FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 5: Gross Income: Exclusions

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 61

Multiple Choice

Review LaterAdd Note

Review Later

The taxpayer's marginal tax bracket is 25%.Which would the taxpayer prefer?

A) $1.00 taxable income rather than $1.00 tax-exempt income.
B) $.80 tax-exempt income rather than $1.00 taxable income.
C) $1.25 taxable income rather than $1.00 tax-exempt income.
D) $1.30 taxable income rather than $1.00 tax-exempt income.
E) None of the above.

F) A) and B)
G) A) and C)

Correct Answer

verified

Show Answer

Question 62

Multiple Choice

Review LaterAdd Note

Review Later

Heather's interest and gains on investments for 2012 were as follows: Heather's gross income from the above is:

A) $2,000.
B) $1,800.
C) $1,400.
D) $1,300.
E) None of the above.

F) A) and C)
G) None of the above

Correct Answer

verified

Show Answer

Question 63

Essay

Review LaterAdd Note

Bob had a terminal illness and realized that he "can't take it with him." Therefore, he cashed in his insurance policy and received $120,000. He had paid $50,000 in premiums on the policy. He used the money to fulfill his lifelong ambitions of going to the Super Bowl, driving an expensive sports car, and vacationing in Bermuda. Was Bob's behavior consistent with the Congressional intent in providing the tax exemption he was permitted to use?

Doug and Pattie received the following interest income in the current year: Greenbacks Bank also gave Doug and Pattie a cellular phone (worth $100) for opening the savings account.What amount of interest income should they report on their joint income tax return?

A cash basis taxpayer took an itemized deduction of $5,500 for state income tax paid in 2012. His total itemized deductions in 2012 were $18,000. In 2013, he received a $900 refund of his 2012 state income tax.The taxpayer must include the $900 refund in his 2013 Federal gross income in accordance with the tax benefit rule.

Section 119 excludes the value of meals from the employee's gross income:

The Royal Motor Company manufactures automobiles.Employees of the company can buy a new automobile for Royal's cost plus 2%.The automobiles are sold to dealers at cost plus 20%.Generally, employees of Local Dealer, Inc., are allowed to buy a new automobile from the company at the dealer's cost.Officers of Local Dealer are allowed to use a company vehicle (for personal use) at no cost.

In December 2012, Todd, a cash basis taxpayer, paid $1,200 of fire insurance premiums for the calendar year 2013 on a building he held for rental income. Todd deducted the $1,200 of insurance premiums on his 2012 tax return.He had $150,000 of taxable income that year. On June 30, 2013, he sold the building and, as a result, received a $500 refund on his fire insurance premiums.As a result of the above:

Stuart owns 300 shares of Turquoise Corporation stock and 2,000 shares of Blue Corporation stock.During the year, Stuart received 150 shares of Turquoise as a result of a 1 for 2 stock split.The value of the shares received was $4,800.Stuart also received 100 shares of Blue Corporation stock as a result of a 5% stock dividend.Stuart did not have the option of receiving cash from Blue.The additional shares he received had a value of $7,200.Stuart's gross income from the receipt of the additional Turquoise and Blue shares is:

The exclusion for health insurance premiums paid by the employer applies to:

Heather is a full-time employee of the Drake Company and participates in the company's flexible spending plan that is available to all employees.Which of the following is correct?

When Betty was diagnosed as having a terminal illness, she sold her life insurance policy to Insurance Purchase, Inc., a company that is licensed to invest in these types of contracts.Betty sold the policy for $32,000 and Insurance Purchase, Inc., became the beneficiary.She had paid total premiums of $19,000.Betty died 8 months after the sale.Insurance Purchase, Inc., collected $50,000 on the policy.The company had paid additional premiums of $4,000 on the policy.Betty is not required to recognize a $13,000 gain from the sale of her life insurance policy and Insurance Purchase, Inc., is required to recognize a $14,000 gain from the insurance policy.

If a scholarship does not satisfy the requirements for a gift, the scholarship must be included in gross income.

In the case of interest income from state and Federal bonds:

Ben was hospitalized for back problems.While he was away from the job, he collected his regular salary from an employer-sponsored income protection insurance policy.Ben's employer-sponsored hospitalization insurance policy also paid for 90% of his medical expenses.Ben also collected on an income protection policy that he purchased.Which of the above sources of income are taxable? Explain the basis for excluding any item or items.

Gold Company was experiencing financial difficulties, but was not bankrupt or insolvent.The National Bank, which held a mortgage on other real estate owned by Gold, reduced the principal from $110,000 to $85,000. The bank had made the loan to Gold when it purchased the real estate from Silver, Inc.Pink, Inc., the holder of a mortgage on Gold's building, agreed to accept $40,000 in full payment of the $55,000 due.Pink had sold the building to Gold for $150,000 that was to be paid in installments over 8 years.As a result of the above, Gold must: