Deck 4: Income Exclusions

Question 1

Match each statement with the correct term below.
a.Dues, uniforms, subscriptions.
b.Intended to punish and are taxable.
c.Taxable if from an employer-provided policy.
d.Any personal wrong, such as libel, slander, or assault.
e.Excludable amount limited to gross profit percentage.
f.Gratuitous and not a form of compensation for services.
g.Excludability requires that it must be a condition of employment.
h.Excluded if for compensatory payments for sickness or personal physical injury.
i.To replace lost earnings and is excluded if due to personal physical injury.
j.Excluded if provided on the employer's business premises and for the convenience of employer.
Personal injury

Answer 1

D

Question 2

Match each statement with the correct term below.
a.An employee may exclude up to $5,000 annually of these employer-provided services.
b.If cash is received under this program, taxpayers are taxed on the amount of cash received.
c.A salary reduction plan that allows employees to pay for medical and child care costs with before-tax dollars.
d.A transfer of property without any profit motivation with an intention that includes affection, charity, and respect.
e.Payments made into an employee's account are not taxable in the current period; taxation is deferred until funds are withdrawn.
f.Employer provided benefit that may be excluded from income because the dollar amounts are too small for a reasonable accounting.
Cafeteria plan

Answer 2

B

Question 3

Match each statement with the correct term below.
a.An employee may exclude up to $5,000 annually of these employer-provided services.
b.If cash is received under this program, taxpayers are taxed on the amount of cash received.
c.A salary reduction plan that allows employees to pay for medical and child care costs with before-tax dollars.
d.A transfer of property without any profit motivation with an intention that includes affection, charity, and respect.
e.Payments made into an employee's account are not taxable in the current period; taxation is deferred until funds are withdrawn.
f.Employer provided benefit that may be excluded from income because the dollar amounts are too small for a reasonable accounting.
Child & dependent care

Answer 3

A

Question 4

Match each statement with the correct term below.
a.An employee may exclude up to $5,000 annually of these employer-provided services.
b.If cash is received under this program, taxpayers are taxed on the amount of cash received.
c.A salary reduction plan that allows employees to pay for medical and child care costs with before-tax dollars.
d.A transfer of property without any profit motivation with an intention that includes affection, charity, and respect.
e.Payments made into an employee's account are not taxable in the current period; taxation is deferred until funds are withdrawn.
f.Employer provided benefit that may be excluded from income because the dollar amounts are too small for a reasonable accounting.
Gift

Question 5

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below.
a.Fully excluded from gross income.
b.Fully included in gross income.
c.Partially excluded from gross income.
Michelle's employer pays for her graduate school classes.Tuition during the year totals $2,500 (her employer does not have a qualified plan).

Question 6

Match each statement with the correct term below.
a.Dues, uniforms, subscriptions.
b.Intended to punish and are taxable.
c.Taxable if from an employer-provided policy.
d.Any personal wrong, such as libel, slander, or assault.
e.Excludable amount limited to gross profit percentage.
f.Gratuitous and not a form of compensation for services.
g.Excludability requires that it must be a condition of employment.
h.Excluded if for compensatory payments for sickness or personal physical injury.
i.To replace lost earnings and is excluded if due to personal physical injury.
j.Excluded if provided on the employer's business premises and for the convenience of employer.
Disability payment

Question 7

Match each statement with the correct term below.
a.An employee may exclude up to $5,000 annually of these employer-provided services.
b.If cash is received under this program, taxpayers are taxed on the amount of cash received.
c.A salary reduction plan that allows employees to pay for medical and child care costs with before-tax dollars.
d.A transfer of property without any profit motivation with an intention that includes affection, charity, and respect.
e.Payments made into an employee's account are not taxable in the current period; taxation is deferred until funds are withdrawn.
f.Employer provided benefit that may be excluded from income because the dollar amounts are too small for a reasonable accounting.
Flexible benefits plan

Question 8

Match each statement with the correct term below.
a.Dues, uniforms, subscriptions.
b.Intended to punish and are taxable.
c.Taxable if from an employer-provided policy.
d.Any personal wrong, such as libel, slander, or assault.
e.Excludable amount limited to gross profit percentage.
f.Gratuitous and not a form of compensation for services.
g.Excludability requires that it must be a condition of employment.
h.Excluded if for compensatory payments for sickness or personal physical injury.
i.To replace lost earnings and is excluded if due to personal physical injury.
j.Excluded if provided on the employer's business premises and for the convenience of employer.
Employer-provided lodging

Question 9

Match each statement with the correct term below.
a.Dues, uniforms, subscriptions.
b.Intended to punish and are taxable.
c.Taxable if from an employer-provided policy.
d.Any personal wrong, such as libel, slander, or assault.
e.Excludable amount limited to gross profit percentage.
f.Gratuitous and not a form of compensation for services.
g.Excludability requires that it must be a condition of employment.
h.Excluded if for compensatory payments for sickness or personal physical injury.
i.To replace lost earnings and is excluded if due to personal physical injury.
j.Excluded if provided on the employer's business premises and for the convenience of employer.
Employee discount

Question 10

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below.
a.Fully excluded from gross income.
b.Fully included in gross income.
c.Partially excluded from gross income.
Laura's employer pays the first $5,000 in childcare benefits under their childcare assistance plan.

Question 11

Match each statement with the correct term below.
a.An employee may exclude up to $5,000 annually of these employer-provided services.
b.If cash is received under this program, taxpayers are taxed on the amount of cash received.
c.A salary reduction plan that allows employees to pay for medical and child care costs with before-tax dollars.
d.A transfer of property without any profit motivation with an intention that includes affection, charity, and respect.
e.Payments made into an employee's account are not taxable in the current period; taxation is deferred until funds are withdrawn.
f.Employer provided benefit that may be excluded from income because the dollar amounts are too small for a reasonable accounting.
Qualified pension plan

Question 12

Match each statement with the correct term below.
a.Dues, uniforms, subscriptions.
b.Intended to punish and are taxable.
c.Taxable if from an employer-provided policy.
d.Any personal wrong, such as libel, slander, or assault.
e.Excludable amount limited to gross profit percentage.
f.Gratuitous and not a form of compensation for services.
g.Excludability requires that it must be a condition of employment.
h.Excluded if for compensatory payments for sickness or personal physical injury.
i.To replace lost earnings and is excluded if due to personal physical injury.
j.Excluded if provided on the employer's business premises and for the convenience of employer.
Damage payments

Question 13

Match each statement with the correct term below.
a.An employee may exclude up to $5,000 annually of these employer-provided services.
b.If cash is received under this program, taxpayers are taxed on the amount of cash received.
c.A salary reduction plan that allows employees to pay for medical and child care costs with before-tax dollars.
d.A transfer of property without any profit motivation with an intention that includes affection, charity, and respect.
e.Payments made into an employee's account are not taxable in the current period; taxation is deferred until funds are withdrawn.
f.Employer provided benefit that may be excluded from income because the dollar amounts are too small for a reasonable accounting.
De minimus fringe

Question 14

Match each statement with the correct term below.
a.Dues, uniforms, subscriptions.
b.Intended to punish and are taxable.
c.Taxable if from an employer-provided policy.
d.Any personal wrong, such as libel, slander, or assault.
e.Excludable amount limited to gross profit percentage.
f.Gratuitous and not a form of compensation for services.
g.Excludability requires that it must be a condition of employment.
h.Excluded if for compensatory payments for sickness or personal physical injury.
i.To replace lost earnings and is excluded if due to personal physical injury.
j.Excluded if provided on the employer's business premises and for the convenience of employer.
Working condition fringe

Question 15

Match each statement with the correct term below.
a.Dues, uniforms, subscriptions.
b.Intended to punish and are taxable.
c.Taxable if from an employer-provided policy.
d.Any personal wrong, such as libel, slander, or assault.
e.Excludable amount limited to gross profit percentage.
f.Gratuitous and not a form of compensation for services.
g.Excludability requires that it must be a condition of employment.
h.Excluded if for compensatory payments for sickness or personal physical injury.
i.To replace lost earnings and is excluded if due to personal physical injury.
j.Excluded if provided on the employer's business premises and for the convenience of employer.
Scholarship

Question 16

Match each statement with the correct term below.
a.Dues, uniforms, subscriptions.
b.Intended to punish and are taxable.
c.Taxable if from an employer-provided policy.
d.Any personal wrong, such as libel, slander, or assault.
e.Excludable amount limited to gross profit percentage.
f.Gratuitous and not a form of compensation for services.
g.Excludability requires that it must be a condition of employment.
h.Excluded if for compensatory payments for sickness or personal physical injury.
i.To replace lost earnings and is excluded if due to personal physical injury.
j.Excluded if provided on the employer's business premises and for the convenience of employer.
Punitive damages

Question 17

Match each statement with the correct term below.
a.Dues, uniforms, subscriptions.
b.Intended to punish and are taxable.
c.Taxable if from an employer-provided policy.
d.Any personal wrong, such as libel, slander, or assault.
e.Excludable amount limited to gross profit percentage.
f.Gratuitous and not a form of compensation for services.
g.Excludability requires that it must be a condition of employment.
h.Excluded if for compensatory payments for sickness or personal physical injury.
i.To replace lost earnings and is excluded if due to personal physical injury.
j.Excluded if provided on the employer's business premises and for the convenience of employer.
Loss-of-income damages

Question 18

Match each statement with the correct term below.
a.Dues, uniforms, subscriptions.
b.Intended to punish and are taxable.
c.Taxable if from an employer-provided policy.
d.Any personal wrong, such as libel, slander, or assault.
e.Excludable amount limited to gross profit percentage.
f.Gratuitous and not a form of compensation for services.
g.Excludability requires that it must be a condition of employment.
h.Excluded if for compensatory payments for sickness or personal physical injury.
i.To replace lost earnings and is excluded if due to personal physical injury.
j.Excluded if provided on the employer's business premises and for the convenience of employer.
Meals provided by employer

Question 19

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below.
a.Fully excluded from gross income.
b.Fully included in gross income.
c.Partially excluded from gross income.
Frank receives $1,000 interest income from City of St Louis bonds.

Question 20

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below.
a.Fully excluded from gross income.
b.Fully included in gross income.
c.Partially excluded from gross income.
Katrina receives $1,000 interest income from U.S.Treasury bonds that her uncle had given to her.

Question 21

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below.
a.Fully excluded from gross income.
b.Fully included in gross income.
c.Partially excluded from gross income.
Sarah,the managing partner in an accounting firm,has her downtown parking space ($325/per month)paid by the firm.None of the accounting staff receive parking privileges.

Question 22

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below.
a.Fully excluded from gross income.
b.Fully included in gross income.
c.Partially excluded from gross income.
Raymond dies on July 8^th of the current year.Out of love and respect for Raymond,his employer gives his widow $5,000.

Question 23

Connie received a $1,000 scholarship to attend State University from a local civic group based on her grades and community activities.The $1,000 is included in income.

Question 24

Any income earned subsequent to the death of the decedent from inherited property is excludable from the heir's taxable income.

Question 25

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below.
a.Fully excluded from gross income.
b.Fully included in gross income.
c.Partially excluded from gross income.
Marline receives $14 million in punitive damages for a personal physical injury.

Question 26

Gifts received are not subject to income taxation; however the donor is subject to the gift tax rules on the making of a gift.

Question 27

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below.
a.Fully excluded from gross income.
b.Fully included in gross income.
c.Partially excluded from gross income.
Kenneth receives a new Ford Explorer worth $28,900 that his parents bought him for his 24^th birthday.

Question 28

To keep the employees on the premises in case an emergency arises,the Riverview Hotel provides meals to its employees in a room adjacent to their restaurant.Since the meals are provided as a convenience to the employer and on their premises,the value of the meals is excluded in the income of the employees.

Question 29

Matt,a U.S.citizen,can exclude all of his $100,000 salary he earned as a bullfighter in Spain where he lived all year,from his U.S.tax return.

Question 30

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below.
a.Fully excluded from gross income.
b.Fully included in gross income.
c.Partially excluded from gross income.
Julia receives $6.3 million in compensatory damages for a personal physical injury.

Question 31

No-additional-cost services and employee discounts must be made available to employees on a nondiscriminatory basis and must also be in the same line of business in which the employee works to be excluded from the employee's income.

Question 32

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below.
a.Fully excluded from gross income.
b.Fully included in gross income.
c.Partially excluded from gross income.
Hank's employer gives him fishing gear that is worth $1,250 at his retirement party.

Question 33

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below.
a.Fully excluded from gross income.
b.Fully included in gross income.
c.Partially excluded from gross income.
David's employer laid him off for three months during the slow winter season.He collects $4,375 in unemployment compensation.

Question 34

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below.
a.Fully excluded from gross income.
b.Fully included in gross income.
c.Partially excluded from gross income.
Dick lives rent-free in an apartment (value $675/month)in a complex where he is the apartment manager and must be on the premises to handle problems.

Question 35

Myra's employer paid her health and accident insurance premium of $5,600.Since she had the option to take the cash and purchase her own insurance,the $5,600 must be included in income.

Question 36

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below.
a.Fully excluded from gross income.
b.Fully included in gross income.
c.Partially excluded from gross income.
Julian's tenant improves her side of the duplex by making improvements to the bathroom and kitchen that are worth $750.Julian does not adjust her rent for the $750 improvements.

Question 37

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below.
a.Fully excluded from gross income.
b.Fully included in gross income.
c.Partially excluded from gross income.
Jeane's employer pays his medical premiums each month ($130/month).

Question 38

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below.
a.Fully excluded from gross income.
b.Fully included in gross income.
c.Partially excluded from gross income.
Tina receives 100 shares of Welby stock as a result of a 2 for 1 stock split.The shares have a value of $7,000 the day of the split.

Question 39

Robert's employer provides all of its employees a $40,000 group term life insurance policy.The cost of this policy must be included in Robert's income.

Question 40

Each of the numbered items below is accorded only one of the following lettered treatments. Use the existing law as it applies to the current year, match the best answer to the statements below.
a.Fully excluded from gross income.
b.Fully included in gross income.
c.Partially excluded from gross income.
Jeane's medical insurance carrier reimburses him 80% of his qualified medical expenses.During the current year Jeane receives $3,682 in payments.

Question 41

Health Savings Accounts are available only to self-employed individuals or small businesses.

Question 42

Drew graduated from business school in December 2012.To honor Drew,on January 3,2013,his uncle gives him two tickets to the Super Bowl.The uncle paid $1,200 for each ticket.Because he had to report to work at a brokerage firm in Indianapolis on January 15,2013,he could not use the tickets.Therefore,he sells them for $2,500 each.How much income must Drew recognize in 2013 because of these events?

A)$ - 0 -
B)$2,000
C)$2,400
D)$2,600
E)$5,000

Question 43

Ally served as chairperson of the local school board.Upon completion of her term in office,the organization awards her a silver-serving tray in recognition of her outstanding service to the organization.The value of the tray is $200.What are the tax effects of the award?
I)The value of the tray is included in gross income because of services rendered.
II)The tray is a gift because it is from a detached and disinterested generosity.

A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.

Question 44

Clarance rented office space to an attorney who left town before the lease was completed.The attorney left several bookcases and other improvements to cover the remaining rent.Clarance must include in income the value of the leasehold improvements to the extent of the remaining rent that was due.

Question 45

Systech offered its stockholders a choice between stock and cash for their annual dividend.Since Carol has chosen stock,she does not have to include the dividend in income.

Question 46

Ward and June are in the 28% tax bracket.Included in their assets is a Dell Computer Corporation bond with a face value of $10,000.The bond pays $1,000 a year in interest.Ward and June gift the bond to their son,Wally (age 19),on January 1,2013.Wally is in the 15% tax bracket.The 2013 net tax savings for the family unit of Ward,June and Wally related to the transfer of the bond is

A)$ -0-
B)$130
C)$150
D)$280

Question 47

Ally served as chairperson of the local school board.Upon completion of her term in office,the employees in the school district offices take up a collection and purchase her a silver sterling tray in recognition of her outstanding service to the organization.The value of the tray is $200.What are the tax effects of the award?
I)The value of the tray is included in gross income because of services rendered.
II)The tray is a gift because it is from a detached and disinterested generosity.

A)Only statement I is correct.
B)Only statement II is correct.
C)Both are correct.
D)Neither is correct.

Question 48

On her 18th birthday,Patti's grandfather gave her $8,000 of dividends on stock he owned,which she uses to pay college expenses.The cost of Patti's tuition,fees,and books is $6,000.Patti's gross income from this event is:

A)$ - 0 -
B)$ 2,000
C)$ 6,000
D)$ 8,000

Question 49

On her 18th birthday,Anna's grandfather gave her stock worth $100,000.During the current year,Anna receives $5,000 of dividends on the stock,which she uses to pay college expenses.The cost of Anna's tuition,fees,and books is $4,000.Anna's income from this event is:

A)$ - 0 -
B)$ 1,000
C)$ 4,000
D)$ 5,000
E)$75,000

Question 50

Patrick ran up a large credit card debt.Since the bank wanted to keep Patrick's account they forgave $5,000 of his balance.Patrick was solvent before and after the forgiveness.He has to include the $5,000 in his income.

Question 51

Terri is driving down a road when she sees that Sonny is having trouble changing a tire.Terri stops and helps Sonny.As Sonny is leaving,he gives Terri $50 and thanks her.What are the effects of the $50 receipt?
I)The $50 is a gift because it is from detached and disinterested generosity.
II)The $50 is compensation received for services rendered.

A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.

Question 52

Ward and June are in the 28% tax bracket.Included in their assets is a Dell Corporation bond with a face value of $10,000.The bond pays $1,000 a year in interest.Ward and June make a gift to their son,Wally (age 19)of the $1,000 in interest income.Wally is in the 10% tax bracket.What is Ward and June's tax liability related to the bond and the bond interest for the current year?

A)$ -0-
B)$ 100
C)$ 280
D)$1,000
E)$2,800

Question 53

For the past seven years Karen,an attorney,has directed litigation clients to Rebecca,a CPA,for accounting investigatory work.Because of the amount of litigation work Karen directed to Rebecca,Rebecca's business is now comprised solely of litigation support work.Karen began taking tennis lessons this year.Rebecca gives Karen a new tennis racquet so they could share afternoons by playing tennis together.
I)The "gift" appears to be a form of compensation.
II)Substance-over-form applies to this situation.
III)The tennis racquet meets the income tax definition of a gift.
IV)Karen recognizes no gross income from the receipt of the tennis racquet.

A)Only statement I is correct.
B)Only statement IV is correct.
C)Statements I and II are correct.
D)Statements III and IV are correct.
E)Statements I, II, and IV are correct.

Question 54

On April 1,Sally is given $20,000 worth of City of Boise bonds for her 18^th birthday.On June 30,Sally receives the $800 annual interest payment on the bonds.How much income should Sally recognize due to these two events?

A)$ - 0 -
B)$ 200
C)$ 800
D)$20,000
E)$20,800

Question 55

On April 1,Sally is given $20,000 worth of General Motors bonds for her 18^th birthday.On June 30,Sally receives the $800 annual interest payment on the bonds.How much income should Sally recognize due to these two events?

A)$ - 0 -
B)$ 200
C)$ 800
D)$20,000
E)$20,800

Question 56

Melvin was in an accident which was the other driver's fault.Melvin received $15,000 for pain and suffering,emotional distress,and lost wages.Melvin may exclude the entire $15,000.

Question 57

Ward and June are in the 28% tax bracket.Included in their assets is a Dell Corporation bond with a face value of $10,000.The bond pays $1,000 per year in interest.Ward and June gift the bond to their son,Wally (age 19),on January 1,2013.Wally is in the 10% tax bracket.Wally's taxable income from the receipt of the bond and the bond interest in 2013 is

A)$ -0-
B)$ 1,000
C)$ 1,500
D)$10,000
E)$11,000

Question 58

When Rick found out that Ryan's liabilities exceeded his assets by $15,000,he forgave Ryan the $1,000 he owed Rick in hoping that Ryan might get back on his feet.Ryan is allowed to exclude the $1,000 from income.

Question 59

The interest from Guam Water Authority bonds is excluded from income as "Municipal Bond Interest."

Question 60

Cornell is a building contractor who builds 25-30 homes a year.Charlotte is a real estate broker who sells all of Cornell's homes.Charlotte has recently referred a couple to Cornell who wanted him to build a $400,000 home for them.Knowing that Charlotte and her husband enjoy skiing,he bought her a nice pair of skis and boots.
I)The "gift" appears to be a form of compensation.
II)The skis are considered a gift for income tax purposes.
III)Substance-over-form applies to this situation.
IV)Charlotte recognizes gross income from the receipt of the skis.

A)Only statement I is correct.
B)Only statement II is correct.
C)Statements I, III, and IV are correct.
D)Statements II and IV are correct.
E)Statements II, III, and IV are correct.

Question 61

Sanford's employer has a qualified pension plan that allows employees to contribute up to 10% of their gross salaries to the plan.The employer matches the contribution at the rate of 50% of the employee's contribution.Sanford's current annual salary is $80,000.This is his only source of income.If he contributes the maximum amount to the pension plan,what is Sanford's gross income for the current year?

A)$72,000
B)$76,000
C)$80,000
D)$84,000
E)$88,000

Question 62

Jerry's wife dies in September.His wife had paid $20,000 of premiums on a $150,000 face value whole life insurance policy.Jerry elects to receive the life insurance policy proceeds in 20 annual installments of $10,000.Jerry receives his first $10,000 payment this year.How much of the payment should Jerry report as gross income?

A)$ - 0 -
B)$ 2,500
C)$ 5,000
D)$ 7,500
E)$10,000

Question 63

Hector's employer has a qualified pension plan to which it contributes 6% of his gross salary.Hector's current annual salary is $50,000.The pension plan also earns $2,500 during the current year on contributions made to the plan on behalf of Hector.What is Hector's gross income from these transactions for the current year?

A)$50,000
B)$52,500
C)$53,000
D)$55,500

Question 64

A college student who is a candidate for a degree may exclude the value of a scholarship received for
I)Meals.
II)Books.
III)Computer.
IV)Tuition.
V)Housing.

A)Statements I and V are correct.
B)Statements II, III, and IV are correct.
C)Only statement IV is correct.
D)Statements II and IV is correct.
E)Statements I, II, III, IV, and V are correct.

Question 65

Barbara was the legal owner of a $100,000 life insurance policy on herself.Glenna is the stated beneficiary.Shortly before her death,Barbara transfers ownership of the policy to Glenna for $15,000.Glenna makes one premium payment in the amount of $1,000 before Barbara dies.Glenna subsequently receives the $100,000 life insurance proceeds.How much of the $100,000 is taxable to Glenna?

A)$ - 0 -
B)$ 15,000
C)$ 84,000
D)$ 85,000
E)$100,000

Question 66

Bart's spouse,Carla,dies during the current year.Carla's life insurance policy names Bart the sole beneficiary of the $2 million proceeds.Bart invests the $2 million in a bank certificate of deposit (CD).For the current year,Bart earns $98,000 interest from the CD.What are the tax effects of these events for Bart?
I)The $2 million is excluded from gross income.
II)Bart has no taxable income from these transactions.

A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.

Question 67

Mei-Ling is a candidate for a master's degree in taxation from Western State University.During the current year she receives the following cash payments:
$$\begin{array} { l r } \text { State allocated tuition waiver scholarship } & \$ 2,200 \\\text { A Microsoft scholarship (for fees and books) } & 800 \\\text { Check from her grandmother } & 1,700 \\\text { Loan proceeds from the college financial aid office } & 2,500 \\\text { Prize won from a "rub and scratch" lottery ticket } & 300 \\\text { Loan from her roommate } & 100 \\\text { Interest received from National Bank CD } & 400\end{array}$$
How much must be included in Mei-Ling's gross income?

A)$ - 0-
B)$ 700
C)$1,500
D)$3,700
E)$8,000

Question 68

Donna is a student at Eastern State University.She receives a $4,000 academic scholarship from the Silverman Foundation.She also has a $2,000 assistantship to grade and tutor for the Department of Economics.Tuition,books,fees,and supplies are $5,000.How much gross income must Donna recognize from the scholarship and assistantship?

A)$ - 0 -
B)$1,000
C)$2,000
D)$5,000
E)$6,000

Question 69

Gary receives $40,000 worth of Quantro,Inc.,common stock from the estate of his late grandmother.He receives a $100 cash dividend six months later.Before the end of the year,Gary sells the stock for $42,000.Due to these events,how much must Gary include in his gross income for the year?

A)$ -0-
B)$ 100
C)$ 2,000
D)$ 2,100
E)$42,100

Question 70

Maria is on a "full ride" tennis scholarship at Western University.Her $12,500 scholarship covers tuition and books ($7,000)and room and board ($5,500).Maria's gross income is

A)$ - 0 -
B)$ 2,000
C)$ 5,500
D)$ 7,000
E)$12,500

Question 71

Sylvia is a United States citizen who has established legal residency in Japan.She has been teaching school there for several years.Her annual salary is $60,000.Anne's tax situation is

A)She is not subject to U.S. tax law.
B)She can elect to exclude her foreign income from U.S. taxation and take a tax credit for foreign taxes paid.
C)She can elect to exclude her foreign income from U.S. taxation, or take a tax credit for foreign taxes paid.
D)She is not eligible to take a tax credit for foreign taxes paid or exclude her foreign income from her U.S. gross income.
E)Only one jurisdiction, either the U.S. or Japan, not both, can tax Sylvia on her income while in Japan.

Question 72

Fran dies on January 14,2013.Her spouse,Carl,is the beneficiary of a $100,000 life insurance policy.Carl elects to receive the proceeds in 10 equal installments of $11,000.In 2013,Carl receives $11,000.The amount included in Carl's 2013 gross income is

A)$ - 0 -
B)$ 1,000
C)$ 10,000
D)$ 11,000
E)$111,000

Question 73

In May,Josefina receives stock worth $10,000 from the estate of her Uncle.The following November she receives a $500 cash dividend on the stock.Josefina must
I)include the $500 dividend in her gross income.
II)include the $10,000 value of the stock received in her gross income.

A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.

Question 74

Nancy teaches school in a Chinese university.She is a U.S.citizen and has been teaching in China for 5 years.In the current year she will earn $100,000.What are some of Nancy's options for reporting U.S.gross income?
I)She may include the foreign earned income in her gross income,calculate her U.S.income tax,and take a tax credit for foreign taxes paid.
II)She may exclude up to $97,600 in foreign earned income for the current year.
III)She may exclude all of her income because it is earned outside of the U.S.

A)Only I is correct.
B)Only II is correct.
C)Only III is correct.
D)I and II are correct.
E)II and III are correct.

Question 75

During the current year,Eleanor receives land valued at $30,000 from the estate of her grandfather.Her grandfather's basis in the land was $8,000.Eleanor sells the land for $34,000 late in the year.Eleanor's gross income is:

A)$ - 0 -
B)$ 4,000
C)$ 8,000
D)$16,000
E)$26,000

Question 76

David,an employee of Lima Corporation,is a U.S.citizen and the regional sales manager for South America.His office is in Miami and he spends nine months each year on business in South America.Which of the following statements about the treatment of his income from Lima Corporation is correct?

A)He must include his Lima income in his gross income and is not allowed a tax credit for any South American taxes paid.
B)He has the option of either excluding $97,600 of his Lima income or taking a tax credit for the South American taxes paid.
C)Because he is in South America only nine months of the year, he is only allowed to exclude $68,625 of Lima income.
D)Because he is in South America only nine months of the year, he is not allowed to exclude any of his Lima income, but he can take a tax credit for any South American taxes paid.

Question 77

Victor receives a $4,000 per year scholarship from Southern College.The college specifies that $2,500 is for tuition,books,supplies,and equipment for classes.The other $1,500 is for room and board.As part of the conditions of the scholarship,Victor must also work ten hours per week as a grader,for which he is paid $1,700 for the year.Of the total amount received,Victor will include in income:

A)$1,500
B)$1,700
C)$2,500
D)$3,200
E)$5,700

Question 78

Bernice is the beneficiary of a $50,000 insurance policy on her father's life.If she receives the proceeds in installments from the insurance company that carries the policy,she will earn only five-percent interest per year,receiving $10,500 per year for five years.Bernice decides to take the $50,000 in a lump-sum payment and invest the funds herself.Of the $50,000 received:

A)All $50,000 is tax-free.
B)All $50,000 is taxable income.
C)$500 is interest income for each year.
D)The first $25,000 is taxable.

Question 79

Denise receives an academic scholarship to Pollytech College.Under the scholarship agreement,she receives tuition ($1,500),books ($400),and room and board ($5,000).How much of the scholarship is included in Denise's gross income?

A)$ - 0 -
B)$ 400
C)$1,500
D)$5,000
E)$6,900

Question 80

Bart's spouse,Carla,dies during the current year.Carla's life insurance policy names Bart the sole beneficiary of the $2 million proceeds.Bart invests the $2 million in a bank certificate of deposit (CD).For the current year,Bart earns $98,000 interest from the CD.What are the tax effects of these events for Bart?
I)The $98,000 is included in gross income.
II)The $2 million is included in gross income.

A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.