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Taxation questions




Question;Your quiz has been submitted successfully.;Ch. 5 TF;Question 1 1;/ 1 point;Amber Machinery Company purchased a building from Ted for;$250,000 cash and a mortgage of $750,000. One year after the transaction, the;mortgage had been reduced to $725,000 by principal payments by Amber, but it;was apparent that Amber would not be able to continue to make the monthly;payments on the mortgage. Ted reduced the amount owed by Amber to $600,000.;This reduced the monthly payments to a level that Amber could pay. Amber must;recognize $125,000 income from the reduction in the debt by Ted.;True;False;View Feedback;Question 2 1;/ 1 point;If a scholarship does not satisfy the requirements for a;gift, the scholarship must be included in gross income.;True;False;View Feedback;Question 3 0;/ 1 point;A U.S. citizen who works in France from February 1, 2013;until January 31, 2014 is eligible for the foreign earned income exclusion in;2013 and 2014.;True;False;View Feedback;Question 4 1;/ 1 point;Roger is in the 35% marginal tax bracket. Roger?s employer has created a flexible;spending account for medical and dental expenses that are not covered by the;company?s health insurance plan. Roger had his salary reduced by $1,200 during;the year for contributions to the flexible spending plan. However, Roger;incurred only $1,100 in actual expenses for which he was reimbursed. Under the;plan, he must forfeit the $100 unused amount. His after-tax cost of overfunding;the plan is $65.;True;False;View Feedback;Question 5 0;/ 1 point;Gary cashed in an insurance policy on his life. He needed the funds to pay for his terminally;ill wife?s medical expenses. He had paid $12,000 in premiums and he collected;$30,000 from the insurance company. Gary is not required to include the gain of;$18,000 ($30,000 ? $12,000) in gross income.;True;False;View Feedback;Ch. 5 MC;Question 6 0;/ 1 point;Barney is a full-time graduate student at State University.;He serves as a teaching assistant for which he is paid $700 per month for 9;months and his $5,000 tuition is waived. The university waives tuition for all;of its employees. In addition, he;receives a $1,500 research grant to pursue his own research and studies.;Barney?s gross income from the above is;$0.;$6,300.;$11,300.;$12,800.;None of the above.;View Feedback;Question 7 1;/ 1 point;Under the Swan Company?s cafeteria plan, all full-time;employees are allowed to select any combination of the benefits below, but the;total received by the employee cannot exceed $8,000 a year.;I. Group;medical and hospitalization insurance for the employee, $3,600 a year.;II. Group;medical and hospitalization insurance for the employee?s spouse and children;$1,200 a year.;III. Child-care;payments, actual cost but not more than $4,800 a year.;IV. Cash;required to bring the total of benefits and cash to $8,000.;Which of the following statements is true?;Sam, a full-time employee, selects choices II and III and;$2,000 cash. His gross income must include the $2,000.;Paul, a full-time employee, elects to receive $8,000 cash;because his wife?s employer provided these same insurance benefits for him.;Paul is required to include the $8,000 in gross income.;Sue, a full-time employee, elects to receive choices I, II;and $3,200 for III. Sue is required to include $3,200 in gross income.;All of the above.;None of the above.;Question 8 1;/ 1 point;A scholarship recipient at State University may exclude from;gross income the scholarship proceeds used to pay for;Only tuition.;Tuition, books, and supplies.;Tuition, books, supplies, meals, and lodging.;Meals and lodging.;None of the above.;Question 9 1;/ 1 point;On January 1, 2003, Cardinal Corporation issued 5% 25-year;bonds at par and used the $12,000,000 proceeds to finance the construction of a;new plant. On January 1, 2013, the company acquired the bonds on the open;market for $11,500,000. Assuming that Cardinal Corporation is neither bankrupt;nor insolvent, the acquisition and retirement of the bonds results in which of;the following;The company must recognize a $500,000 gain.;The company can make an election to recognize a $500,000;gain or reduce the company?s basis in the plant by $500,000.;The company must recognize a $500,000 gain and increase the;company?s basis in the plant by $500,000.;The company can amortize the $500,000 gain, recognizing;income over the remaining life of the bonds.;None of the above.;Question 10 1;/ 1 point;In the case of interest income from state and Federal bonds;Interest on United States government bonds received by a;state resident can be subject to that state?s income tax.;Interest on United States government bonds is subject to;Federal income tax.;Interest on bonds issued by State A received by a resident;of State B cannot be subject to income tax in State B.;All of the above are correct.;None of the above are correct.;View Feedback;Attempt Score:7 / 10;Your quiz has been submitted successfully.;Ch. 5 TF;Question 1 1;/ 1 point;Employees of a CPA firm located in Virginia may exclude from;gross income the meals and lodging provided by the employer while they were on;an audit in Texas.;True;False;View Feedback;Question 2 1;/ 1 point;Mother participated in a qualified state tuition program for;the benefit of her son. She contributed $15,000. When the son entered college;the balance in the fund satisfied the tuition charge of $20,000. When the funds;were withdrawn to pay the college tuition for her son, neither Mother nor son;must include $5,000 ($20,000 ? $15,000) in gross income.;True;False;View Feedback;Question 3 1;/ 1 point;Workers? compensation benefits are included in gross income;if the employer also pays the employee while the employee is recovering from his;or her injury.;True;False;View Feedback;Question 4 1;/ 1 point;Mauve Company permits employees to occasionally use the;copying machine for personal purposes. The copying machine is located in the;office where the higher paid executives work, so they occasionally use the;machine. However, the machine is not convenient for use by the lower paid;warehouse employees and, thus, they never use the copier. The use of the copy;machine may not be excluded from gross income because the benefit is discriminatory.;True;False;View Feedback;Question 5 1;/ 1 point;Mel was the beneficiary of a $45,000 group term life;insurance policy on his wife. His wife?s;employer paid all of the premiums on the policy. Mel used the life insurance;proceeds to purchase a United States Government bond, which paid him $2,500;interest during the current year. Mel?s;Federal gross income from the above is $2,500.;True;False;View Feedback;Ch. 5 MC;Question 6 1;/ 1 point;Hazel, a solvent individual but a recovering alcoholic;embezzled $6,000 from her employer. In the same year that she embezzled the;funds, her employer discovered the theft. Her employer did not fire her and;told her she did not have to repay the $6,000 if she would attend Alcoholics;Anonymous. Hazel met the conditions and her employer canceled the debt.;Hazel did not realize any income because her employer made a;gift to her.;Hazel must include $6,000 in gross income from discharge of;indebtedness.;Hazel must include $6,000 in gross income under the tax;benefit rule.;Hazel may exclude the $6,000 from gross income because the;debt never existed.;None of the above.;View Feedback;Question 7 1;/ 1 point;The employees of Mauve Accounting Services are permitted to;use the copy machine for personal purposes, provided the privilege is not;abused. Ed is the president of a civic;organization and uses the copier to make several copies of the organization?s;agenda for its meetings. The copies made;during the year would have cost $150 at a local office supply.;Ed must include $150 in his gross income.;Ed may exclude the cost of the copies as a no-additional;cost fringe benefit.;Ed may exclude the cost of the copies only if the;organization is a client of Mauve.;Ed may exclude the cost of the copies as a de minimis fringe;benefit.;None of the above.;View Feedback;Question 8 1;/ 1 point;Peggy is an executive for the Tan Furniture Manufacturing;Company. Peggy purchased furniture from the company for $9,500, the price Tan;ordinarily would charge a wholesaler for the same items. The retail price of;the furniture was $12,500, and Tan?s cost was $9,000. The company also paid for;Peggy?s parking space in a garage near the office. The parking fee was $600 for;the year. All employees are allowed to buy furniture at a discounted price;comparable to that charged to Peggy. However, the company does not pay other;employees? parking fees. Peggy?s gross income from the above is;$0.;$600.;$3,500.;$4,100.;None of the above.;View Feedback;Question 9 1;/ 1 point;Matilda works for a company with 1,000 employees. The;company has a hospitalization insurance plan that covers all employees.;However, the employee must pay the first $3,000 of his or her medical expenses;each year. Each year, the employer contributes $1,500 to each employee?s health;savings account (HSA). Matilda?s employer made the contributions in 2012 and;2013, and the account earned $100 interest in 2013. At the end of 2013, Matilda;withdrew $3,100 from the account to pay the deductible portion of her medical;expenses for the year and other medical expenses not covered by the;hospitalization insurance policy. As a result, Matilda must include in her 2013;gross income;$0.;$100.;$1,600.;$3,100.;None of the above.;View Feedback;Question 10 1;/ 1 point;Adam repairs power lines for the Egret Utilities Company. He;is generally working on a power line during the lunch hour. He must eat when;and where he can and still get his work done. He usually purchases something at;a convenience store and eats in his truck. Egret reimburses Adam for the cost;of his meals.;Adam must include the reimbursement in his gross income.;Adam can exclude the reimbursement from his gross income;since the meals are provided for the convenience of the employer.;Adam can exclude the reimbursement from his gross income;because he eats the meals on the employer?s business premises (the truck).;Adam may exclude from his gross income the difference;between what he paid for the meals and what it would have cost him to eat at home.;None of the above.


Paper#40202 | Written in 18-Jul-2015

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