates that taxpayers realize income whether they receive money, property, or services in a transaction

If a taxpayer cashes out a life insurance policy before death due to a chronic illness, she may exclude from income the amount used to pay for her_____________.

long-term care

Income from property is referred to as _______________ income.

unearned

Return of Capital Doctrine

when receiving a payment for property, taxpayers are allowed to recover the cost of the property tax-free