Which of the following statements regarding exclusions and/or deferrals is false?
A)Exclusions are favorable because taxpayers never pay tax on income that is excluded.
B)Interest income from municipal bonds is excluded from gross income.
C)Deferrals are income items taxpayers realize in one year but include in gross income in a subsequent year.
D)An income item need not be realized in order to qualify as an exclusion item.

Question

Quizplus · Accepted Answer

Exclusions refer to types of income that are not subject to taxation at all, meaning the taxpayer does not include this income on their tax return. For an income item to qualify as an exclusion, it must be specifically outlined in the tax code as not taxable. The statement that an income item need not be realized in order to qualify as an exclusion item is false because, generally, for any income to be considered for tax purposes, including exclusions, it must be realized.

Which of the Following Statements Regarding Exclusions And/or Deferrals Is