Tax Gleim Part 2
Anthony and Cleopatra are married and file jointly for 2017. They received the following in 2017: Taxable pension $10,000 Interest income (taxable) 500 Anthony's Social Security benefits 6,600 Cleopatra's Social Security benefits 2,400 What is the amount of Anthony and Cleopatra's taxable Social Security benefits for 2017? None of the answers are correct $9,000 $4,500 $0
$0
Baker, an unmarried individual, sold a personal residence, which has an adjusted basis of $70,000, for $165,000. Baker owned and lived in the residence for 7 years. Selling expenses were $10,000. Four weeks prior to the sale, Baker paid a handyman $1,000 to paint and fix-up the residence. What is the amount of Baker's recognized gain? $95,000 $84,000 $85,000 $0
$0
During an all-employee awards ceremony, Pedals Company gave Mollie a new bicycle for her outstanding safety record. This award was presented to Mollie for her services to the company and in accordance with Pedals's qualified employee achievement awards program. The bicycle cost Pedals $1,200 and has a fair market value of $1,700. What amount must Mollie include in income? $500 $0 $1,200 $1,700
$0
On February 1, Year 5, Hall learned that he was bequeathed 500 shares of common stock under his father's will. Hall's father had paid $2,500 for the stock in Year 1. Fair market value of the stock on February 1, Year 5, the date of his father's death, was $4,000 and had increased to $5,500 6 months later. The executor of the estate elected the alternate valuation date for estate tax purposes. Hall sold the stock for $4,500 on June 1, Year 5, the date that the executor distributed the stock to him. How much income should Hall include in his Year 5 individual income tax return for the inheritance of the 500 shares of stock that he received from his father's estate? $5,500 $4,000 $0 $2,500
$0
Wynn, a 60-year old single individual, sold his personal residence for $450,000. Wynn had owned his residence, which had a basis of $250,000, for 6 years. Within 8 months of the sale, Wynn purchased a new residence for $400,000. What is Wynn's recognized gain from the sale of his personal residence? $0 $75,000 $50,000 $200,000
$0
Zippy worked at the Maxwell Hotel as a desk clerk. Since there was no one to replace him during the dinner hour, the Maxwell Hotel provided Zippy's meal out of the dining room free of charge. Zippy was allowed to go and eat elsewhere but was encouraged to eat at the hotel and mind the desk. The cost of the meals to the Maxwell Hotel was $450, and the fair market value of the meals was $800. How much must Zippy include in gross income? $0 $350 $450 $800
$0
Pierre, a pizza delivery person, received tips totaling $1,000 in December Year 1. On January 5, Year 2, Pierre reported this tip income to his employer in the required written statement. At what amount, and in which year, should this tip income be included in Pierre's gross income? $1,000 in Year 2. $1,000 in Year 1. $83 in Year 1 and $917 in Year 2. $500 in Year 1 and $500 in Year 2.
$1,000 in Year 2.
Basil Company, a cash-basis taxpayer, had the following activity during Year 2: Sales in Year 2, uncollected $ 40,000 Sales in Year 2, collected 1,000,000 Total sales in Year 2 1,040,000 Collections on Year 1 bad debt 50,000 What is the correct amount of income to be reported for Year 2? $1,040,000 $1,050,000 $1,000,000 $1,090,000
$1,050,000
Roger Burrows, age 19, is a full-time student at Marshall College and a candidate for a bachelor's degree. His tuition and fees were $4,000 per year. During 2017 he received the following payments: State scholarship for 10 months $3,600 Loan from college financial aid office 1,500 Cash support from parents 3,000 Cash dividends on investments 700 Cash prize awarded in newspaper contest 500 $9,300 What is Burrows' gross income for 2017? $9,300 $4,800 $1,200 $1,100
$1,200
Clark filed Form 1040EZ for the 2016 taxable year. In July 2017, Clark received a state income tax refund of $900, plus interest of $10, for overpayment of 2016 state income tax. What amount of the state tax refund and interest is taxable in Clark's 2017 federal income tax return? $900 $910 $10 $0
$10
Jensen reported the following items during the current year: Fair rent value of a condominium owned by Jensen's employer $ 1,400 Cash found in a desk purchased for $30 at a flea market 400 Inheritance 11,000 The employer allowed Jensen to use the condominium for free in recognition of outstanding achievement. Based on this information, what is Jensen's gross income for the year? $1,770 $1,800 $12,400 $1,400
$1,800
Charles and Marcia are married cash-basis taxpayers. In 2017, they had interest income as follows: $500 interest on federal income tax refund $600 interest on state income tax refund $800 interest on federal government obligations $1,000 interest on state government obligations What amount of interest income is taxable on Charles and Marcia's 2017 joint income tax return? $1,100 $500 $2,900 $1,900
$1,900
In 2017, Emil Gow won $10,000 in a state lottery and spent $800 for the purchase of lottery tickets. Emil elected the standard deduction on his 2017 income tax return. The amount of lottery winnings that should be included in Emil's 2017 gross income is $2,850 $0 $10,000 $3,650
$10,000
In 2017, Joan accepted and received a $10,000 award for outstanding civic achievement. Joan was selected without any action on her part, and no future services are expected of her as a condition of receiving the award. What amount should Joan include in her 2017 gross income in connection with this award? $10,000 $0 $5,000 $4,000
$10,000
Smith, a retired corporate executive, earned consulting fees of $8,000 and director's fees of $2,000 in 2017. Smith's gross earnings from self-employment in 2017 was $10,000 $8,000 $0 $2,000
$10,000
Howard, an employee of Ogden Corporation, died on June 30, 2017. During July, Ogden made employee death payments of $10,000 to his widow and $10,000 to his 15-year-old son. What amounts should be included in gross income by the widow and son in their respective tax returns for 2017? Widow Son $0 $0 $10,000 $10,000 $7,500 $7,500 $5,000 $5,000
$10,000 $10,000
Johnson, an accrual-method landlord, receives the following receipts during the current year associated with his rental of apartments: Lessees' refundable deposits $ 2,000 Payment for modifying a lease 50 Rent 10,000 Lessee improvements made in lieu of rent 1,500 Prepaid rent 500 Bonus for granting a lease 200 What amount should Johnson report as taxable income from his rental investment? $12,250 $14,250 $12,000 $12,050
$12,250
Willie Coconut was injured during the year and was not able to work due to his injury and the associated emotional distress. Willie received the following payments during the year: Disability pay $3,500 Accident insurance proceeds (substitute for lost income) 7,000 Damages for emotional distress received by a lawsuit 2,000 Punitive damages 5,000 Willie has paid the premiums for all of his policies and has not taken any deductions for the medical expenses. The total amount of compensation for injury that Willie may exclude from gross income is $17,500 $5,500 $3,500 $12,500
$12,500
On September 18, 2017, Dennis was killed in an automobile accident. In October 2017, his widow received a lump-sum death benefit from his employer in the amount of $15,000. Dennis had no right to the $15,000 prior to death. For 2017, what amount should his widow include in adjusted gross income, assuming a joint tax return was filed? $14,000 $10,000 $0 $15,000
$15,000
During 2017, Ash had the following cash receipts: Wages $15,000 Interest income from U.S. Treasury bonds 350 Workers' compensation following a job-related injury 8,500 What is the total amount that must be included in gross income on Ash's 2017 income tax return? $23,850 $15,000 $15,350 $23,500
$15,350
Mr. T has been a night watchman at Y Company for 10 years. During the current year, he received the following payments from Y Company: Salary $15,000 Hospitalization insurance premiums 3,600 Required lodging on Y's premises for Y's convenience as a condition to T's employment 2,400 Reward for preventing a break-in 1,000 Christmas ham (value) 15 What amount is includible in Mr. T's gross income in the current year? $15,000 $16,015 $17,400 $16,000
$16,000
In the current year, Joe Green purchased XYZ Corporation's 10-year, 10% bonds at original issue for $12,000. The bonds had a stated redemption price of $15,000. How much original issue discount must Green include in gross income in the current year assuming a current market yield for bonds of similar quality of 14%? $3,180 $300 $180 $120
$180
Martha, filing single, purchased her home on July 7, Year 1, and lived in it continuously until its sale on January 7, Year 3, due to a qualified hardship. Her gain on the sale of the home is $300,000. She did not exclude any gain on any other home sale during this time. What is the maximum amount of gain she may exclude on this sale? $250,000 $187,500 $300,000 $125,000
$187,500
Major, a candidate for a graduate degree, received the following scholarship awards from the university in 2017: $10,000 for tuition, fees, books, and supplies required for courses $2,000 stipend for research services required by the scholarship What amount of the scholarship awards should Major include as taxable income in 2017? $12,000 $0 $10,000 $2,000
$2,000
Paul Crane, age 25, is single with no dependents and had an adjusted gross income of $30,000 in 2017, exclusive of $2,000 in unemployment compensation benefits received in 2017. The amount of Crane's unemployment compensation benefits taxable for 2017 is $0 $500 $1,000 $2,000
$2,000
Which of the following fringe benefits is not excludable from an employee's wages? Educational assistance expenses of $5,250 provided through an educational assistance program. Qualified employee discount. Dependent care assistance of $5,000 provided through a dependent care assistance program. $2,500 of group term life insurance covering the death of an employee's spouse or dependent.
$2,500 of group term life insurance covering the death of an employee's spouse or dependent.
Alayna is a voice and singing coach. She is a calendar-year taxpayer using the accrual method of accounting. On November 2, 2016, she received $3,200 for a 2-year contract for 64 one-hour voice and singing lessons beginning on that date. The contract provided that Alayna give 8 lessons in 2016 and 48 lessons in 2017, with the remaining lessons to be given in 2018. What is the amount that Alayna should report on her 2017 return? $0 $3,200 $2,400 $2,800
$2,800
George Black is single and files Form 1040 for 2017. He received the following income in 2017: Fully taxable pension $18,600 Wages from part-time job 9,400 Interest income 990 Total $28,990 George also received Social Security benefits during 2017. Form SSA-1099 shows $5,980 in box 5, Net Benefits for 2017. How much of George's Social Security is taxable? $2,990 $4,700 $6,980 $5,980
$2,990
Joe has owned shares in a company that has a dividend reinvestment plan since 2005. The plan allows him to invest more cash to buy additional shares of stock at a price less than fair market value. In 2017, Joe took advantage of that option and purchased 100 additional shares for $30 each. On the dividend payment date, the fair market value of the shares he purchased was $32 per share. Based on this information, Joe must report $200 of short-term capital gain income, based on the fact that Joe could not have taken advantage of the option to buy the shares at the discounted price if he had not taken part in the dividend reinvestment plan. $0. No income must be reported until the shares are sold. $200 as ordinary income, based on the difference between the amount Joe paid and the fair market value of the shares. $200 of long-term capital gain income, based on the fact that Joe has owned shares in the company for more than 18 months.
$200 as ordinary income, based on the difference between the amount Joe paid and the fair market value of the shares.
William owns a four-unit apartment building for which he receives $500 per month per unit. Three of the units were rented for the entire 12 months. The fourth unit was occupied from January 1 to April 30, 2017. Upon vacating the unit the tenant was not refunded his security deposit of $500 due to damage to the unit. The unit was subsequently rented for 1 year beginning August 1, 2017. On August 1, 2017, the new tenant paid the first and last months' rent and a refundable security deposit of $500. What is William's rental income for 2017? $23,000 $23,500 $22,500 $24,000
$23,500
Trish Durwood works for a small retail-clothing store. She earned $26,000 in wages during the entire calendar year. Because of a cash flow problem in April, Trish did not receive her $500 weekly check but instead was given a credit of $500 toward clothing purchased for her family. How much income should be shown on her Form W-2 and reported on her Form 1040? $26,000 $25,000 $25,500 $26,500
$26,000
Nare, an accrual-basis taxpayer, owns a building which was rented to Mott under a 10-year lease expiring August 31, Year 4. On January 2, Year 1, Mott paid $30,000 as consideration for canceling the lease. On November 1, Year 1, Nare leased the building to Pine under a 5-year lease. Pine paid Nare $10,000 rent for the 2 months of November and December, and an additional $5,000 for the last month's rent. What amount of rental income should Nare report in its Year 1 income tax return? $10,000 $40,000 $15,000 $45,000
$45,000
John is a cash-basis taxpayer. He received the following items of income in December Year 3: The loan on his truck was forgiven because he performed some accounting work for the dealer. He owed $2,000 at the time. He received a retainer of $500 from a new client to guarantee that his services would be available in February when the client would need help preparing financial statements. He finally received the $800 for work he completed in November of Year 1. How much of this income must John include on his Year 3 tax return? $3,300 $500 $2,500 $1,300
$3,300
Randolph is a single individual who always claims the standard deduction. Randolph received the following in the current year: Wages $22,000 Unemployment compensation 6,000 Pension distribution (100% taxable) 4,000 A state tax refund from the previous year 425 What is Randolph's gross income? $22,000 $32,000 $32,425 $28,425
$32,000
Employee Y, who is 44 years old, is provided with $120,000 of nondiscriminatory group term life insurance by his employer. Based on the IRS uniform premium cost table, the total annual cost of a policy of this type is $1.20 per $1,000 of coverage. Y's required contribution to the cost of the policy is $4.00 per month. Y was covered for the entire year. How much of the cost must Y include in his income? $0 $96 $36 $84
$36
Mr. Cypress owned a small three-unit apartment building in Detroit, Michigan. The rent on each apartment was $1,000 per month. During 2017, he received the following payments: Apt. A - Timely rent payments were made for 12 months. Apt. B - The apartment was vacant in January and February. On 3/1/17, a new tenant entered into a 1-year lease from 3/1/17 through 2/28/18. The tenant paid first and last month's rent and a security deposit of $1,500. The security deposit is to be returned at the end of the lease if the tenant lives up to the terms of the lease. The tenant timely paid the rent for the next 9 months (April through December) on the first of each month. Apt. C - In December, after timely paying the rent for 12 months of the year, the tenant came to Mr. Cypress and told him that he had been transferred to a new job location in Tennessee. He asked to be released from his 2-year lease obligation, which was scheduled to expire on June 30, 2018. Mr. Cypress agreed to accept 3 months' rent to cancel the lease. The tenant paid Mr. Cypress $3,000 to cancel the lease in December. Assuming Mr. Cypress is a cash-basis taxpayer, what amount should Mr. Cypress include in his 2017 gross income from the apartment building? $35,500 $38,000 $35,000 $39,500
$38,000
Flowers, a married taxpayer, purchased an annuity for $64,400 that will pay $700 per month over the life of Flowers and Flowers's spouse. At the time of purchase, the couple's joint life expectancy was 23 years. Flowers received payment beginning April 1, Year 1, amounting to $6,300 in the first year of the annuity contract. How much is includible in Flowers's gross income in the first year? $2,100 $0 $4,200 $6,300
$4,200
During 2017, Kay received interest income as follows: On U.S. Treasury certificates $4,000 On refund of 2016 federal income tax 500 The total amount of interest subject to tax in Kay's 2017 tax return is $500 $4,000 $4,500 $0
$4,500
In 2017, Sam received the following corporate distributions: $1,500 dividend on stock held in a public corporation that offers a dividend reinvestment plan that lets him choose to use the dividend to buy (through an agent) more stock in the corporation at a price equal to its fair market value instead of receiving the dividends in cash. Sam chose to take part in the plan. $2,500 dividend on stock held in a public corporation that offers a dividend reinvestment plan that lets him choose to use the dividend to buy (through an agent) more stock in the corporation at a price less than its fair market value. The fair market value of shares Sam purchased through the plan on the dividend payment date in 2017 was $3,000. $2,000 return of capital distribution reported on Form 1099-DIV. Based on the above information, how much ordinary dividend income must Sam report on his 2017 return? $4,000 $6,500 $6,000 $4,500
$4,500
Cassidy, an individual, reported the following items of income and expense during the current year: Salary $50,000 Alimony paid to a former spouse 10,000 Inheritance from a grandparent 25,000 Proceeds of a lawsuit for physical injuries 50,000 What is the amount of Cassidy's adjusted gross income? $50,000 $40,000 $115,000 $125,000
$40,000
Mr. and Mrs. Jones sold their principal residence for $750,000. They had lived in their residence for 20 years, and it had an adjusted basis of $210,000. The Joneses have decided not to purchase a new home and will instead rent a condominium on the beach. What amount of gain must they recognize on this transaction? $0 $540,000 $750,000 $40,000
$40,000
Porter was unemployed for part of the year. Porter received $35,000 of wages, $4,000 from a state unemployment compensation plan, and $2,000 from his former employer's company-paid supplemental unemployment benefit plan. What is the amount of Porter's gross income? $39,000 $41,000 $37,000 $35,000
$41,000
Klein, a master's degree candidate at Briar University, was awarded a $12,000 scholarship from Briar in Year 1. The scholarship was used to pay Klein's Year 1 university tuition and fees. Also in Year 1, Klein received $5,000 for teaching two courses at a nearby college. What amount must be included in Klein's Year 1 gross income? $12,000 $5,000 $17,000 $0
$5,000
Sam and Ann Hoyt filed a joint federal income tax return for the calendar year 2017. Among the Hoyts' cash receipts during 2017 was the following: $6,000 first installment on a $75,000 life insurance policy payable to Ann in annual installments of $6,000 each over a 15-year period, as beneficiary of the policy on her uncle, who died in 2016. What portion of the $6,000 installment on the life insurance policy is excludable from 2017 gross income in arriving at the Hoyts' adjusted gross income? $6,000 $1,000 $5,000 $0
$5,000
Midwest Department Stores allows all its employees to purchase goods worth up to $1,000 in retail value each year at a 50% discount. Mark, an employee of Midwest, took full advantage of this policy one year and received a $500 discount. Midwest's gross profit percentage on sales to customers is 45%. The normal industry discount was only 30%. How much must Mark include in gross income? $50 $200 $500 $0
$50
John Budd files a joint return with his wife. Budd's employer pays 100% of the cost of all employees' group term life insurance under a qualified plan. Under this plan, the maximum amount of tax-free coverage that may be provided for Budd by his employer is $5,000 $50,000 $100,000 $10,000
$50,000
Ms. Orchard purchased a duplex in Year 1. She lived in one unit as her principal residence and rented out the other unit until she sold the duplex in February Year 15 (the current year). In April Year 15, she bought and lived in a small single home. She did not replace the rental property. Her records showed the following: Duplex Original cost $100,000 Capital improvements 30,000 Depreciation until date of sale (rental unit only) 40,000 Selling price 250,000 Selling expenses 20,000 What is the amount of gain that Ms. Orchard may exclude in Year 15? $0 $150,000 $140,000 $50,000
$50,000
During the year, Barbra Carrey received an inheritance of $15,000 and a $500 gift from her employer. What amount of gifts received should Barbra include in her income tax return? $500 $15,500 $0 $15,000
$500
Paul Bristol, a cash-basis taxpayer, owns an apartment building. The following information was available for Year 1: An analysis of the Year 1 bank deposit slips showed recurring monthly rents received totaling $50,000 for the year. On March 1, Year 1, the tenant in apartment 2B paid Bristol $2,000 to cancel the lease expiring on December 31, Year 1. The lease of the tenant in apartment 3A expired on December 31, Year 1, and the tenant left improvements valued at $1,000. The improvements were not in lieu of any required rent. In computing net rental income for Year 1, Bristol should report gross rents of $50,000 $51,000 $52,000 $53,000
$52,000
Perle, a dentist and a cash-basis taxpayer, billed Wood $600 for dental services. Wood paid Perle $200 cash and built a bookcase for Perle's office in full settlement of the bill. Wood sells comparable bookcases for $350. What amount should Perle include in taxable income as a result of this transaction? $200 $600 $550 $0
$550
Ms. Oak rented a small house to Mr. Acorn for $500 a month for all of 2017. The house was in serious need of rehabilitation. Mr. Acorn, an electrician, approached Ms. Oak with a proposal that he would rewire the house in lieu of payment of his January through April rent (4 months). Ms. Oak accepted Mr. Acorn's offer, and Mr. Acorn completed his work in July. In August, Ms. Oak notified Mr. Acorn that she would be out of town for 3 months starting at the beginning of September, and she asked him to "look after things." While she was away, he paid $200 to have the furnace repaired. When she returned at the end of November, he paid her $1,300 (3 months' rent for September, October, and November less the $200 he had paid for the furnace). Mr. Acorn timely paid his rent on the first of each month for May, June, July, August, and December. What amount should Ms. Oak include in her 2017 gross rental income? $4,000 $4,200 $6,200 $6,000
$6,000
Mr. Hawk, a factory assembly line worker, received the following benefits from his employer: Medical insurance plan policy $250 Christmas bonus 125 Reimbursement for college undergraduate physics course during the current year under a nondiscriminatory written plan 450 $40,000 nondiscriminatory group term life insurance policy 475 Membership in a local health club 550 How much is includible in Mr. Hawk's income for the current year? $675 $1,050 $1,125 $925
$675
Blake, a single individual, age 67, had a 2017 adjusted gross income of $60,000 exclusive of Social Security benefits. Blake received Social Security benefits of $8,400 and interest of $1,000 on tax-exempt obligations during 2017. What amount of Social Security benefits must be included in Blake's 2017 taxable income? $0 $8,400 $7,140 $4,200
$7,140
Ruby Diaz is a commissioned salesperson. She is a cash-method taxpayer. At the end of 2017, her earnings for the year were $75,000. During the year, she also received $10,000 in advances on future commissions and repaid $8,000. How much income should Ruby report for 2017? $87,000 $75,000 $85,000 $77,000
$77,000
During the current year, Hal Leff sustained a serious injury in the course of his employment. As a result of this injury, Hal received the following payments during the year: Workers' compensation $2,400 Reimbursement from his employer's accident and health plan for medical expenses paid by Hal and not deducted by him 1,800 Punitive damages for personal physical injuries 8,000 The amount to be included in Hal's gross income for the current year should be $0 $8,000 $12,200 $1,800
$8,000
In 2017, Gail Judd received dividends from the following: Life Ins. Co., on Gail's life insurance policy (Total dividends received have not yet exceeded accumulated premiums paid.) $100 Safe National Bank, on bank's common stock 300 Roe Mfg. Corp., a Delaware corporation, on preferred stock 500 What amount of dividend income should Gail report in her 2017 income tax return? $900 $500 $800 $300
$800
With regard to the inclusion of Social Security benefits in gross income for the 2017 tax year, which of the following statements is true? 85% of the Social Security benefits is the maximum amount of benefits to be included in gross income. The Social Security benefits in excess of one-half the modified adjusted gross income are included in gross income. The Social Security benefits in excess of the modified adjusted gross income over $32,000 are included in gross income. The Social Security benefits in excess of modified adjusted gross income are included in gross income.
85% of the Social Security benefits is the maximum amount of benefits to be included in gross income.
Which payment(s) is(are) included in a recipient's gross income? I.Payment to a graduate assistant for a part-time teaching assignment at a university. Teaching is not a requirement toward obtaining the degree. II.A grant to a Ph.D. candidate for his participation in a university sponsored research project for the benefit of the university. II only I only Both I and II Neither I nor II
Both I and II
DAC Foundation awarded Kent $75,000 in recognition of lifelong literary achievement. Kent was not required to render future services as a condition to receive the $75,000. What condition(s) must have been met for the award to be excluded from Kent's gross income? I. Kent was selected for the award by DAC without any action on Kent's part. II.Pursuant to Kent's designation, DAC paid the amount of the award either to a governmental unit or to a charitable organization. II only. Neither I nor II. I only. Both I and II.
Both I and II.
Calvin and Gloria were divorced in a prior year. As part of the final divorce decree of the court, Calvin was ordered to pay $500 a month toward the support of his two children, Robert and Myra. During 2017, Calvin got 6 months behind in his child support payments. As a result of his delinquency, two things happened in 2017 to allow Calvin to catch up in his payments. Gloria had Calvin's wages garnished for $1,000 to pay 2 delinquent months' child support. Calvin, a cash-basis taxpayer, was due $2,000 for past work he had done for the XYZ Corp. He told the XYZ Corp. to pay the $2,000 directly to Gloria to make up 4 months' child support. The XYZ Corp. paid the money directly to Gloria. Which of the following statements is true? Calvin did not receive any constructive income in 2017 when the $1,000 wages were garnished and the $2,000 income was paid directly to Gloria. Calvin constructively received both the $1,000 wages and the $2,000 income in 2017. Calvin constructively received the $1,000 wages but not the $2,000 income in 2017. Calvin constructively received the $2,000 income but not the $1,000 wages in 2017.
Calvin constructively received both the $1,000 wages and the $2,000 income in 2017.
Chrisp, a freelance photographer, uses the cash method for business. The tax year ends on December 31. Which of the following should not be included in the determination of Chrisp's gross income for the current year? Chrisp received a dividend check on January 4 of the following year. The dividends were declared payable on December 30 of the current year. A client notified Chrisp on December 27 of the current year that a check was ready. The check was not picked up until January 4 of the following year. Chrisp owns controlling shares of a closely-held corporation and is planning to delay the bonus payment from the corporation until January of the next year. Bonus was authorized on December 15 of the current year and may be drawn at any time. Chrisp received a check from a client on December 28 of the current year for a family portrait produced on December 22 of the current year. The check was dated December 23 of the current year but was not deposited until January 4 of the following year.
Chrisp received a dividend check on January 4 of the following year. The dividends were declared payable on December 30 of the current year.
A cash-basis taxpayer should report gross income For the year in which income is either actually or constructively received, whether in cash or in property. For the year in which income is either actually or constructively received in cash only. Only for the year in which income is actually received in cash. Only for the year in which income is actually received whether in cash or in property.
For the year in which income is either actually or constructively received, whether in cash or in property.
The fringe benefit that must be included in wages and reported on Form W-2 is Contributions by your employer to provide long-term care services. Health or accident insurance coverage provided by your employer. Employer-provided parking near the place of business valued at less than $250 per month. Group-term life insurance coverage in excess of $50,000.
Group-term life insurance coverage in excess of $50,000.
Peter is an auto mechanic. On November 25, Year 1, he made some major auto repairs on Harry's Mercedes. Harry is an attorney. In exchange for the service, Harry is going to draft Peter's will and represent him when he settles on his new house. Harry will perform all of these services in Year 2. The repair bill for the Mercedes came to $1,200. Both Peter and Harry are cash-basis taxpayers. How do they report this income? Both report $1,200 income in Year 1. Harry reports $1,200 in Year 1 and Peter reports $1,200 in Year 2. Peter reports $1,200 in Year 1 and Harry reports $1,200 in Year 2. Both report $1,200 income in Year 2.
Harry reports $1,200 in Year 1 and Peter reports $1,200 in Year 2.
Which of the following items may be considered alimony? Payments Mr. Stone made under a written separation agreement for the mortgage and real estate taxes on a home he owned by himself and in which his former spouse lived rent-free. Payments made to a third party on behalf of the former spouse for the former spouse's medical expenses. Payments made for the 3-month period after the death of the recipient spouse. Noncash property settlement.
Payments made to a third party on behalf of the former spouse for the former spouse's medical expenses.
Jerry, a general contractor by trade, is a tenant of Montgomery Apartments. In exchange for 4 months' rent ($500/month), Jerry provided the following items and services for Paul, the owner of the apartments: Paint and miscellaneous supplies for the apartments $ 300 Labor for painting and miscellaneous repairs 700 Labor and supplies for paving the apartment parking area 1,000 How should Paul treat this transaction on his Schedule E? Rental income of $2,000 and rental expenses of $2,000. Rental income of $2,000, rental expenses of $1,000, and depreciation computed on the capital expenditures of $1,000. No rental income or rental expenses are to be reflected on the Schedule E because the net effect is zero. Rental income of $2,000 and depreciation computed on the capital expenditures of $2,000.
Rental income of $2,000, rental expenses of $1,000, and depreciation computed on the capital expenditures of $1,000.
Scholarships and fellowships awarded to degree candidates are not taxable unless they are used for Tuition. Room and board. Books. Supplies required for the course of study.
Room and board.
Shifty borrowed $10,000 from Easy. When Easy tried to collect the debt, she discovered that Shifty had moved to another state. Easy tracked Shifty down and demanded payment. Knowing it would cost Easy a substantial amount of time and money to collect the debt, Shifty offered to pay $5,000 on the condition that Easy cancel the remainder of the debt. Easy agreed to accept the $5,000 and cancel the remaining $5,000 of the debt. Which of the following statements is correct? Shifty has $5,000 of income when Easy cancels the debt. Shifty had $10,000 of income upon obtaining the loan. Easy has $5,000 of income upon collection of half of the debt. Neither Shifty nor Easy has any income from this transaction.
Shifty has $5,000 of income when Easy cancels the debt.
In Year 1, Stewart Corp. properly accrued $5,000 for an income item on the basis of a reasonable estimate. In Year 2, after filing its Year 1 federal income tax return, Stewart determined that the exact amount was $6,000. Which of the following statements is true? Stewart is required to file an amended return to report the additional $1,000 of income. Stewart is required to notify the IRS within 30 days of the determination of the exact amount of the item. No further inclusion of income is required, as the difference is less than 25% of the original amount reported and the estimate had been made in good faith. The $1,000 difference is includible in Stewart's Year 2 income tax return.
The $1,000 difference is includible in Stewart's Year 2 income tax return.
Rachel Robinson, age 52, receives a $500 per month annuity from her pension plan. The annuity started January 1, 2017. Her contributions to the plan totaled $39,600. The number of anticipated monthly payments is 360. What is Rachel's nontaxable part of the annuity payment? One-half of each payment. The full amount received until the original cost of the annuity has been recovered. The investment in the contract divided by the number of anticipated monthly payments. Any amount received once the original cost of the annuity has been recovered.
The investment in the contract divided by the number of anticipated monthly payments.
Darr, an employee of Source C corporation, is not a shareholder. Which of the following should be included in Darr's gross income? The fair market value of land that the taxpayer inherited from an uncle. Employer-provided medical insurance coverage under a health plan. The dividend income on shares of stock that the taxpayer received for services rendered. A $15,000 gift from the taxpayer's grandparents.
The dividend income on shares of stock that the taxpayer received for services rendered.
