Question 1

Loretta received $6,200 from a disability insurance policy that she purchased directly this year. Loretta must include all $6,200 in her gross income.

Accepted Answer

A) True 
 B)False

Question 2

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 the above benefits is included in gross incomeF) D) and E)
G) A) and E)

Question 3

This year Henry realized a gain on the sale of an antique car that he inherited from his uncle. The buyer has promised to pay Henry in installment payments over the next few years. Identify the principle that will determine when Henry should be taxed on the gain from the sale:

Accepted Answer

A)   Assignment of income.
B)   Constructive receipt.
C)   Return of capital principle.
D)   Wherewithal to pay.
E)   All of the choices are correct.F) B) and D)
G) A) and E)

Question 4

Sally is a cash basis taxpayer and a member of the Valley Barter club. This year Sally provided 100 hours of sewing services to the barter club in exchange for two football playoff tickets. Which of the following is a true statement?

Accepted Answer

A)   Sally need not recognize any gross income unless she sells the football tickets.
B)   Sally's exchange does not result in taxable income.
C)   Sally is taxed on the value of the football tickets even if she cannot attend the game.
D)   Sally is taxed on the value of her sewing services only if she is a professional seamstress.
E)   None of the choices are correct.F) A) and B)
G) B) and D)

Question 5

U.S. citizens generally are subject to tax on all income whether it is generated in the United States or in foreign countries.

Accepted Answer

A) True 
 B)False

Question 6

To provide relief from double taxation, Congress allows a foreign-unearned income exclusion for interest and dividends earned in foreign countries.

Accepted Answer

A) True 
 B)False

Question 7

The all-inclusive definition of income means that gross income is defined very broadly.

Accepted Answer

A) True 
 B)False

Question 8

The tax benefit rule applies when a taxpayer refunds amounts that were previously included in income.

Accepted Answer

A) True 
 B)False

Question 9

Opal deducted $2,400 of state income taxes on her tax return last year. This year she received a state income tax refund of $170. What amount of the refund, if any, should Opal include in her gross income if last year her total itemized deductions exceeded the standard deduction by $350?

Accepted Answer

A)   $2,050
B)   $350
C)   $180
D)   $170
E)   None of the above - refunds of state income taxes are not included in gross income.F) B) and D)
G) C) and D)

Question 10

Dave is a plumber who uses the cash method of accounting. This year Dave requested that his clients make their checks payable to his son, Steve. This year Steve received checks in the amount of $62,000 for Dave's plumbing services. Which of the following is a true statement?

Accepted Answer

A)   Dave is taxed on $62,000 of plumbing income this year.
B)   Steve is taxed on $62,000 of plumbing income this year.
C)   Steve is taxed on $62,000 of income from gifts received this year.
D)   Dave may deduct the $62,000 received by Steve.
E)   None of the choices are correct.F) None of the above
G) B) and D)

Exam 5: Gross Income and Exclusions

Opal deducted $2,400 of state income taxes on her tax return last year. This year she received a state income tax refund of $170. What amount of the refund, if any, should Opal include in her gross income if last year her total itemized deductions exceeded the standard deduction by $350?

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

The all-inclusive definition of income means that gross income is defined very broadly.

Correct Answer
verified

The tax benefit rule applies when a taxpayer refunds amounts that were previously included in income.

Correct Answer
verified

U.S. citizens generally are subject to tax on all income whether it is generated in the United States or in foreign countries.

Correct Answer
verified

Loretta received $6,200 from a disability insurance policy that she purchased directly this year. Loretta must include all $6,200 in her gross income.

Correct Answer
verified

This year Henry realized a gain on the sale of an antique car that he inherited from his uncle. The buyer has promised to pay Henry in installment payments over the next few years. Identify the principle that will determine when Henry should be taxed on the gain from the sale:

Correct Answer
verified

Sally is a cash basis taxpayer and a member of the Valley Barter club. This year Sally provided 100 hours of sewing services to the barter club in exchange for two football playoff tickets. Which of the following is a true statement?

Correct Answer
verified

To provide relief from double taxation, Congress allows a foreign-unearned income exclusion for interest and dividends earned in foreign countries.

Correct Answer
verified

Dave is a plumber who uses the cash method of accounting. This year Dave requested that his clients make their checks payable to his son, Steve. This year Steve received checks in the amount of $62,000 for Dave's plumbing services. Which of the following is a true statement?

Correct Answer
verified

Exam 5: Gross Income and Exclusions

Opal deducted $2,400 of state income taxes on her tax return last year. This year she received a state income tax refund of $170. What amount of the refund, if any, should Opal include in her gross income if last year her total itemized deductions exceeded the standard deduction by $350?

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

The all-inclusive definition of income means that gross income is defined very broadly.

Correct AnswerverifiedShow Answer

The tax benefit rule applies when a taxpayer refunds amounts that were previously included in income.

Correct AnswerverifiedShow Answer

U.S. citizens generally are subject to tax on all income whether it is generated in the United States or in foreign countries.

Correct AnswerverifiedShow Answer

Loretta received $6,200 from a disability insurance policy that she purchased directly this year. Loretta must include all $6,200 in her gross income.

Correct AnswerverifiedShow Answer

This year Henry realized a gain on the sale of an antique car that he inherited from his uncle. The buyer has promised to pay Henry in installment payments over the next few years. Identify the principle that will determine when Henry should be taxed on the gain from the sale:

Correct AnswerverifiedShow Answer

Sally is a cash basis taxpayer and a member of the Valley Barter club. This year Sally provided 100 hours of sewing services to the barter club in exchange for two football playoff tickets. Which of the following is a true statement?

Correct AnswerverifiedShow Answer

To provide relief from double taxation, Congress allows a foreign-unearned income exclusion for interest and dividends earned in foreign countries.

Correct AnswerverifiedShow Answer

Dave is a plumber who uses the cash method of accounting. This year Dave requested that his clients make their checks payable to his son, Steve. This year Steve received checks in the amount of $62,000 for Dave's plumbing services. Which of the following is a true statement?

Correct AnswerverifiedShow Answer

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