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tax-Chapter 05 Gross Income and Exclusions

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Question;True / False Questions;1. Gross;income includes all income realized during the year.;True False;2. Excluded;income will never be subject to the federal income tax.;True False;3. The;all-inclusive definition of income means that gross income is defined very;broadly.;True False;4. A;taxpayer who borrows money will include that amount borrowed in their gross;income under the all-inclusive definition of income.;True False;5. Income is;included in gross income unless a tax provision specifies that it can be;deferred or excluded.;True False;6. The;principle of realization for tax purposes is very different from realization as;it is understood for financial reporting purposes.;True False;7. Wherewithal;to pay represents the principle that a realized transaction should require a;taxpayer to sell other assets in order to pay income taxes.;True False;8. Barter;clubs are an effective means of avoiding realization for tax purposes.;True False;9. The cash;method of accounting requires taxpayers to recognize income only when that;income is received as cash.;True False;10. When a;carpenter provides $100 of services in exchange for $100 of groceries, the;carpenter has realized $100 of income.;True False;11. Recognized;income may be in the form of cash or property received (but not services;received).;True False;12. When a;taxpayer sells an asset, the entire proceeds from the sale must be included in;gross income regardless of the cost of the asset.;True False;13. Jake sold;his car for $2,400 in cash this year. He will realize a taxable gain of $1,000;if he purchased the car for $1,400.;True False;14. When an;asset is sold, the taxpayer calculates the gain or loss by subtracting the tax;basis of the asset from the proceeds of the sale.;True False;15. The tax;benefit rule applies when a taxpayer refunds amounts that were previously;included in income.;True False;16. Jim;received a $500 refund of state income taxes this year. Jim will not need to;include the $500 in his gross income this year because he did not deduct state;income taxes last year.;True False;17. Constructive;receipt represents the principle that cash basis taxpayers should be taxed on;income when it is made available to them without substantial restrictions.;True False;18. Claim of;right states that income has been realized if a taxpayer receives income and;there are substantial restrictions on the taxpayer's use of the income.;True False;19. Community;property laws dictate that income earned by one spouse is treated as though it;was earned equally by both spouses.;True False;20. Interest;income is earned in the year in which it is received by the taxpayer or;credited to the bank account.;True False;21. The;assignment of income doctrine requires that to shift income from property to;another person, the taxpayer must transfer only the income to the other person.;True False;22. For tax;purposes, unearned income means income that has not yet been realized.;True False;23. A portion;of each payment from a purchased annuity represents income.;True False;24. The;exclusion ratio for a purchased annuity is the cost of the annuity divided by;the interest rate.;True False;25. Rental;income generated by a partnership is reported by partners as dividend income.;True False;26. The tax;law defines alimony to include transfers of property (but not cash) between;former spouses.;True False;27. The tax;law includes a complex set of restrictions called the anti-frontloading rules;to make it difficult for taxpayers to disguise property payments as alimony;payments.;True False;28. Prizes and;awards are generally taxable.;True False;29. Gambling;winnings are included in gross income only to the extent that the winnings;exceed gambling losses incurred during the same period.;True False;30. Generally;85 percent of Social Security benefits are included in income of high income taxpayers.;True False;31. Unemployment;benefits are excluded from gross income.;True False;32. A taxpayer;generally includes in gross income the amount of debt forgiven by a lender.;True False;33. An;employee may exclude up to a 40 percent employer-provided discount on services.;True False;34. A;below-market loan (e.g., from an employer to an employee) is a common example;of a transaction that generates taxable imputed income.;True False;35. Interest;earned on a Federal Treasury bond is excluded from gross income (for federal;tax purposes).;True False;36. Interest;earned on a city of Denver bond is excluded from gross income (for federal tax;purposes).;True False;37. Taxpayers;meeting certain home ownership and use requirements can permanently exclude up;to $1,000,000 of realized gain on the sale of their principal residence.;True False;38. Qualified;fringe benefits received by an employee can be excluded from gross income.;True False;39. Scholarships;are excluded from gross income for degree candidates even if the scholarship;pays for required fees and books in addition to tuition.;True False;40. Earnings;from 529 plans and Coverdell education savings accounts are excluded from gross;income as long as they use the earnings to pay for qualifying educational;expenditures.;True False;41. Trevor;received a gift of $25,000 in cash from his rich uncle. Trevor must include;$15,000 of this gift in his gross income this year.;True False;42. Anna;received $15,000 from life insurance paid upon the death of her grandmother.;Anna can exclude the entire amount of the life insurance from her gross income.;True False;43. U.S.;citizens generally are subject to tax on all income whether it is generated in;the United States or in foreign countries.;True False;44. To provide;relief from double taxation, Congress allows a foreign-unearned income;exclusion for interest and dividends earned in foreign countries.;True False;45. Worker's;compensation benefits are excluded from gross income.;True False;46. Fred must;include in gross income a $7,500 payment received from his neighbor to;compensate Fred for the emotional distress he suffered when his neighbor;accidentally ran over his dog.;True False;47. Loretta;received $6,200 from disability insurance that she purchased directly this;year. Loretta must include all $6,200 in her gross income.;True False;48. Brad was;disabled for part of the year and he received $11,500 of benefits from a;disability plan purchased by Brad's employer. Brad must include all $11,500 of;benefits in his gross income because Brad was not taxed on the disability;insurance premiums paid by his employer.;True False;Multiple Choice Questions;49. 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;these.;50. Which of;the following is not a necessary condition for income to be included in gross;income?;A. income;must be realized;B. income;must be paid in cash;C. income;cannot be excluded by law;D. income;must be made available to a taxpayer on the cash basis;E. All of;these;51. 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.;E. All of;these are true.;52. 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;these - Barney is not entitled to a loss deduction.;53. 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. 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;these is true.;54. 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;these;55. Identify;the rule dictating that on a sale of an asset a taxpayer need only include the;incremental gain in gross income rather than the entire proceeds from the sale;A. Tax;benefit rule;B. Constructive;receipt;C. Return of;capital principle;D. Wherewithal;to pay;E. None of;these;56. 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;these;57. 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. All of;these are true;58. 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-separate from Jill?;A. $72,000;if they reside in a common law state.;B. $76,000;if they reside in a community property law state.;C. $84,000;if they reside in a common law state.;D. $78,000;if they reside in a community property law state.;E. All of;these;59. Identify;which of the items below help determine which taxpayer must recognize earned;income;A. Residence;in a community property law state;B. Assignment;of income;C. Residence;in a common law state;D. Both;residence in a community property law state and assignment of income above;E. All of;these;60. 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;61. Emily is a;cash basis taxpayer, and she was an especially productive salesperson last;year. In December of last year her supervisor told Emily she had earned a;$5,000 bonus. However, Emily received the bonus check after year end. Identify;the principle that will determine when Emily is taxed on the bonus;A. Assignment;of income;B. Constructive;receipt;C. Return of;capital principle;D. Wherewithal;to pay;E. All of;these;62. Ophra is a;cash basis taxpayer who is employed in the publishing industry. This year her;employer informed her that because of her outstanding performance she is;entitled to a free world cruise. Ophra asked her employer to issue the cruise;tickets to her parents, and he complied with this request. Identify the;principle that will determine whether Ophra or her parents are taxed on the;value of the cruise tickets;A. Assignment;of income;B. Constructive;receipt;C. Return of;capital principle;D. Wherewithal;to pay;E. All of;these;63. This year;Henry realized a gain on the sale of an antique car that he inherited from his;uncle. The buyer has promised to pay Henry in installment payments over the;next few years. Identify the principle that will determine when Henry should be;taxed on the gain from the sale;A. Assignment;of income;B. Constructive;receipt;C. Return of;capital principle;D. Wherewithal;to pay;E. All of;these;64. This year;Mary received a $200 refund of state income taxes that she deducted on her tax;return last year. Mary included a total of $4,000 of state income taxes when;she itemized deductions last year. What amount of the refund, if any, should;Mary include in her gross income this year?;A. $200 is;included because Mary itemized her deductions last year.;B. $200 is;included if itemized deductions exceeded the standard deduction by $200.;C. $200 is;included because itemized deductions exceeded the standard deduction.;D. $200 is;included even if Mary claimed the standard deduction.;E. None of;these - refunds of state income taxes are not included in gross income.;65. Opal;deducted $2,400 of state income taxes on her tax return last year. This year;she received a state income tax refund of $170. What amount of the refund, if;any, should Opal include in her gross income if last year her total itemized;deductions exceeded the standard deduction by $350?;A. $2,050;B. $350;C. $180;D. $170;E. None of;these - refunds of state income taxes are not included in gross income.;66. Wilma has;a $25,000 certificate of deposit (CD) at the local bank. The interest on this;certificate, $1,000, was credited to her account this year but she must pay an;early withdrawal penalty if she cashes in the CD before next year. Which of the;following is a true statement?;A. Wilma;must include the $1,000 of interest in her income this year.;B. Wilma;must include the $1,000 of interest in her income when she cashes the CD.;C. Wilma;must include the $1,000 of interest in her income this year only if the bank;waives the early withdrawal penalty.;D. Wilma;must include the $1,000 of interest in her income next year if she does not pay;the early withdrawal penalty.;E. All of;these;67. Which of;the following is a true statement about the first payment received from a;purchased annuity?;A. The;payment is included in gross income.;B. A portion;of the payment is a return of capital.;C. The;payment can only be taxed in the year after the annuity was purchased.;D. The;payment is not taxed until the annuity payments cease altogether.;E. All of;these;68. Which of;the following is a description of how the annuity exclusion ratio is calculated;for an annuity paid over a fixed period?;A. The;expected return is divided by the number of payments.;B. The;original investment is divided by the prevailing interest rate.;C. The;original investment is divided by the number of payments.;D. The;expected return is divided by the prevailing interest rate.;E. None of;these;69. 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;these;70. 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;C. $12,000;D. $32,400;E. All of;these;71. Harold;receives a life annuity from his qualified pension that pays him $5,000 per;year for as long as he lives. Later this year Harold will recover the remainder;of his cost of the annuity. Which of the following correctly describes how the;annuity payments are taxed after Harold has recovered the cost of the annuity?;A. Harold;will continue to apply the annuity exclusion ratio to determine the amount of;each annuity payment includible in gross income.;B. Harold;will include the entire amount of each annuity payment in gross income after he;recovers the cost of the annuity.;C. The;entire amount of each annuity payment is excluded from gross income after;Harold recovers his cost of the annuity.;D. Harold;must request that the IRS calculate his exclusion ratio based upon a revised;life expectancy.;E. All of;these;72. To;calculate a gain or loss on the sale of an asset, the proceeds from the sale;are reduced by which of the following?;A. Tax basis;of the property;B. Selling;expenses;C. Amount;realized;D. Tax basis;of the property and Selling expenses;E. All of;these;73. Nate is a;partner in a partnership that received $5,000 of interest income this year.;Nate's share of the interest is $1,000, and he should report this income on his;individual return as;A. business;income;B. income;from a partnership;C. interest;income;D. dividend;income because the partnership intends to organize next year as a limited;liability company;E. All of;these;74. Which of;the following statements about alimony payments is true?;A. To;qualify as alimony, payments must be made in cash.;B. Alimony;payments are includible in the gross income of the recipient.;C. To;qualify as alimony, payments cannot continue after the death of the recipient.;D. To;qualify as alimony, payments must be made under a written agreement or divorce;decree that does not designate the payments as "nonalimony" or child;support.;E. All of;these;75. Barney and;Betty got divorced this year. In the divorce decree Betty agreed to transfer;100 shares of common stock worth $50,000 and pay Barney $24,000 per year for;five years (or until Barney's death or remarriage). What amount (if any) is;included in Barney's gross income this year?;A. $24,000;B. $50,000;C. $74,000;D. $170,000;E. None of;the payments are included in gross income;76. Charles;and Camilla are getting divorced. Under the terms of the decree Charles will;pay Camilla $50,000 in cash in each of the next five years (or until Camilla's;death or remarriage). In addition, Charles will transfer a castle worth;$2,000,000 to Camilla and pay $12,000 per year to support their son, Clyde;until he turns 19 years old. What amount (if any) is included in Camilla's;gross income this year?;A. $2,062,000;B. $12,000;C. $50,000;D. $2,050,000;E. None of;the payments are included in gross income;77. Hal Gore;won a $1 million prize for special contributions to environmental research.;This prize is awarded for public achievement, and Hal directed the awarding;organization to transfer $400,000 of the award to the Environmental Protection;Agency. How much of the prize should Hal include in his gross income?;A. $400,000;B. $600,000;C. $1;million;D. None of;these because all prizes are excludible;E. None of;these because prizes from charities are excludible;78. Ethan;competed in the annual Austin Marathon this year and won a $25,000 prize for;fastest wheelchair entrant. Ethan indicated that he would transfer the prize to;the local hospital. How much of the prize should Hal include in his gross;income?;A. $25,000;B. $25,000;because all prizes are taxable;C. Zero;because prizes transferred to charities are excludible;D. Zero;because all prizes are excludible;E. Zero;because prizes from charities are excludible;79. This year;Ed celebrated his 25th year as an employee of Designer Jeans Company. In;recognition of his long and loyal service, the company awarded Ed a gold watch;worth $250 and a $2,000 cash bonus. What amount must Ed include in his gross;income?;A. $2,250;B. $2,000;C. $250;D. Zero if Ed;offers to contribute his watch and bonus to a qualified charity;E. Zero -;all employee awards are excluded from gross income;80. Rhett made;his annual gambling trip to Uwin Casino. On this trip Rhett won $250 at the;slots and $1,200 at poker. Also this year, Rhett made several trips to the race;track, but he lost $700 on his various wagers. What amount must Rhett include;in his gross income?;A. $1,450;B. $1,200;C. $750;D. $250;E. Zero -;gambling winnings are not included in gross income;81. Bernie is;a former executive who is retired. This year Bernie received $250,000 in;pension payments and $10,000 of social security payments. What amount must;Bernie include in his gross income?;A. $250,000;B. $255,000;C. $258,500;D. $260,000;E. Zero;82. Bart, a;single taxpayer, has recently retired. This year, he received $24,000 in;pension payments and $5,000 of social security payments. What amount must Bart;include in his gross income for the social security payments?;A. $4,250;B. $2,500;C. $1,500;D. $750;E. Zero;83. Karl works;at Moe's grocery. This year Karl was paid $43,000 in salary but he was allowed;to purchase his groceries at 10% below Moe's cost. This year Karl spent $3,600;to purchase groceries costing Moe $4,000 and worth $6,000. What amount must;Karl include in his gross income?;A. $46,600;B. $47,000;C. $49,000;D. $43,400;E. $45,500;84. Joyce's;employer loaned her $50,000 this year (interest-free) to buy a new car. If the;federal interest rate was 3%, which of the following is correct?;A. Joyce;recognizes $1,500 of taxable interest income.;B. Joyce's;employer recognizes $1,500 of deductible interest expense.;C. Joyce;recognizes $1,500 of imputed compensation income.;D. Joyce;recognizes $1,500 of imputed dividend income.;E. None of;these.;85. Janine's;employer loaned her $5,000 this year (interest-free) to buy a used car. If the;federal interest rate was 4%, which of the following is correct?;A. Janine;recognizes $200 of taxable interest income.;B. Janine's;employer recognizes $200 of deductible interest expense.;C. Janine;recognizes $200 of imputed compensation income.;D. Janine;recognizes $200 of imputed dividend income.;E. None of;these.;86. Deb has;found it very difficult to repay her loans. Because of these difficulties, the;bank decided to forgive one of her most recent loans, an amount of $45,000.;After the loan was discharged, Deb had total assets of $232,000 and her;remaining loans total $217,000. What amount must Deb include in her gross income?;A. $15,000;B. $45,000;C. $30,000;D. $28,000;E. Zero -;Deb was not solvent when the loan was discharged;87. Mike;received the following interest payments this year. What amount must Mike;include in his gross income (for federal tax purposes)?;A. $2,650;B. $2,350;C. $2,050;D. $2,300;E. $3,500;88. This year;Fred and Wilma sold their home (sales price $750,000, cost $200,000). All;closing costs were paid by the buyer. Fred and Wilma owned and lived in their;home for 20 years. How much of the gain is included in gross income?;A. $550,000;B. $300,000;C. $250,000;D. $50,000;E. None;89. This year;Barney and Betty sold their home (sales price $750,000, cost $200,000). All;closing costs were paid by the buyer. Barney and Betty owned and lived in their;home for 18 months. How much of the gain is included in gross income?;A. $550,000;B. $300,000;C. $250,000;D. $50,000;E. None;90. Frank;received the following benefits from his employer this year. What amount must;Frank include in his gross income?;A. $54,450;B. $57,350;C. $56,250;D. $59,150;E. Zero -;these benefits are excluded in gross income;91. Ben's;employer offers employees the following benefits. What amount must Ben include;in his gross income?;A. $9,400;B. $11,070;C. $10,600;D. $7,000;E. Zero -;None of these benefits is included in gross income;92. Shaun is a;student who has received an academic scholarship to State University. The;scholarship paid $14,000 for tuition, $2,500 for fees, and $1,000 for books. In;addition, Shaun's dormitory fees of $8,500 were paid by the University when he;agreed to counsel freshman on campus living. What amount must Shaun include in;his gross income?;A. $9,500;B. $11,000;C. $2,500;D. $8,500;E. Zero -;None of these benefits is included in gross income;93. Graham has;accepted an offer to do graduate work in the chemistry department at State;University. The chemistry department offered Graham a $5,000 tuition reduction;and $3,500 toward the cost of room and meals. Under the terms of the;scholarship Graham must work in the chemistry labs during the summer as a;research assistant. What amount must Graham include in his gross income?;A. $8,500;B. $5,000;C. $3,500;D. $2,500;E. Zero -;None of these benefits is included in gross income;94. Sam, age;45, saved diligently for his college education by putting part of his pay into;U.S. Series EE saving bonds. Sam purchased the bonds for $6,500, and this year;he redeemed the bonds for $7,200. He has no other income this year. What amount;must Sam include in his gross income?;A. $7,200.;B. $6,500.;C. a maximum;of $350 if Sam uses the proceeds to pay for his college tuition and fees.;D. $700;unless Sam uses the proceeds to pay for his college tuition and fees.;E. Zero -;proceeds from cashing bonds sold at a discount is not realized income.;95. Brenda has;$15,000 in U.S. Series EE saving bonds and she is considering whether to cash;the bonds. Under what conditions can Brenda exclude the interest on the savings;bonds from her gross income?;A. Brenda;can exclude the interest if she uses the proceeds to pay for college tuition.;B. Brenda's;modified AGI must be below a phase-out range for the exclusion.;C. The;proceeds must be used for higher education expenses of Brenda, her spouse, or;Brenda's dependent.;D. All of;these are necessary conditions for Brenda to exclude the interest.;E. None of;these - the interest is always included in gross income;96. Dora made;a gift of stock to her granddaughter. At the time of the gift, the stock was;worth $15,000. Several months after the gift, a $500 dividend was declared on;the stock and paid to Dora's granddaughter. What amount must Dora's;granddaughter include in her gross income?;A. $2,000;B. $15,000;C. $15,500;D. $2,500;E. None of;these;97. Irene's;husband passed away this year. After his death, Irene received $250,000 of;proceeds from life insurance on her husband, and she inherited her husband's;stock portfolio worth $750,000. What amount must Irene include in her gross;income?;A. $1;million;B. $750,000;C. $500,000;D. Zero but;only if Irene does not opt to receive the life insurance proceeds in a lump sum;E. Zero -;None of these benefits is included in gross income;98. Helen is a;U.S. citizen and CPA, who moved to London, England three years ago to work for;a British company. This year, she spent the entire year in London and earned a;salary of $110,000. How much of her salary will she be allowed to exclude from;gross income in the U.S.?;A. $82,000;B. $99,200;C. $105,500;D. $108,000;E. All of;her salary is included in gross income;99. Hank is a;U.S. citizen and is doing a three to six year assignment as a sales executive;in Paris for a French company, which began this year. Hank earned $109,500;working for the French company this year but only lived in France for 340 days;(out of 365 days). What amount of Hank's $109,500 salary this year will he be;allowed to exclude from gross income in the U.S. (rounded to the nearest;one-hundred dollars)?;A. Hank can;exclude his entire salary because he worked more than 330 days overseas;B. 102,000;C. 92,400;D. 99,200;E. None of;his salary can be excluded from gross income because Hank must reside overseas;for the entire year;100. NeNe is an;accountant and U.S. citizen, who has accepted a permanent position in Madrid;Spain for a Spanish financial services company. This year, NeNe spent the;entire year working in Madrid. NeNe's employer paid $40,000 of her Madrid;housing expenses this year. What amount of the $40,000 housing payments may;NeNe exclude?;A. NeNe can;exclude all of the housing payment because she worked more than 330 days;overseas;B. 15,872;C. 24,128;D. 13,888;E. None of;her salary can be excluded from gross income.;101. Pam;recently was sickened by eating spoiled peanut butter. She successfully sued;the manufacturer for her medical bills ($3,700), her emotional distress ($6,000;- she now fears peanut butter), and punitive damages ($44,000). What amount;must Pam include in her gross income?;A. $44,000;B. $50,000;C. $47,700;D. $9,700;E. Zero -;None of these benefits is included in gross income;102. This year;Zach was injured in an auto accident. As a result he received the following;payments.;Zach received $18,000 of disability pay. Zach has disability;insurance provided by his employer as a nontaxable fringe benefit. Zach's;employer paid $4,300 in disability premiums for Zach this year.;Zach's hospital bills totaled $4,500 and were paid by his;health insurance. Zach has health insurance provided by his employer as a;nontaxable fringe benefit. Zach's employer paid $6,250 in health insurance;premiums for Zach this year.;What amount must Zach include in his gross income?;A. $22,500;B. $18,000;C. $4,500;D. $10,550;E. Zero -;None of these benefits is included in gross income;103. Samantha;was ill for four months this year. Samantha missed work during this period, but;disability insurance paid $18,000 of disability pay to replace her missed;salary. Samantha shares the cost of the insurance with her employer. This year;Samantha's employer paid $2,200 in disability premiums for Samantha as a;nontaxable fringe benefit and Samantha paid the remaining $1,100 of premiums;from her salary. What amount of the disability pay must Samantha include in her;gross income (rounded to the nearest whole dollar)?;A. $18,000;B. $12,000;C. $7,000;D. $1,100;E. Zero -;None of these disability pay is included in gross income;104. Acme;published a story about Paul and as a result Paul sued Acme for damage to his;reputation, emotional distress, and punitive damages. Paul won an award of;$20,000 for damages, $5,500 for emotional distress, and $50,000 for punitive;damages. What amount must Paul include in his gross income?;A. $5,500;B. $20,000;C. $50,000;D. $70,000;E. All of;these benefits are included in gross income;Essay Questions;105. This year;Ann has the following stock transactions. What amount is included in her gross;income if Ann paid a $200 selling commission for each sale?;106. Blake is a;limited partner in Kling-On Partners. This year Kling-On reported that Blake's;share of dividend income was $3,700 and his share of municipal interest was;$2,750. Early this year Blake found a bundle of $100 bills in the alley outside;his apartment. When no one claimed the money, the cash (a total of $2,400) was;returned to Blake. Finally, Blake earned salary of $42,000 but almost $6,500;was withheld for income taxes and FICA tax. Compute Blake's realized income and;gross income.;107. Henry works;part-time on auto repairs and restoration projects. This year Henry was paid;$5,400 for repairs he made to his neighbor's auto. Henry's neighbor promised to;pay Henry another $2,200 in cash next year. Henry's brother borrowed $4,100 in;cash in December of this year and gave him a negotiable promissory note for;$4,300 due in three months with interest. Henry sold the note in January for;$3,500. Finally, Henry restored a car for the football coach. The coach paid;him with a pass to next year's football games. The pass is worth $750. Compute;Henry's gross income assuming that he uses the cash basis of accounting.;108. Juan works;as a landscaper for local businesses on weekends, and he often provides;services in exchange for property. This year Juan provided lawn-mowing services;in exchange for $1,275 of car repair services, $3,570 of groceries, and a;certificate of deposit (C.D.) for $4,050. The C.D. matures next year with;interest. Finally, Juan received a gift card that can only be applied for $850;of clothing at a local mall. Juan has only applied the gift card to purchase;$100 of clothing. Compute Juan's gross income assuming that he uses the cash;basis of accounting.;109. This year;Kelsi received a $1,900 refund of state income taxes that she paid last year.;Last year Kelsi claimed itemized deductions of $7,200 including $2,800 of state;income taxes. How much of the refund, if any, must Kelsi include in gross;income if the standard deduction last year was $6,100?;110. In April of;this year Victoria received a $1,400 refund of state income taxes that she paid;last year. Last year Victoria claimed itemized deductions of $8,690. Victoria's;itemized deductions included state income taxes paid of $3,750. How much of the;refund, if any, must Victoria include in gross income if the standard deduction;last year was $6,100?;111. Aubrey and;Justin divorced on June 30 of this year. Through June 30 Aubrey earned $62,000;of salary, and Justin earned $45,000. For the year Aubrey reported a total;salary of $130,000, and Justin earned a total salary of $88,000. Aubrey and;Justin live in a community property state. How much income earned will Justin;report

 

Paper#38043 | Written in 18-Jul-2015

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