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Exam 5: Gross Income and Exclusions

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Question 41

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Rental income generated by a partnership is reported by the partners as dividend income on their own individual tax returns.

A) True
B) False

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Question 42

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J.Z. (single taxpayer)is retired and received $10,000 of Social Security benefits this year. How much of the $10,000 Social Security benefits are taxable if his only other income was $28,000 of pension income?

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$4,000
J.Z.'s modified AGI + 50 percent ...

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Question 43

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Constructive receipt represents the principle that cash-basis taxpayers will be taxed on income when it is made available to them without substantial restrictions.

This year, Fred and Wilma, married filing jointly, 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?

Karl works at Moe's grocery. This year Karl was paid $53,000 in salary, but he was allowed to purchase his groceries at 5 percent below Moe's cost. This year Karl spent $6,650 to purchase groceries, costing Moe $7,000. The groceries were worth $10,500. What amount must Karl include in his gross income?

This year, Barney and Betty sold their home (sales price $600,000; cost $164,000) . All closing costs were paid by the buyer. Barney and Betty owned and lived in their home for 18 months. Assuming no unusual or hardship circumstances apply, how much of the gain is included in gross income?

This year Joseph joined the board of directors for a company. Besides his director's fees, Joseph received the following employee benefits: The stock bonus consisted of 5,000 shares of Bell stock given to Joseph as compensation. At the time of the transfer the stock was listed at $4 per share. What amounts, if any, should Joseph include in gross income this year?

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?

This year Kevin provided services to several clients, each of whom paid with different types of property. Which of the following payments is not included in Kevin's gross income?

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 totaled $217,000. What amount must Deb include in her gross income?

Fran purchased an annuity that provides $13,800 quarterly payments for the next 10 years. The annuity was purchased at a cost of $345,000. How much of the first quarterly payment will Fran include in her gross income?

In January of the current year, Dora made a gift of stock to her granddaughter. At the time of the gift, the stock was worth $15,000. Several months later in the same year 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 for the current year?

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?

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 $14,790. 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 $12,200?

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.

In April of this year Victoria received a $1,460 refund of state income taxes that she paid last year. Last year Victoria claimed itemized deductions of $17,550. Victoria's itemized deductions included state income taxes paid of $6,600. How much of the refund, if any, must Victoria include in gross income if the standard deduction last year was $12,200?

Regardless of when a divorce agreement is executed, alimony is included in gross income of the recipient and is deductible for AGI by the payer.

Simon was awarded a scholarship to attend State Law School from Gary Harris & Associates, Attorneys at Law. The scholarship pays Simon's tuition ($7,000 per semester)and fees ($500 per semester)and provides a $4,500 per-semester stipend to pay for food and housing. In order to qualify for the stipend, Simon must work 10 hours per week at Gary Harris & Associates during the term. How much of the scholarship is Simon required to include in gross income?

Community property laws dictate that income earned by one spouse is treated as though it were earned equally by both spouses.

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 rendered. Which of the following is a true statement?