Question;1. Tim;earns a salary of $40,000. This year, Tim's employer establishes a cafeteria;plan under which Tim signed a salary reduction of $2,500 for which $1,500 is to;cover his health insurance premiums and $1,000 is available to reimburse;medical expenses. During the year, he is reimbursed $900 for medical expenses.;What is the total taxable to Tim this year?;A) $37,500 B);$38,400 C) $40,000 D) $37,600;2. For;2013, the maximum foreign-earned income exclusion is;A) $97,600. B);$95,100. C) $92,900. D) $91,500.;3. The;discharge of certain student loans is excluded from income if all of the;following are present except for;A) the loan proceeds must have been used to pay the cost of;attending an education institution or used to refinance outstanding student;loans.;B) the loan forgiveness must be contingent upon the;individual's working for a specified period of time in certain professions.;C) the loan must have been made by governmental;educational, or charitable organizations.;D) the loan forgiveness is based on age.;4. Arthur;pays tax of $5,000 on taxable income of $50,000 while taxpayer Barbara pays tax;of $12,000 on $120,000. The tax is a;A) proportional tax. B);progressive tax.;C) regressive tax. D);None of the above.;5. Which;of the following taxes is progressive?;A) sales tax B);income tax C) property tax D) excise tax;6. Steve;Greene is divorced, age 66, has good eyesight, and lives alone. He claims his;son Dylan, who is blind, as his dependent. In 2013 Steve had income and;expenses as follows;Gross income from salary $80,000;Total itemized deductions 5,500;A) $63,100. B);$64,600.;C) $60,700. D);$59,200.;7. In;September of 2013, Michelle sold shares of qualified small business stock for;$1,000,000 that had a basis of $200,000. She had held the stock for 7 months.;Forty-five;days after the sale she purchased other qualified small business stock for;$1,100,000. How much of the gain will she recognize?;A) $100,000 B);$900,000 C) $800,000 D) $ -0-;8. Jacob;who is single, paid educational expenses of $16,000 in the current year. He;redeemed Series EE bonds and received principal of $8,000 and interest of;$3,000. Jacob has other adjusted gross income of $78,700. The $3,000 exclusion must be reduced by;A) $3,000. B);$0. C) $1,600. D) $1,400.;9. Which;of the following advance payments cannot qualify for income tax deferral?;A) advance collection of rent with associated services;B) advance collection of rent without associated services;C) advance collection for merchandise;D) advance collection for services;10. Thomas;and Sally were divorced last year. As a result, Thomas must pay Sally alimony;of $100,000 per year starting this year and relinquish the house and car with a;combined value of $170,000 and a combined cost basis of $155,000. The house and;car are given as a property settlement. As a result of these transactions;Thomas has a deduction of;A) $170,000. B);$100,000. C) $155,000. D) $270,000.;11. While;using a metal detector at the beach during spring break, Toni uncovered some;rare coins with a current fair market value of $9,000. What are her tax;consequences regarding this find?;A) Since she "found" the coins, she does not have;to report any amount of income until she sells the coins.;B) Under the discovery rules in the tax law, she will never;report any amount as taxable since the value is under $10,000.;C) Because it was a "find" she only reports half;of the FMV as income.;D) She reports the entire FMV as income.;12. Annisa;who is 28 and single, has adjusted gross income of $55,000 and itemized;deductions of $5,000. In 2013, Annisa will have taxable income of;A) $51,100. B);$45,000. C) $48,900. D) $42,150.;13. Which;of the following types of itemized deductions are included in the category of;miscellaneous expenses that are deductible only if the aggregate amount of such;expenses exceeds 2% of the taxpayer's adjusted gross income?;A) medical expenses;B) charitable contributions;C) home mortgage interest expense;D) unreimbursed employee business expenses;14. All;of the following items are deductions for adjusted gross income except;A) rent and royalty expenses. B) trade or business expenses.;C) alimony paid. D);state and local income taxes.;15. Charlie;is claimed as a dependent on his parents' tax return in 2013. He received;$8,000 during the year from a part-time acting job, which was his only income. What is his;standard deduction?;A) $8,350 B);$6,100 C) $8,000 D) $1,000;16. Helen;who is single, is considering purchasing a residence that will provide a;$28,000 tax deduction for property taxes and mortgage interest. If her marginal;tax rate is 25% and her effective tax rate is 20%, what is the amount of;Helen's tax savings from purchasing the residence?;A) $21,000 B);$5,600 C) $7,000 D) $22,400;17. Ben;age 67, and Karla, age 58, have two children who live with them and for whom;they provide total support. Their daughter is 21 years old, blind, is not a;full-time;student and has no income. Her twin brother is 21 years old, has good sight, is;a full-time;student and has income of $4,500. Ben and Karla can claim how many personal and;dependency exemptions on their tax return?;A) 2 B) 3 C) 4 D);5;18. You;may choose married filing jointly as your filing status if you are married and;both you and your spouse agree to file a joint return. Which of the following;facts would prevent you from being considered married for filing purposes?;A) You were married for several years, but your divorce;became final in December.;B) Your spouse died during the year but the executor of the;estate has agreed to the filing of a joint return.;C) You are married but living apart until some problems can;be solved.;D) None of the above.;19. Sarah;contributes $25,000 to a church. Sarah's marginal tax rate is 35% while her;average tax rate is 25%. After considering her tax savings, Sarah's contribution;costs;A) $6,250. B);$18,750. C) $16,250. D) $8,750.;20. Paul;makes the following property transfers in the current year;?;$22,000 cash to his wife;?;$34,000 cash to a qualified charity;?;$220,000 house to his son;?;$3,000 computer to an unrelated friend;The total of Paul's taxable gifts, assuming he does not;elect gift splitting with his spouse, subject to the unified transfer tax is;A) $214,000. B);$206,000. C) $234,000. D) $279,000.;21. Which;of the following is not a social objective of the tax law?;A) an exclusion for interest earned by large businesses;B) a deduction for charitable contributions;C) creation of tax-favored pension plans;D) prohibition of a deduction for illegal bribes, fines and;penalties;22. Healthwise;Ambulance requires its employees to be on 24-hour call and consequently gives them;$800 per month housing allowance and a $200 per month food allowance. Ron, an;employee of Healthwise, receives a salary of $40,000 per year (this does not;include the allowances). Ron will be taxed each year on;A) $49,600. B);$40,000. C) $52,000. D) $42,400.;23. Which;of the following is not excluded from income? (Assume that any amounts;received by the taxpayer were kept.;A) gifts and inheritances.;B) fair market value of prize won on a game show.;C) life insurance proceeds paid by reason of death.;D) public assistance payments.;24. Which;of the following statements regarding the qualified tuition plans (QTP) is incorrect?;A) Distributions can be made tax-free to pay for room and board at;college.;B) Distributions made from the QTP for college tuition will;be tax-free;in addition to qualifying for the American Opportunity credit or lifetime;learning credit.;C) Distributions of income not used for qualified higher;education expenses are taxable and subject to a 10% penalty.;D) Katie's parents had established a QTP for Katie, but she;has received a "full-ride" scholarship.;Katie's parents can name her sister as a replacement beneficiary of the;QTP.;25. Ms.;Marple's books and records for 2013 reflect the following information;Salary earned this year;$65,000;Interest on savings account (credited to her account;in 2013, withdrawn in 2014);1,000;Interest on county bonds earned and collected in 2013;2,000;What is the amount Ms. Marple should include in her gross;income in 2013?;A) $68,000 B);$67,000 C) $65,000 D) $66,000;26. During;2013, Christiana's employer withheld $1,500 from her wages for state income;taxes. She claimed the $1,500 as an itemized deduction on her 2013 federal;income tax return which included $8,000 of itemized deductions. Christiana is;single. On her 2013 state income tax return, her state income tax was $900. As;a result, Christiana received a $600 refund in 2014. What amount must Christiana;include in income in 2014?;A) $0 B) $1,500 C) $900D) $600;27. During;2013, Mark's employer withheld $2,000 from his wages for state income tax. Mark;claimed the $2,000 as an itemized deduction on his 2013 federal income tax;return. His total itemized deductions for 2013 were $6,000. Mark's taxable;income for 2013 was a negative $20,000 due to substantial business losses. Mark;received the $2,000 as a refund from the state during 2014. What amount must;Mark include in income in 2014?;A) $0 B) $1,000 C) $6,000 D) $2,000;28. During;2013, Robert and Cassie had $2,600 withheld from their pay for state income;taxes. They file a joint return for 2013 and claimed the $2,600 taxes withheld;as an itemized deduction on their federal tax return. Their itemized deductions;totaled $12,800 on their 2013 tax return. Their 2013 state income tax was only;$1,000 and they received a refund of $1,600 when they filed their state income;tax return in 2014. As a result, Robert;and Cassie must;A) reduce their deduction for state income taxes for 2014;by $1,600.;B) amend 2013's federal tax return.;C) report income of $1,600 in 2014.;D) report income of $600 in 2014.;29. Michelle;purchased her home for $150,000, and subsequently added a garage costing;$25,000 and a new porch costing $5,000. Repairs to the home's plumbing cost;$1,000. The adjusted basis in the home is;A) $181,000. B);$180,000. C) $150,000. D) $151,000.;30. Allison;buys equipment and pays cash of $50,000, signs a note of $10,000 and assumes a;liability on the property for $3,000. Also, Allison pays an installation cost;of $500 and a delivery cost of $800. Allison's basis in the asset is;A) $63,500. B);$64,300. C) $63,000. D) $60,000.;31. Edward;purchased stock last year as follows;Month;Shares;Total Cost;March;100;$ 270;July;200;600;October;600;$1,200;In April of this year, Edward sells 80 shares for $250.;Edward cannot specifically identify the stock sold. The basis for the 80 shares;sold is;A) $160. B);$240.C) $216. D) $184.;32. How;long must a capital asset be held to qualify for long-term treatment?;A) one year B);6 months;C) one year and one dayD);same trade date one year from purchase;33. On;July 25, 2012, Marilyn gives stock with a FMV of $7,500 and a basis of $5,000;to her nephew Darryl. Marilyn had purchased the stock on March 18, 2012. Darryl;sold the stock on April 18, 2013 for $7,800. As a result of the sale, what will;Darryl report on his 2013 tax return?;A) $2,800 STCGB);$2,800 LTCG C) $300 LTCG D) $300 STCG;34. On;July 25, 2012, Karen gives stock with a FMV of $7,500 and a basis of $8,000 to;her nephew Bill. Karen had purchased the stock on March 18, 2012. Bill sold the stock on April 18, 2013 for;$6,000. As a result of the sale, what must Bill report on his 2013 tax return?;A) ($1,500) LTCL B);($1,500) STCL C) ($2,000);LTCL D) ($2,000) STCL;35. Rita;died on January 1, 2013 owning an asset with a FMV of $730,000 that she;purchased in 2007 for $600,000. Bert inherited the asset from Rita. When Bert;sells the asset for $800,000 on August 20 of this year, he must recognize a;A) LTCG of $200,000. B);LTCG of $70,000.;C) STCG of $70,000. D);STCG of $200,000.;36. Amanda;who lost her modeling job, sued her employer for age discrimination. She was;awarded $75,000 in lost wages, $25,000 for emotional distress, and $150,000;punitive damages. The amount taxable is;A) $225,000. B);$150,000. C) $-0-. D) $250,000.;37. Hope;receives an $18,500 scholarship from State University. The university specifies;that $8,500 is for tuition, books, supplies, and equipment, while $10,000 is;for room and board. In addition, Hope works part-time at the campus library and earns;$5,000. Hope's gross income is;A) $23,500. B);$15,000. C) $5,000. D) $18,500.;38. Miranda;is not a key employee of AB Corporation. AB provides Miranda with group term;life insurance coverage of $140,000. The premiums attributable to the excess;coverage are $1,300. The uniform one-month group-term premium is one dollar per $1,000 of;coverage. How much must Miranda include in income?;A) $1,300 B);$1,080 C) $0 D) $1,680;39. Which;of the following item(s) must be included in the income of the respective;employees?;A) ABC Hospital Corporation provides free meals in the;hospital cafeteria to employees while on duty in order that they be available;for emergency calls.;B) More than one, but not all, of the amounts must be;included in income.;C) IBX Corporation requires its employees to work overtime;three evenings each year when the company takes inventory. The corporation pays;to provide catered dinners on its premises on these evenings.;D) The state of California highway patrol organization;provides its officers with a daily meal allowance to compensate them for meals;eaten at any location while they are on duty.;TRUE/FALSE. Bubble ?A? for True and ?B? for False on the;Scantron;40. Except;as otherwise provided, gross income means all income from whatever source;derived.;41. For;federal income tax purposes, income is allocated between a husband and wife;depending on the state of residence.;42. Ellen;a CPA, prepares a tax return for Frank, a farmer, in exchange for twenty;bushels of rice. Since no cash changed hands, neither taxpayer reports income.;43. Distributions;in excess of a corporation's current and accumulated earnings and profits are;treated as a nontaxable recovery of capital unless they exceed the basis of the;stock.;44. Corporate;taxpayers may offset capital losses only against capital gains and may carry;excess losses back three years and then forward five years.;45. The;wherewithal-to-pay concept;provides that a tax should be collected when the taxpayer has the financial;resources to pay the tax.
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