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Exam 5: Gross Income and Exclusions

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Question 91

Multiple Choice

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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 freshmen 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 are included in gross income.

F) A) and D)
G) A) and E)

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Question 92

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Retired taxpayers over 59½ years of age at the end of the year must receive minimum distributions from defined contribution plans or they are subject to a penalty.

A) True
B) False

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Question 93

Multiple Choice

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When selling stocks, which method of calculating basis provides the greatest opportunity for minimizing gains or increasing losses?

Qualified retirement plans include defined benefit plans but not defined contribution plans.

The tax law defines alimony to include transfers of property (but not cash)between former spouses.

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?

Aubrey and Justin file married filing separately.This year, Aubrey earned salary of $130,000, and Justin earned salary of $88,000.Aubrey and Justin live in a community property state.How much income earned will Justin report on his tax return for this year?

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?

Suzanne received 20 ISOs (each option gives her the right to purchase 20 shares of stock for $12 per share)at the time she started working, when the stock price was $13 per share.Three years later, when the share price was $23 per share, she exercised all of her options.If Suzanne holds the shares for two additional years and sells them when the market price is $30, how much gain will Suzanne recognize on the sale and how much tax will she pay assuming her marginal tax rate is 35 percent?

Excluded income will never be subject to the federal income tax.

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.?

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?