Question 1

Rhett made his annual gambling trip to Uwin Casino. On this trip Rhett won $250 at the slots and $1,200 at poker. Also this year, Rhett made several trips to the race track, but he lost $700 on his various wagers. What amount must Rhett include in his gross income?

Accepted Answer

A)   $1,450
B)   $1,200
C)   $750
D)   $250
E)   Zero - gambling winnings are not included in gross incomeF) C) and D)
G) A) and C)

Question 2

This year Ed celebrated his 25th year as an employee of Designer Jeans Company. In recognition of his long and loyal service, the company awarded Ed a gold watch worth $250 and a $2,000 cash bonus. What amount must Ed include in his gross income?

Accepted Answer

A)   $2,250
B)   $2,000
C)   $250
D)   Zero if Ed offers to contribute his watch and bonus to a qualified charity
E)   Zero - all employee awards are excluded from gross incomeF) B) and C)
G) A) and E)

Question 3

Juan works as a landscaper for local businesses on weekends, and he often provides services in exchange for property. This year Juan provided lawn-mowing services in exchange for $1,275 of car repair services, $3,570 of groceries, and a certificate of deposit (C.D.) for $4,050. The
C.D. matures next year with interest. Finally, Juan received a gift card that can only be applied for $850 of clothing at a local mall. Juan has only applied the gift card to purchase $100 of clothing. Compute Juan's gross income assuming that he uses the cash basis of accounting.
$1,275 + $3,570 + $4,050 + $850 = $9,745

Accepted Answer

$1,275 + $...

Question 4

Nate is a partner in a partnership that received $5,000 of interest income this year. Nate's share of the interest is $1,000, and he should report this income on his individual return as:

Accepted Answer

A)   business income
B)   income from a partnership
C)   interest income
D)   dividend income because the partnership intends to organize next year as a limited liability company
E)   All of theseF) B) and D)
G) A) and B)

Question 5

Recognized income may be in the form of cash or property received (but not services received).

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Identify the rule that states that income has been realized when a taxpayer receives the income and there are no restrictions on the taxpayer's use of the income (e.g., no obligation to repay the amount) :

Accepted Answer

A)   Claim of right
B)   Constructive receipt
C)   Return of capital principle
D)   Wherewithal to pay
E)   None of theseF) B) and C)
G) B) and E)

Question 8

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?

Accepted Answer

A)   $1 million
B)   $750,000
C)   $500,000
D)   Zero but only if Irene does not opt to receive the life insurance proceeds in a lump sum
E)   Zero - None of these benefits is included in gross incomeF) B) and D)
G) D) and E)

Question 9

Interest earned on a city of Denver bond is excluded from gross income (for federal tax purposes).

Accepted Answer

A) True 
 B)False

Question 10

This fall Angelina, age 35, plans to attend college. To fund her tuition she cashed in Series EE savings bonds with a redemption value of $24,000 and an original cost of $16,800. Angelina plans on spending $7,200 of the proceeds to pay tuition. The redemption proceeds are Angelina's only source of income. What amount of interest must Angelina include in gross income this year?

Accepted Answer

The answer of This fall Angelina, age 35, plans to...

Question 11

Barter clubs are an effective means of avoiding realization for tax purposes.

Accepted Answer

A) True 
 B)False

Exam 5: Gross Income and Exclusions

Correct Answer
verified
$1,275 + $...
View Answer

Barter clubs are an effective means of avoiding realization for tax purposes.

Correct Answer
verified

Correct Answer
verified

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?

Correct Answer
verified

Rhett made his annual gambling trip to Uwin Casino. On this trip Rhett won $250 at the slots and $1,200 at poker. Also this year, Rhett made several trips to the race track, but he lost $700 on his various wagers. What amount must Rhett include in his gross income?

Correct Answer
verified

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

Correct Answer
verified

Recognized income may be in the form of cash or property received (but not services received).

Correct Answer
verified

Identify the rule that states that income has been realized when a taxpayer receives the income and there are no restrictions on the taxpayer's use of the income (e.g., no obligation to repay the amount) :

Correct Answer
verified

Interest earned on a city of Denver bond is excluded from gross income (for federal tax purposes).

Correct Answer
verified

Nate is a partner in a partnership that received $5,000 of interest income this year. Nate's share of the interest is $1,000, and he should report this income on his individual return as:

Correct Answer
verified

This year Ed celebrated his 25th year as an employee of Designer Jeans Company. In recognition of his long and loyal service, the company awarded Ed a gold watch worth $250 and a $2,000 cash bonus. What amount must Ed include in his gross income?

Correct Answer
verified

Exam 5: Gross Income and Exclusions

Correct Answerverified$1,275 + $...View AnswerShow Answer

Barter clubs are an effective means of avoiding realization for tax purposes.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

Rhett made his annual gambling trip to Uwin Casino. On this trip Rhett won $250 at the slots and $1,200 at poker. Also this year, Rhett made several trips to the race track, but he lost $700 on his various wagers. What amount must Rhett include in his gross income?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Recognized income may be in the form of cash or property received (but not services received).

Correct AnswerverifiedShow Answer

Identify the rule that states that income has been realized when a taxpayer receives the income and there are no restrictions on the taxpayer's use of the income (e.g., no obligation to repay the amount) :

Correct AnswerverifiedShow Answer

Interest earned on a city of Denver bond is excluded from gross income (for federal tax purposes).

Correct AnswerverifiedShow Answer

Nate is a partner in a partnership that received $5,000 of interest income this year. Nate's share of the interest is $1,000, and he should report this income on his individual return as:

Correct AnswerverifiedShow Answer

This year Ed celebrated his 25th year as an employee of Designer Jeans Company. In recognition of his long and loyal service, the company awarded Ed a gold watch worth $250 and a $2,000 cash bonus. What amount must Ed include in his gross income?

Correct AnswerverifiedShow Answer

Correct Answer
verified
$1,275 + $...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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