REG Unit 1

Mark and Molly met at a New Year’s Eve party held December 31, Year 1. They instantly bonded, fell madly in love, and were married at 11:38 pm that night. Identify Mark’s filing status for Year 1.

a. single

b. surviving spouse

c. married filing jointly

d. head of household

c. married filing jointly

Which of the following is (are) among the requirements to enable a taxpayer to be classified as a “qualifying surviving spouse”?

I. a dependent has lived with the taxpayer for six months

II. the taxpayer has maintained the cost of the principal residence for six months

a. neither I nor II

b. II only

c. both I and II

d. I only

a. neither I nor II

Where is the deduction for qualified business income (QBI) applied in the individual tax formula?

a. as a deduction from adjusted gross income separate from the standard deduction and itemized deduction

b. as an alternative to the standard deduction

c. as an itemized deduction

d. as an adjustment to arrive at adjusted gross income

a. as a deduction from adjusted gross income separate from the standard deduction and itemized deduction

In which of the following situations may taxpayers file as married filing jointly?

a. taxpayers who were married but lived under a legal separation agreement at the end of the year

b. taxpayers who were divorced during the year

c. taxpayers who were married but lived apart during the year

d. taxpayers who were legally separated but lived together for the entire year

c. taxpayers who were married but lived apart during the year

A taxpayer’s spouse dies in August of the current year. Which of the following is the taxpayer’s filing status for the current year?

a. single

b. qualifying surviving spouse

c. head of household

d. married filing jointly

d. married filing jointly

Taylor, an individual, commenced business on August 4 of this year. Taylor does not keep adequate records. On which of the following dates must Taylor’s tax year end?

a. August 31

b. December 31

c. August 3

d. July 31

b. December 31

John and Theresa are in the process of obtaining a divorce. Although they are not legally separated, John moved out of the family home in October of Year 1 and moved into an apartment nearby. John and Theresa’s two children, Jenna and Stella, lived with Theresa in the family home for more than half of the tax year. What filing status can Theresa use to file her Year 1 tax return?

a. qualifying surviving spouse

b. single

c. married filing jointly/separately

d. head of household

c. married filing jointly/separately

Mort and Mindy met at a New Year’s Eve party held December 31, Year 1. They instantly bonded, fell madly in love, and were married at 11:38 pm that night. Sadly, Mort passed away November 15, Year 2. What filing status should Mindy use for Year 2?

a. single

b. surviving spouse

c. married filing jointly

d. head of household

c. married filing jointly

Thompson’s spouse died in Year 1. Thompson did not remarry in Year 2 and lived alone the entire year. What is Thompson’s Year 2 filing status?

a. qualifying surviving spouse

b. head of household

c. married filing jointly

d. single

d. single

As of December 31, the Mitchells were legally separated and maintained separate households for the entire year. The Mitchell have no children. What filing status should Mr. Mitchell claim for the year?

a. head of household

b. married filing jointly

c. single

d. married filing separately

c. single

In which of the following scenarios would be head of household filing status be available to the taxpayer?

a. an unmarried taxpayer maintains a household with a 38-year-old son, who earned $10,000 during the tax year

b. a single taxpayer maintains a separate home for his parent, who qualifies as a dependent

c. a taxpayer with no dependents is the surviving spouse of an individual who died in the current year

d. a single taxpayer maintains a household that is the principal home for five months of the year for his disabled child

b. a single taxpayer maintains a separate home for his parent, who qualifies as a dependent

Parker, whose spouse died during the preceding year, has not remarried. Parker maintains a home for a dependent child. What is Parker’s most advantageous filing status?

a. single

b. qualifying surviving spouse

c. head of household

d. married filing separately

b. qualifying surviving spouse

Mort and Mandy met at a New Year’s Eve party held December 31, Year 1. They instantly bonded, fell madly in love, and were married at 11:38 pm that night. Sadly, Mort passed away November 15, Year 2. In January, Year 3, Mindy gave birth to triplets Mark, Mandy, and Maureen. Assuming that Mindy has not remarried, what filing status should she use for Year 4?

a. single

b. qualifying surviving spouse

c. head of household

d. married filing jointly

b. qualifying surviving spouse

Mort and Mandy met at a New Year’s Eve party held December 31, Year 1. They instantly bonded, fell madly in love, and were married at 11:38 pm that night. Sadly, Mort passed away November 15, Year 2. In January, Year 3, Mindy gave birth to triplets Mark, Mandy, and Maureen. The triplets live with Mindy and she provides all of their support. Assuming Mindy has not remarried, what filing status should she use for Year 5?

a. single

b. married filing jointly

c. head of household

d. qualifying surviving spouse

c. head of household

In Year 4, after Mindy’s three children have grown and moved out of the house, Mindy (unmarried) moved her mother, Mary, into an assisted living facility for which Mindy pays 75% of the cost. Mindy has not previously lived with Mary, and Mary paid for her own living expenses while she lived in her own home. What filing status should Mindy use for Year 4, assuming Mary moved into the assisted living facility on January 1, Year 4?

a. surviving spouse

b. head of household

c. married filing jointly

d. single

b. head of household

In Year 4, after Mindy’s three children have grown and moved out of the house, Mindy (unmarried) moved her mother, Mary, into an assisted living facility for which Mindy pays 75% of the cost. Mindy has not previously lived with Mary, and Mary paid for her own living expenses while she lived in her own home. What filing status should Mindy use for Year 4, assuming Mary moved into the assisted living facility on August 1, Year 4?

a. married filing jointly

b. single

c. head of household

d. surviving spouse

b. single

Four years ago, when Cox’s spouse died, cox filed a joint tax return for that year. Cox did not remarry, but continued to provide full support for a minor child who has been living with Cox. What is Cox’s most advantageous filing status for the current year?

a. married filing separately

b. single

c. head of household

d. surviving spouse

c. head of household

Which of the following taxpayers would not qualify for the filing status of head of household?

a. a married taxpayer with a dependent child in the household who has lived apart from the taxpayer’s spouse for the entire year due to abandonment

b. a single taxpayer whose spouse died in the preceding tax year and who has a dependent child living in the household

c. a single taxpayer who provides one-half of the support for a dependent child who has lived almost the entire year at the U.S. university while pursuing an undergraduate degree

d. a single taxpayer who provides over one-half of the support for a dependent parent in a nursing home but does not have a qualifying child in the household

b. a single taxpayer whose spouse died in the preceding tax year and who has a dependent child living in the household

The spouse of a married taxpayer died on January 15, Year 1. The taxpayer’s qualifying child moved to live with grandparents in their home on August 30, Year 2. If the taxpayer did not remarry before the end of Year 2, then which filing status should the taxpayer choose for Year 2?

a. head of household

b. qualifying surviving spouse

c. married filing jointly

d. married filing separately

a. head of household

Dave and Pam Stevens contributed to the support of their three children, Lisa, Tanya, and Hannah, and Pam’s divorced mother, Ellen. For the current year, Lisa, a 26-year-old sales clerk, earned $27,000. Tanya, a 23-year-old, full-time college graduate student in accounting, earned $35,000 working for a CPA firm. Hannah, a 20-year-old artist, earned nothing during the year, but is still aspiring to sell her first piece and has signed on with an art studio. Ellen received $10,000 in nontaxable Social Security benefits and $2,000 in dividend income. All are U.S. citizens and are over half supported by Dave and Pam. How many dependents do Dave and Pam Stevens have under the qualifying child (QC) and qualifying relative (QR) rules?

a. two

b. zero

c. three

d. one

c. three

Anderson, a computer engineer, and spouse, who is unemployed, provide more than half of the support for their younger child, age 23, who is a full-time student and who earns $7,000. They also provide more than half of the support for their older child, age 33, who earns $2,000 during the year. Both children are U.S. citizens and live in their parents’ home for most of the year. How many dependent meet qualifying relative or qualifying child rules for the Andersons?

a. one

b. zero

c. three

d. two

d. two

Nicole and Andrew Harris contribute to more than half of the support of their three children, Travis, Luke, and John. Travis, age 20, worked full time at the local deli and earned $20,000. Luke, 18, is a part-time college student who earned $5,000 working as a resident assistant in the student dormitory where he lived half of the year. John, age 25, is an aspiring actor who lives at home with Nicole and Andrew. John earned $2,500 for the three commercials he starred in. Who qualifies as a dependent for Nicole and Andrew under either the rules of qualifying child or qualifying relative?

a. Travis and Luke

b. Luke and John

c. Travis, Luke, and John

d. Travis

b. Luke and John

Jim and Kay Ross contributed to the support of their two children, Dale and Kim, and Jim’s widowed parent, Grant. For Year 27, Dale, a 19-year-old full-time college student, earned $4,500 as a babysitter. Kim, a 23-year-old bank teller, earned $12,000. Grant received $8,000 in dividend income and $4,000 in nontaxable Social Security benefits. Grant and Kim are U.S. citizens and were over one-half supported by Jim and Kay, but neither of the two currently reside with Jim and Kay. Dale’s main place of residence is with Jim and Kay, and he is currently on a temporary absence to attend school. How many people meet the definition of either qualifying child or qualifying relative on the Year 27 joint income tax return for Jim and Kay Ross?

a. three

b. one

c. two

d. zero

b. one

John earned $500,000 in his business during the current year, and his wife received investment income of $15,000. John provides more than half of the support of his 50-year-old widowed sister, who lives with John and earned $45,000 in salary in the current year. John also provides full support for his two children, an 18-year-old daughter and a 20-year-old son, who is a full-time college student. The family employs a live-in housekeeper and a live-in butler to assist them with their residence. Both the live-in housekeeper and the live-in butler provided all of their own support. How many people qualify as either a qualifying child or qualifying relative for John?

a. four

b. zero

c. two

d. five

c. two

The Clarks have a 21-year-old son, Alex, who is a full-time student at the state university. Alex received $10,000 in scholarships this year for academic achievement. He also works part time at the university bookstore and earned $7,500 this year. The Clarks paid $10,000 to support Alex this year. Alex was home for two months in the summer and at school for the rest of the year. Alex used the scholarship, the earnings from the part-time job, and the money from his parents and his only source of support this year. Which of the following definitions does Alex meet for the Clarks?

a. qualifying person

b. qualifying relative

c. exemption

d. qualifying child

d. qualifying child

Bob is single and supports his three dogs. He has no other dependents. How many dependents does Bob have?

a. one

b. two

c. zero

d. three

c. zero

Mary is single and fully supports her 22-year-old daughter, Jill, a full-time college student who graduated in May. Jill earned $5,000 by working part-time jobs during the year. Jill lived in a dorm until she graduated and then lived with Mary the rest of the year. How many dependents does Mary have?

a. one

b. two

c. zero

d. three

a. one

Amy and Jack are married and file a joint return. They provide 100 percent of the support for their 5-year-old son, Peter, and Amy's father, Bill, who has no income and lives alone in a separate home purchased by Amy and Jack. How many dependents do Amy and Jack have?

a. one

b. two

c. zero

d. three

b. two

Dave and Mary are married and file a joint return. Dave's fraternity brother from college, Mark, lived with them for the entire year. Mark earned $6,000 from odd jobs during the year and is supported more than 50 percent by Dave and Mary. How many dependents do Dave and Mary have?

a. one

b. two

c. zero

d. three

c. zero

Dave and Mary are married and file a joint return. Dave's fraternity brother from college, Mark, lived with them for the entire year. Mark has no income and is supported more than 50 percent by Dave and Mary. How many dependents do Dave and Mary have?

a. one

b. two

c. zero

d. three

a. one

Jane is single and supports her three children: Karen is age 4 and in preschool. Seth is age 20 and lives away from home at college. Seth has no income and maintains his mother's house as his permanent address. Tom is age 25 and in medical school. Tom earned $10,000 in wages during the year. Both Seth and Tom are full-time students. How many dependents does Jane have?

a. one

b. two

c. zero

d. three

b. two

Abby and Brandon married on December 30 of the current year. Abby had taxable wages of $50,000 in the current year. Brandon was unemployed and did not have any taxable income. Abby and Brandon do not have children or other dependents. What is Abby and Brandon’s filing status?

a. married filing jointly/separately

b. single

c. head of household

d. qualifying surviving spouse

a. married filing jointly/separately

Carey and Donald, became engaged in January of the current year. They lived together for the entire year and got married on January 2 of the following year. Carey and Donald each had taxable wages of $50,000 during the current year. Carey and Donald do not have children or other dependents. What is Carey and Donald’s filing status?

a. married filing jointly/separately

b. single

c. head of household

d. qualifying surviving spouse

b. single

Edgar is unmarried and provides most of the support for his elderly aunt. Edgar paid more than half of the costs of his aunt's nursing home, where she lived the entire year. Edgar's aunt did not have any taxable income in the current year. What is Edgar’s filing status?

a. married filing jointly/separately

b. single

c. head of household

d. qualifying surviving spouse

b. single

Fiona is unmarried and provides most of the support for her elderly father. Fiona paid more than half of the costs of maintaining her father's house, where he lived the entire year. Fiona's father did not have any taxable income in the current year. What is Fiona’s filing status?

a. married filing jointly/separately

b. single

c. head of household

d. qualifying surviving spouse

c. head of household

George's spouse, Helen, died in January of the current year. Helen and George do not have children or other dependents. What is George’s filing status?

a. married filing jointly/separately

b. single

c. head of household

d. qualifying surviving spouse

a. married filing jointly/separately

Iris's spouse, Jacob, died last year. Jacob and Iris do not have children. Iris paid more than half of the costs of her mother's nursing home, where her mother lived the entire year. Iris' mother did not have any taxable income in the current year. What is Iris’s filing status?

a. married filing jointly/separately

b. single

c. head of household

d. qualifying surviving spouse

c. head of household

Kevin's spouse, Louise, died five years ago. Louise and Kevin do not have children or other dependents. What is Kevin’s filing status?

a. married filing jointly/separately

b. single

c. head of household

d. qualifying surviving spouse

b. single

Monica's spouse, Nathan, died in May of the current year. Monica provided all the support for their 7-year-old daughter, who lived in Monica's home the entire year. What is Monica’s filing status?

a. married filing jointly/separately

b. single

c. head of household

d. qualifying surviving spouse

a. married filing jointly/separately

Oliver's spouse, Penelope, died last year. Oliver provided all the support for their 15-year-old son, who lived in Oliver's home the entire year. What is Oliver’s filing status?

a. married filing jointly/separately

b. single

c. head of household

d. qualifying surviving spouse

d. qualifying surviving spouse

Quinn's spouse, Robert, died five years ago. Quinn paid most of the costs of maintaining a home where her 17-year-old daughter lived until May of the current year, when her daughter went to live with her grandmother. What is Quinn’s filing status?

a. married filing jointly/separately

b. single

c. head of household

d. qualifying surviving spouse

b. single

Sam and his spouse divorced in December of the current year. Sam's 12-year-old son lived with his mother during the school year and lived with Sam in the summer. Sam provided most of their son's support. What is Sam’s filing status?

a. married filing jointly/separately

b. single

c. head of household

d. qualifying surviving spouse

b. single

Tiana and her spouse divorced in January of the current year. Tiana's 9-year-old daughter lived with her during the school year and lived with her father in the summer. Her father provided most of their daughter's support. What is Tiana’s filing status?

a. married filing jointly/separately

b. single

c. head of household

d. qualifying surviving spouse

c. head of household

Ulysses and his spouse, Valerie, filed for divorce in November of the current year. They lived apart but did not obtain a legal separation. The divorce was not finalized until February of the following year. They do not have children or other dependents. What is Ulysses’ filing status?

a. married filing jointly/separately

b. single

c. head of household

d. qualifying surviving spouse

a. married filing jointly/separately

Winona is unmarried and provided most of the support for her 3-year-old grandson, who lived in Winona's home the entire year. What is Winona’s filing status?

a. married filing jointly/separately

b. single

c. head of household

d. qualifying surviving spouse

c. head of household

Xavier is unmarried and provided most of the support for his 25-year-old girlfriend, who lived in Xavier's home for the entire year. Xavier's girlfriend did not have any taxable income in the current year. What is Xavier’s filing status?

a. married filing jointly/separately

b. single

c. head of household

d. qualifying surviving spouse

b. single

Yvonne and her spouse married three years ago. In October of the current year they moved into separate homes. They obtained a legal separation in November of the current year. They do not have children or other dependents. What is Yvonne’s filing status?

a. married filing jointly/separately

b. single

c. head of household

d. qualifying surviving spouse

b. single

Zack and his spouse divorced three years ago. Zack provided most of the support for his 20-year-old daughter, who is a full-time college student, for the current year. His daughter lived in the college dorm during the academic year but lived with Zack in the summer. She did not have any taxable income in the current year. What is Zack’s filing status?

a. married filing jointly/separately

b. single

c. head of household

d. qualifying surviving spouse

c. head of household

Clark did not itemize deductions on his Year 8 federal income tax return. In July Year 9, Clark received a state income tax refund of $900 plus interest of $10, for overpayment of Year 8 state income tax. What amount of the state tax refund and interest is taxable on Clark's Year 9 federal income tax return?

a. $0

b. $10

c. $910

d. $900

b. $10

John and Mary were divorced in 2017. The divorce decree (executed June 30, 2017) provides that John pay alimony of $10,000 per year, to be reduced by 20 percent on their child's 18th birthday. During the current year, the $10,000 was paid in the following way: John paid $7,000 directly to Mary and $3,000 to Spring College for Mary's tuition. What amount of these payments should be reported as income in Mary's current year income tax return?

a. $10,000

b. $8,600

c. $8,000

d. $5,600

c. $8,000

DAC Foundation awarded Kent $75,000 in recognition of lifelong literary achievement. Kent was not required to render future services as a condition to receive the $75,000. What condition(s) must have been met for the award to be excluded from Kent's gross income?

I. Kent was selected for the award by DAC without any action on Kent’s part.

II. Pursuant to Kent’s designation, DAC paid the amount of the award either to a governmental unit or to a charitable organization

a. both I and II

b. neither I nor II

c. II only

d. I only

a. both I and II

Klein, a master's degree candidate at Blair University, was awarded a $12,000 scholarship from Blair in Year 8. The scholarship was used to pay Klein's Year 8 university tuition and fees. Also in Year 8, Klein received $5,000 for teaching two courses at a nearby college. What amount is includable in Klein's Year 8 gross income?

a. $17,000

b. $0

c. $5,000

d. $12,000

c. $5,000

Which one of the following will result in an accruable expense for an accrual-basis taxpayer?

a. a signed contract for repair work to be done and the work is to be completed at a later date

b. an invoice dated prior to year end but the repair completed after year end

c. a repair completed prior to year end but not invoiced

d. a repair completed prior to year end and paid upon completion

c. a repair completed prior to year end but not invoiced

A cash basis taxpayer should report gross income:

a. only for the year in which income is actually received whether in cash or in property

b. for the year in which income is either actually or constructively received, whether in cash or in property

c. for the year in which income is either actually or constructively received in cash only

d. only ofr the year in which income is actually received in cash

b. for the year in which income is either actually or constructively received, whether in cash or in property

Linda is an employee of JRH Corporation. Which of the following would be included in Linda’s gross income?

a. $1,000 of tuition paid by JRH Corporation to State University for Linda’s master’s degree program

b. $2,500 paid by JRH Corporation for an annual parking pass for Linda

c. Premiums paid by JRH Corporation for a group term life insurance policy for $50,000 of coverage for Linda

d. a $2,000 trip given to Linda by JRH Corporation for meeting sales goals

d. a $2,000 trip given to Linda by JRH Corporation for meeting sales goals

Jensen reported the following items during the current year:

Fair rent value of a condominium owned by Jensen's employer	1,400
Cash found in a desk purchased for $30 at a flea market	400
Inheritance	11,000

The employer allowed Jensen to use the condominium for free in recognition of outstanding achievement. Based on this information, what is Jensen's gross income for the year?

a. $1,800

b. $1,770

c. $1,400

d. $12,400

a. $1,800

Johnson worked for ABC Co. and earned a salary of $100,000. Johnson also received, as a fringe benefit, group term-life insurance at twice Johnson's salary. Assume the annual IRS-established uniform cost of insurance is $2.76 per $1,000 of coverage. What amount must Johnson include in gross income?

a. $100,552

b. $100,276

c. $100,414

d. $100,000

c. $100,414

A painter and an accountant agree to trade their services. The painter provides services valued at $550, and the accountant provides services worth $500. What amount should the accountant report as income or expense?

a. $500 income

b. $50 expense

c. $50 income

d. $550 income

a. $500 income

In Year 2, Carson was hired as an employee of Barton Co. As part of his employment contract, Barton provided a company car for Carson's spouse, Mary, who is not employed. The value for the use of the automobile in Year 2 was $8,000. Carson does not use the automobile. Carson and Mary file separate individual income tax returns. What amounts, if any, should be reported as a taxable fringe benefit on Carson and Mary's Year 2 income tax returns for the personal use of the automobile?

a. Carson $0; Mary $0

b. Carson $8,000; Mary $0

c. Carson $0; Mary $8,000

d. Carson $4,000; Mary $4,000

b. Carson $8,000; Mary $0

In the current year Jensen had the following items:

Salary	50,000
Inheritance	25,000
Alimony from ex-spouse (divorce agreement finalized in 2015)	12,000
Child support from ex-spouse	9,000

What is Jensen's adjusted gross income (AGI) for the current year?

a. $96,000

b. $71,000

c. $62,000

d. $50,000

a. $96,000

Mosh, a sole proprietor, uses the cash basis of accounting. At the beginning of the current year, accounts receivable were $25,000. During the year, Mosh collected $100,000 from customers. At the end of the year, accounts receivable were $15,000. What was Mosh's gross taxable income for the current year?

a. $90,000

b. $75,000

c. $100,000

d. $110,000

c. $100,000

A taxpayer moved over 500 miles at the request of the taxpayer's employer. The taxpayer incurred ordinary moving costs to transport personal property during the move. The taxpayer's employer reimbursed 80 percent of those costs. How will this move affect the taxpayer's taxable income for the year?

a. the reimbursement increases taxable income, and the expenses are not deductible

b. the reimbursement is excluded form taxable income, and the expenses are deductible

c. the reimbursement is excluded from income, and the expenses are not deductible

d. the reimbursement increases taxable income, and the expenses are deductible

a. the reimbursement increases taxable income, and the expenses are not deductible

A taxpayer received a parcel of land valued at $20,000 in exchange for performing services valued at $20,000 for another individual. What is the tax consequence, if any, of the taxpayer's receipt of the land?

a. there is not tax effect

b. $20,000 of capital gain income

c. $20,000 of portfolio income

d. $20,000 or ordinary income

d. $20,000 or ordinary income

The following Year 1 annual report was received by Clark from the qualified traditional defined contribution plan provided by Clark's employer:

Beginning balance	$12,700
Employer contribution	600
Plan earnings	250
Ending balance	$13,550

What income must be included in Clark's gross income for Year 1?

a. $250

b. $600

c. $850

d. $0

d. $0

In a tax year where the taxpayer pays qualified education expenses, interest income on the redemption of qualified U.S. Series EE Bonds may be excluded from gross income. The exclusion is subject to a modified gross income limitation and a limit of aggregate bond proceeds in excess of qualified higher-education expenses. Which of the following is (are) true?

I. The exclusion applies for education expenses incurred by the taxpayer, the taxpayer’s spouse, or any person whom the taxpayer may claim as a dependent for the year.

II. “Otherwise qualified higher-education expenses” must be reduced by qualified scholarships not includible in gross income.

a. neither I nor II

b. II only

c. Both I and II

d. I only

c. Both I and II

Clark bought Series EE U.S. Savings Bonds after 1989. Redemption proceeds will be used for payment of college tuition for Clark's dependent child. One of the conditions that must be met for tax exemption of accumulated interest on these bonds is that the:

a. bonds must be bought by the owner of the bonds before the owner reaches the age of 24

b. purchaser of the bonds must be the sole owner of the bonds (or joints owner with his or her spouse)

c. bonds must be bought by a parent (or both parents) and put in the name of the dependent child

d. bonds must be transferred to the college for redemption by the college rather than by the owner of the bonds

b. purchaser of the bonds must be the sole owner of the bonds (or joints owner with his or her spouse)

During the year Kay received interest income as follows:

On U.S. Treasury certificates	4,000
On refund of prior year's federal income tax	500

The total amount of interest subject to tax in Kay's current year tax return is:

a. $4,500

b. $4,000

c. $500

d. $0

a. $4,500

Charles and Marcia are married cash-basis taxpayers. In Year 8, they had interest income as follows:

• $500 interest on federal income tax refund.

• $600 interest on state income tax refund.

• $800 interest on federal government obligations.

• $1,000 interest on state government obligations.

What amount of interest income is taxable on Charles and Marcia's Year 8 joint income tax return?

a. $1,100

b. $500

c. $1,900

d. $2,900

c. $1,900

Seth Silver had the following items of income during the taxable year:

Interest income from a checking account	1,000
Interest income from a money market account	2,050
Interest income from a municipal bond he purchased during the current year	250
Interest income from federal bonds he purchased 2 years ago	750

On his current year tax return, what amount is taxable income?

a. $3,050

b. $3,300

c. $3,800

d. $4,050

c. $3,800

A taxpayer received $200 in interest from U.S. Treasury bonds and $300 in interest from municipal bonds. What amount of interest should be included in the taxpayer's gross income?

a. $0

b. $200

c. $500

d. $300

b. $200

Falconer received the following interest payments:

Description	Amount
Municipal bonds	$  500
U.S. Treasury bonds	$1,000
Interest on state tax refund	$300
Corporate bonds	$800

What amount is taxable interest?

a. $2,100

b. $1,100

c. $1,800

d. $2,600

a. $2,100

Darr, an employee of Sorce C Corporation, is not a shareholder. Which of the following would be included in Darr's taxable gross income?

a. the dividend income on shares of stock that the taxpayer received for services rendered

b. the fair market value of land that the taxpayer inherited from an uncle

c. a $10,000 gift from the taxpayer’s grandparents

d. employer-provided medical insurance coverage under a health plan

a. the dividend income on shares of stock that the taxpayer received for services rendered

Terry received an ordinary dividend of $5,000 and capital gain distributions of $7,000 from a mutual fund company. Terry took no cash out of the account, but reinvested all of the dividends and capital gain distributions. What is Terry's gross income?

a. $0

b. $5,000

c. $7,000

d. $12,000

d. $12,000

Robbe, a cash-basis single taxpayer, reported $50,000 of adjusted gross income last year and claimed itemized deductions of $13,550, which included $5,500 of state income taxes paid last year. Robbe's itemized deduction amount exceeded the standard deduction available to single taxpayers for last year by $1,150. In the current year, Robbe received a $1,500 state tax refund relating to the prior year. What is the proper treatment of the state tax refund?

a. amend the prior-year’s return and reduce the claimed itemized deductions for that year

b. include $1,500 in income in the current year

c. include none of the refund in income in the current year

d. include $1,150 in income in the current year

d. include $1,150 in income in the current year

Randolph is a single individual who always claims the standard deduction. Randolph received the following in the current year:

Wages	22,000
Unemployment compensation	6,000
Pension distribution (100% taxable)	4,000
A state tax refund from the previous year	425

What is Randolph’s gross income?

a. $32,425

b. $22,000

c. $32,000

d. $28,425

c. $32,000

Kurstie received a $800 state income tax refund this year. Kurstie deducted $3,000 of state income taxes paid in the prior year as part of her itemized deductions. Which of the following statements regarding the taxability of Kurstie’s refund is true?

a. Kurstie must include $3,000 in gross income in the current year

b. if Kurstie’s itemized deductions exceeded the standard deduction by $200, then $200 of the refund is included in gross income

c. if Kurstie’s itemized deductions exceeded the standard deduction by $200, then the $800 refund is included in gross income

d. if Kurstie claimed the standard deduction instead, then the $800 refund is taxable

b. if Kurstie’s itemized deductions exceeded the standard deduction by $200, then $200 of the refund is included in gross income

Which of the following is taxable as gross income?

a. alimony received based on divorce agreement executed in 2019

b. alimony received based on a divorce agreement executed in 2015

c. child support received based on a divorce agreement executed in 2019

d. child support received based on a divorce agreement executed in 2015

b. alimony received based on a divorce agreement executed in 2015

Which of the following should be included when determining adjusted gross income?

a. tuition scholarship

b. alimony received pursuant to a divorce decree executed in 2014

c. rental value of parsonages

d. compensation for injuries or sickness

b. alimony received pursuant to a divorce decree executed in 2014

In a 2017 divorce settlement, the ex-husband was required by court order to pay his ex-wife $36,000 in alimony. She received $25,000 in cash, a painting valued at $10,000, and the use of his beach house, valued at $3,000. What amount of gross income should she report as alimony?

a. $38,000

b. $35,000

c. $25,000

d. $36,000

c. $25,000

As a result of a divorce settled in 2016, a taxpayer received the following during the current year:

Cash from the property settlement	$100,000
Child support	12,000
Alimony payments	30,000

What amount, if any, must be included in gross income for the current year?

a. $130,000

b. $30,000

c. $142,000

d. $0

b. $30,000

An individual received $50,000 during the current year pursuant to a divorce decree executed in 2015. A check for $25,000 was identified as annual alimony, checks totaling $10,000 as annual child support, and a check for $15,000 as a property settlement. What amount should be included in the individual's gross income?

a. $0

b. $50,000

c. $40,000

d. $25,000

d. $25,000

Merrill and Joe's divorce was finalized in June of 2012. As part of the settlement, Joe received the following:

Alimony	$3,000	/per month
Child support	1,000	/per month
Lump-sum property settlement payment	125,000

Payments began in July, 2012; however, Merrill only paid a total of $15,000 during the year. For the current year, what amount must Joe include in gross income on his individual income tax return?

a. $140,000

b. $9,000

c. $134,000

d. $15,000

b. $9,000

Hall, a divorced person and custodian of her 12-year-old child, filed her current year federal income tax return as head of a household. The divorce agreement, executed in 2017, provides for Hall to receive $3,000 per month, of which $600 is designated as child support. After the child reaches 18, the monthly payments are to be reduced to $2,400 and are to continue until remarriage or death. However, for the current year, Hall received a total of only $5,000 from her former husband. Hall paid an attorney $2,000 in the current year in a suit to collect the alimony owed.

What amount should be reported in Hall's current year tax return as alimony income?

a. $28,800

b. $5,000

c. $36,000

d. $0

d. $0

A 65-year-old taxpayer has a traditional IRA. The taxpayer has made deductible contributions to the plan totaling $20,000. The current balance in the account is $28,000. The taxpayer withdraws $10,000 from the plan. What portion of the withdrawal is taxable?

a. $8,000

b. $10,000

c. $2,857

d. $0

b. $10,000

A 60-year-old taxpayer established a Roth IRA six years ago. The taxpayer's contributions to the plan total $12,000, and the plan has a current balance of $15,000. The taxpayer withdraws $5,000 from the plan. What amount of the withdrawal is taxable?

a. $5,000

b. $3,000

c. $1,000

d. $0

d. $0

Sanderson has made deductible contributions to his traditional IRA for many years. Sanderson recently retired at age 60 and received a distribution of $150,000. In which way, if any, will the distribution be taxed?

a. subject to a 10% penalty tax

b. it will not be taxed

c. as a capital gain

d. as ordinary income

d. as ordinary income

A 33-year-old taxpayer withdrew $30,000 from a deductible traditional IRA. The taxpayer has a 33% effective tax rate and a 35% marginal tax rate. What is the total tax liability associated with the withdrawal?

a. $13,000

b. $13,500

c. $10,500

d. $10,000

b. $13,500

Mr. and Mrs. Williams decided during the current tax year to purchase their first new home. The cost of the home was $275,000, and a 20 percent down payment was required to secure a mortgage in the amount of $220,000. The Williamses decided to utilize $10,000 that was kept in a traditional individual retirement account (IRA) owned by Mrs. Williams. This amount was withdrawn on June 12 and used to fund the down payment on July 1. These amounts had been previously deducted as an adjustment by her on an individual tax return in the year of contribution. The remaining $45,000 for the down payment was drawn from a savings account. How much of the distribution from the IRA is subject to the premature distribution penalty tax, and how much must be included in gross income on the Williamses' current year joint income tax return?

		Penalty Tax	Gross Income
	A.	$0	$10,000
	B.	$0	$0
	C.	$10,000	$0
	D.	$10,000	$10,000

a. $0, $10,000

For a cash basis taxpayer, gain or loss on a year-end sale of listed stock arises on the:

a. trade date

b. date of delivery of stock certificate

c. settlement date

d. date of receipt of cash proceeds

a. trade date

Which of the following conditions must be present in a divorce agreement executed on or before December 31, 2018, for a payment to qualify as deductible alimony?

I. Payments must be in cash or its equivalent.

II. The payments must end at the recipient’s death.

a. I only

b. II only

c. both I and II

d. neither I and II

c. both I and II

A retiree invested $100,000 in an annuity that pays $12,000 annually for 10 years. What portion of the first payment should be included in the retiree's gross income?

a. $2,000

b. $12,000

c. $0

d. $10,000

a. $2,000

With regard to the inclusion of Social Security benefits in gross income for the tax year, which of the following statements is correct?

a. 50% of the Social Security benefits is the maximum amount of benefits to be included in gross income

b. 85% of the Social Security benefits is the maximum amount of benefits to be included in gross income

c. 100% of the Social Security benefits received is included in gross income

d. Social Security benefits received are never included in gross income

b. 85% of the Social Security benefits is the maximum amount of benefits to be included in gross income

During the current year, Adler had the following cash receipts:

Wages	18,000
Interest income from investments in municipal bonds	400
Unemployment compensation	3,900

What is the total amount that must be included in gross income on Adler's current year income tax return?

a. $22,300

b. $18,000

c. $21,900

d. $18,400

c. $21,900

Porter was unemployed for part of the current year. Porter received $35,000 of wages, $6,400 from a state unemployment compensation plan, and $2,000 from his former employer's company-paid supplemental unemployment benefit plan. What is the amount of Porter's gross income for the current year?

a. $43,400

b. $35,000

c. $37,000

d. $41,400

a. $43,400

Daisy Dunn, a single calendar-year taxpayer with no dependents, died on March 1, Year 1. Daisy earned $20,000 from her job in Year 1 before she died and had interest income from bank accounts of $500. Her estate received another $1,500 of interest from her bank accounts in Year 1 after her death.

What is the due date for Daisy's Year 1 final federal income tax return?

a. April 15, Year 2

b. April 15, Year 1

c. March 1, Year 2

d. December 31, Year 1

a. April 15, Year 2

Daisy Dunn is a single, calendar-year, cash-basis taxpayer with no dependents. Daisy died on March 1, Year 1. Daisy earned $20,000 from her job and $500 of interest income from bank accounts in Year 1 before she died. Her estate received another $1,500 of interest from her bank accounts in Year 1 after her death.

What is Daisy's taxable gross income on her Year 1 final federal income tax return?

a. $20,000

b. $0

c. $20,500

d. $22,000

c. $20,500

Sullivan sustained personal injuries from an automobile accident. Sullivan was awarded $200,000 in damages for physical personal injury and $2,000,000 in punitive damages. What amount is includible in Sullivan's gross income?

a. $0

b. $200,000

c. $2,000,000

d. $2,200,000

c. $2,000,000

During Year 9, Ash had the following cash receipts:

Wages	13,000
Interest income from U.S. Treasury bonds	350
Workers' compensation following a job-related injury	8,500

What is the total amount that must be included in gross income on Ash's Year 9 income tax return?

a. $13,000

b. $13,350

c. $21,500

d. $21,850

b. $13,350

Which payment(s) is (are) included in a recipient's gross income?

I. Payment to a graduate assistant for a part-time teaching assignment at a university. Teaching is not a requirement toward obtaining the degree.

II. A grant to a Ph.D. candidate for his participation in a university-sponsored research project for the benefit of the university.

a. I only

b. both I and II

c. neither I nor II

d. II only

b. both I and II

Under a $150,000 insurance policy on her deceased father's life, May Green is to receive $12,000 per year for 15 years. Of the $12,000 received in the current year, the amount subject to income tax is:

a. $1,000

b. $12,000

c. $0

d. $2,000

d. $2,000