1. Bobby and Sissy got married 2.5 years ago. Since that time, they have lived in Bobby's home. Sissy sold her previous home three years ago and ex-
... [Show More] cluded her entire gain ($80,000) at that time. Bob- by and Sissy decided to move to a bigger home this year. As a result, they sold Bobby's home for $500,000 (original cost $150,000). How much of the gain from the sale is taxable? 2. T/F Gambling winnings are included in gross in- come only to the extent that the winnings exceed gambling losses incurred during the same period. 3. Hazel received 20 NQOs (each option gives her the right to purchase 10 shares of stock for $7 per share) at the time she started working when the stock price was $14 per share. Now that the 100,000 is taxable because Sissy is ineligible for the exclusion, the amount drops down to 250,000 allowed to exclude. They made 350,000 off the sale, so 350,000-250,000= 100,000. False- Taxpayers must include all gambling winnings for the year in gross income. On the Exercise date she will recognize $2600. 10 shares of stock share price is $20 per share, she exercises all of her at a savings of $13 options. How much income will Hazel recognize on the exercise date and how much tax will she pay assuming her marginal tax rate is 25 percent? 4. Maren received 10 NQOs (each option gives her the right to purchase 10 shares of stock for $8 per share) at the time she started working when the stock price was $6 per share. When the share price was $15 per share, she exercised all of her options. Eighteen months later she sold all of the shares for $20 per share. How much gain will Maren recognize on the sale and how much tax will she pay assuming her marginal tax rate is 35 percent? a)$0 gain and $0 tax. b) $500 gain and $75 tax. (20-7) x 20 NQOs 2600. She will pay 650 in taxes. D c) $500 gain and $175 tax. d) $1,200 gain and $180 tax. 5. Shaun is a student who has received an acade- mic scholarship to State University. The scholar- ship paid $14,000 for tuition, $2,500 for fees, and $1,000 for books. In addition, Shaun's dormitory fees of $8,500 were paid by the University when he agreed to counsel freshman on campus living. What amount must Shaun include in his gross in- come? a) $9,500 b) $11,000 c) $2,500 d) $8,500 e) Zero - none of these benefits is included in gross income 6. Blake is a limited partner in Kling-On Partners. This year Kling-On reported that Blake's share of divi- dend income was $3,700 and his share of municipal interest was $2,750. Early this year Blake found a bundle of $100 bills in the alley outside his apart- ment. When no one claimed the money, the cash (a total of $2,400) was returned to Blake. Finally, Blake earned salary of $42,000 but almost $6,500 was withheld for income taxes and FICA tax. Compute Blake's realized income and gross income. D) Because Shaun is required to per- form services in or- der to receive this money it is deemed taxable. 3700+2400+42000= 48, 3700+2750+2400+4200 7. T/F Retired taxpayers over 59 ½ years of age at the False- It is 70 and a end of the year must receive minimum distributions from defined contribution plans or they are subject to a penalty. 8. Dora made a gift of stock to her granddaughter. At the time of the gift, the stock was worth $15,000. Several months after the gift, a $500 dividend was declared on the stock and paid to Dora's grand- daughter. What amount must Dora's granddaughter include in her gross income? half E because she would only need to include dividend in- come and that is not an option. 15000 is only subject to a)$2,000 b)$15,000 c)$15,500 d) $2,500 e) None of these 9. Charles and Camilla are getting divorced. Under the terms of the decree Charles will pay Camilla $50,000 in cash in each of the next five years (or until Camilla's death or remarriage). In addition, Charles will transfer a castle worth $2,000,000 to Camilla and pay $12,000 per year to support their son, Clyde, until he turns 19 years old. What amount (if any) is included in Camilla's gross income this year? a) $2,062,000 b)$12,000 c) $50,000 d) $2,050,000 e) None of the payments are included in gross in- come 10. Which of the following best describes distributions from a traditional defined contribution plan? a) Distributions from defined contribution plans are fully taxable as ordinary income. b) Distributions from defined contribution plans are partially taxable as ordinary income and partial- ly nontaxable as a return of capital. c) Distributions from defined contribution plans are fully taxable as capital gains. d) Distributions from defined contribution plans are partially taxable as capital gains and partially non- taxable as a return of capital. 11. Wilma has a $25,000 certificate of deposit (CD) at the local bank. The interest on this certificate, $1,000, was credited to her account this year but gift tax, not gift and income tax...that's double taxation C because she would have to in- clude the alimo- ny payments as in- come. a) other than Roth...distribu- tions are considered ordinary income A- because she earned the income this year and has ac- she must pay an early withdrawal penalty if she cashes in the CD before next year. Which of the following is a true statement? a) Wilma must include the $1,000 of interest in her income this year. b) Wilma must include the $1,000 of interest in her income when she cashes the CD. c) Wilma must include the $1,000 of interest in her income this year only if the bank waives the early withdrawal penalty. d) Wilma must include the $1,000 of interest in her income next year if she does not pay the early withdrawal penalty. e) All of these. 12. Which of the following statements regarding con- tributions to defined contribution plans is true? a)Employer contributions to a defined contribution plan are not limited by the tax law. b) Employee contributions to a defined contribu- tion plan are not limited by the tax law. c) An employee who is at least 60 years of age as of the end of the year may contribute more to a defined contribution plan than an employee who has not reached age 60 by year end. d) The tax laws limit the sum of the employer and employee contributions to a defined contribution plan. 13. Jack and Jill are married. This year Jack earned $72,000 and Jill earned $80,000 and they received $4,000 of interest income from a joint savings ac- cess to it, even if it comes at the cost of a fee she has to in- clude it as income D D) 78,000 if they reside in community property law state count. How much gross income would Jack report if he files married-separate from Jill? a) $72,000 if they reside in a common law state. b) $76,000 if they reside in a community property law state. which means, all property belonging to either spouse added up is split directly in half. c) $84,000 if they reside in a common law state. So...72000+80000+4000 d) $78,000 if they reside in a community property law state. e) all of these 14. Brenda has $15,000 in U.S. Series EE saving bonds and she is considering whether to cash the bonds. Under what conditions can Brenda exclude the in- terest on the savings bonds from her gross in- come? a) Brenda can exclude the interest if she uses the proceeds to pay for college tuition. b) Brenda's modified AGI must be below a phase-out range for the exclusion. c) The proceeds must be used for higher education expenses of Brenda, her spouse, or Brenda's de- pendent. d) All of these are necessary conditions for Brenda to exclude the interest. e) None of these - the interest is always included in gross income 15. Shauna received a $100,000 distribution from her 401(k) account this year. Assuming Shauna's mar- ginal tax rate is 25%, what is the total amount of tax and penalty Shauna will be required to pay if she receives the distribution on her 59th birthday and she has not yet retired? a) $0. b) $10,000. c) $25,000. d) $35,000. e) None of these. C D- 25%(100000)+ 10%(100000)= 35000 16. The maximum amount of net capital losses individ- uals may deduct against their ordinary income per year is: a) $3,000 b) $5,000 c) Zero, losses are not deductible d) There is no maximum. All losses are allowed to be deducted e) None of these 17. T/F Defined benefit plans specify the amount of benefit an employee will receive on retire- ment while defined contribution plans specify the amounts that employers and employees will (or can) contribute to an employee's plan. 18. Graham has accepted an offer to do graduate work b True a) only the 3500, be- in the chemistry department at State University. The cause the tuition re- chemistry department offered Graham a $5,000 tu- ition reduction and $3,500 toward the cost of room and meals. Under the terms of the scholarship Graham must work in the chemistry labs during the summer as a research assistant. What amount must Graham include in his gross income? a) $8,500 b) $5,000 c) $3,500 d) $2,500 e) Zero - none of these benefits is included in gross income 19. NeNe is an accountant and U.S. citizen, who has accepted a permanent position in Madrid, Spain for a Spanish financial services company. This year, NeNe spent the entire year working in Madrid. NeNe's employer paid $40,000 of her Madrid hous- ing expenses this year. What amount of the $40,000 housing payments may NeNe exclude? a) NeNe can exclude all of the housing payment duction is covered as a nontaxable op- tion according to the code but the mon- ey towards room and board are consid- ered excess scholar- ship amounts a) because she worked more than 330 days overseas b) 16,128 c) 23,872 d) 14,112 e) None of her salary can be excluded from gross income. 20. Ethan competed in the annual Austin Marathon this year and won a $25,000 prize for fastest wheelchair entrant. Ethan indicated that he would transfer the prize to the local hospital. How much of the prize should Ethan include in his gross income? a) $25,000 b) $25,000 because all prizes are taxable c) Zero because prizes transferred to charities are excludible d) Zero because all prizes are excludible e) Zero because prizes from charities are excludible 21. T/ 22. 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 ex- change for 2 football playoff tickets. Which of the following is a true statement? 23. This year Barney purchased 500 shares of Bell common stock for $20 per share. At year end the Bell shares were only worth $2 per share. What amount can Barney deduct as a loss this year? 24. Hillary is a cash-basis calendar-year taxpayer. Dur- C Sally is taxed on the value of the tickets even if she cannot attend the game. (You must recognize all barter as income, and it is taxable, re- gardless if cash or not) None, Barney is not entitled to a loss de- duction C: Under construc- ing the last week of December she received a letter tive receipt Hillary is taxed on income containing a $5000 check for services. Which of the following is a true statement 25. Dave is a plumber who uses the cash method of ac- counting. This year Dave requested that his clients make their checks payable to his son, Steve. This when property is received or made available to her A: You can't give someone else your income for tax bene- year Steve recieved checks in the amount of $62000 fits. The assignment for Dave's plumbing services. Which of the follow- ing is a true statement? 26. Opal deducted $2400 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 standard deduction by $350 27. George purchased a life annuity for $3200 that will provide him $80 monthly payments for as long as he lives. Based on the IRS tables, Georges life ex- pectancy is 100 months. How much of the first $80 payment will George include in his gross income? 28. Nate is a partner in a partnership that received $5000 of interest income this year. Nate's share of the interest is $1000, and he should report this income on his individual return as: 29. Barney and Betty got divorced this year. In the of income is not ef- fective for tax pur- poses D: The $2400 of de- duction produced a tax benefit of $350 so the entire $170 is included in income C: The annuity ex- clusion ratio is ($3200/100) =32 re- turn of capital per payment. Hence, $48 of the $80 is in- cluded in gross in- come C: income from flow-through entities retains its character when reported on in- dividual returns A: Alimony has to divorce decree Betty agreed to transfer 100 shares be cash to be recog- of common stock worth $50000 and pay Barney $24000 per year for 5 years (or until Barneys death or remarriage) What amount, if any, is included in Barneys gross income this year? nized 30. Hal Gore won a $1 million prize for special con- tributions to environmental research. This prize is awarded for public achievement, and Hal directed the awarding organization to transfer $400,000 of the award to the EPA. How much of the prize should Hal include in gross income? 31. Ethan competed in the annual Austin marathon this B: If you have por- tion of a winning im- mediately directed to an organization, that portion is not includ- ed in gross income A: winnings are in- year and won a $25000 prize for fastest wheelchair cluded in gross in- entrant. Ethan indicated he would transfer the prize to the local hospital. How much of the prize should Hal include in his gross income? 32. This year Ed celebrated his 25th year as an employ- ee of Designer Jeans Company. In recognition of come unless award for scientific, liter- ary, or charitable acheivement B: Cash bonus for length of service is his long and loyal service, the company awarded Ed included, but proper- a gold watch worth $250 and a $2000 cash bonus. What amount must Ed include in his gross income? 33. Rhett made his annual gambling trip to Uwin casi- no. On this trip he won $250 at the slots and $1200 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? 34. Bernie is a former executive who is retired. This ty up to $400 is not A: you only include gambling winnings in gross income, un- less pro gambler C: High income indi- year Bernie received $250,000 in pension payments viduals include 85% and $10,000 of social security payments. What amount must Bernie include in his gross income? 35. Bart, a single taxpayer, has recently retired. This of social security benefits in gross in- come D: 750 year, he received $24,000 in pension payments and If MAGI +50% of $5000 in ss payments. What amount must Bart in- clude in his gross income for the ss payments? SSB <= 25,000 SSB are not taxable. Our example does not pass this 36. Karl works at Moe's grocery store. This year Karl was paid $43,000 in salary but he was allowed to purchase his groceries at 10% below Moe's cost. This year Karl spent $3600 to purchase groceries costing Moe $4000 and worth $6000. What amount must Karl include in his gross income? 37. Joyce's employer loaned her $50,000 this year (in- terest-free) to buy a new car. If the federal interest rate was 3% which of the following is correct? 38. Janine's employer loaned her $5000 this year (in- 50%(24000+2500-2500 43400 C: Joyce recognizes $1500 of imput- ed compensation in- come E: none, because terest-free) to buy a used car. If the federal interest loan did not exceed rate was 4%, which of the following is correct? 39. Deb has found it very difficult to repay her loans. Because of these difficulties, the bank decided to forgive one her most recent loans, an amount of $45,000. After the loan was discharged, Deb had total assets of $232,000 and her remainig loans totaled $217,000. What amount must Deb include in her gross income? $10,000 A: 15,000 If debt relief makes you solvent, then you recognize the amount your assets is greater than liabili- ties If still insolvent, rec- ognize amount of debt forgiveness 40. Mike D. No state and mu- nicipal bonds includ- ed in gross income for tax purposes 41. Ben's employer offers employees the following benefits. What amount must Ben include in his gross income? C: $10,600 Health insurance not 42. Shaun is a student who has received an academ- ic scholarship to State University. The scholarship paid $14,000 for tuition, $2500 for fees, and $1000 for books. In addition, Shaun's dorm fees of $8500 were paid by the university when he agreed to counsel freshman on campus living. What amount must Shaun include in his gross income? 43. Graham has accepted an offer to do graduate work in the chemistry dept at State University. The chem dept offered Graham a $5000 tuition reduction and $3500 toward the cost of room and meals. Under the terms of the scholarship Graham must work in the chem labs during the summer as a research assistant. What amount must he include in gross income? 44. Hank is a U.S citizen and is doing a three to six year assignment as a sales executive in Paris for a french company, which began this year. Hank earned $109,500 working for the french company this year but only lived in France for 340 days(out of 365) What amount of Hank's $109,500 salary this year will he be allowed to exclude from gross in- come in the U.S? 45. Pam recently was sickened by eating spoiled peanut butter. She successfully sued the manufac- turer for her medical bills ($3700), her emotional distress ($6000), and punitive damages ($44,000). included life insurance up to $50,000 not included Disability insurance coverage includ- ed(purchased by ben) Whole life insurance coverage included D: $8500 not tuition, fees, or books C: room and board included, not tuition C: $93,900 $100,800 (max ex- cusion) x (340/365) A: $44,000 any payments, oth- er than punitive, for What amount must Pam include in her gross in- come? physical injury or sickness are non taxable 46. This year Zach was injured in an auto accident. B: $18,000 if employer pays for it as a nontaxable fringe benefit, em- ployee must include all in gross income 47. Samantha was ill for 4 months this year. Saman- tha missed work during the period, but disability insurance paid $18,000 of disability pay to replace B: $12,000 employer paid for her missed salary. Samantha shares the cost of the 2/3s of it, so 2/3 of insuracne with her employer. This year Samantha's employer paid $2200 in disability premiums for the pay is included Sam as a nontaxable fringe benefit and Sam paid 2200/(2200+1100)x1800 the remaining $1100 of premiums from her salary. What amount of disability pay must Sam include in her gross income 48. Acme published a story about Paul and as a result Paul sued Acme for damage to his reputation. Paul won an award of $20,000 for damages, $5500 for emotional distress, and $50,000 for punitive dam- ages. What amount must Paul include in gross in- come? 49. This year, Jong paid $3000 of interest on a qualified education loan. Jong files MFJ and reports modi- fied AGI of $142,000. What is Jong's deduction for interest expense on an educational loan. 50. Max 51. What amount can Ned include in his itemized de- ductions? E: $75,500 must include all be- cause not physical injury or sickness C: $1500 D: $600 The premiums paid 52. Madeoff donated stock (capital gain property) to a public charity. He purchased the stock 3 years ago for $100,000, and on the dates of the gift, it had a fmv of $200,000. What is his max charitable contribution deduction for the year if his AGI is $500,000 (before considering the itemized deduc- tion phase-out)? 53. Carly donated inventory (ordinary income prop- erty) from her sole proprietorship business to a church which will utilize it in day to day activities assisting the homeless. She purchased the inven- toru last month for $100,000, and on the date of the gift, it had a fmv of $92,000. What is her maximum charitable contribution deduction for the year if her AGI is $200,000 54. Simone donated a landscape painting (tangible capital gain property) to a library, a public char- ity. She purchased the painting 5 years ago for $50,000, and on the date of the gift, it had a fmv of $200,000. The library will retain and utilize the painting for its charitable purposes. What is her maximum charitable contribution for the year if AGI is $300,000 (before considering the itemized deduc- tion phase-out)? 55. Larry recorded the following donations this year. . . for medical and health insurance for dependent's is in- cluded in the tax pay- ers medical expens- es when determining itemized deductions. (look up rules for itemized deductions) C: $150,000 The stock is appreci- ated capital gain lim- ited to 30% of AGI Read under illustra- tion 6-20 A: $100,000 Ordinary income property is limited to 50% of AGI C: $90,000 capital gain property limited to 30% of AGI 56. Margaret Lindley paid $15,000 of interest on her $300,000 acquisition debt of her home (fmv of $500,000), $4000 of interest on her $30,000 home-equity loan, $1000 of credit card interest, and $3000 of margin interest for the purchase of stock. Assume that Margaret Lindley has $10,000 of inter- est income this year and no investment expenses. How much of the interest expense may she deduct this year? 57. Jim was in an auto accident this year. Jim paid $2450 to repair his car after the accident and his insurance only reimbursed him $400. Jim bought his car several years ago for $1500. What is the amount of casualty loss from this accident before Jim applies any casualty loss floor limitations 58. Fred's employer dispatched him on a business trip from the Dallas HQ to NY this year. 59. Glenn is an accountant who races stock cars as a hobby. This year Glenn was paid a salary of $80,000 C: $2700 2400 to church plus 300 fmv clothes to salvation army B: $22,000 credit card not de- ductible D: $1100 B: $2570 meals are limited to 50% of the cost B: increase in tax- able income of from his employer and won $2000 in various races. $1640 What is the effect of the racing activities on Glenn's taxable income if Glenn has also incurred $4,200 of hobby expenses this year? Assume that Glenn itemizes his deductions but has no other miscella- neous itemized deductions. 60. Cory recently sold his qualafied small business stock (acquired in 2015) for $90,000 after holding it for 10 years. His basis in the stock is $40,000. hobby expenses are deductable to the ex- tent of hobby rev- enues B: $7000 90000-40000=50000 Assuming his marginal tax rate is 35%, how much tax will he owe on the sale? 61. in x8, Erin had the following capital gains (loss- es) from the sale of her investments: $2000 LTCG, $25,000 STCG, (9000) LTCL, and (15,000) STCL 62. In the current year, Norris, an individual, has $50000 of ordinary income, NSTCL of $10000 and a NLTCG of $2800. Norris reports. . . 63. Ms. Fresh bought 1,000 shares of Ibis Coporation stock for $5000 on Jan. 15, 2013. On Dec. 31, 2015 she sold all 1,000 shares of her stock for $4500. Based on a hot tip from her friend, she bought 1000 shares of Ibis stock on Jan. 23, 2016 for $3000. What is Ms. Fresh's recognized loss on her 2015 sale and what is her basis in her $1000 shares purchased in 2016? 64. Kevin bought 200 shares of Intel stock on Jan 1, 2015 for $50 per share with a brokerage fee of $100. Then, Kevin sells all 200 shares for $75 per share on Dec. 12, 2015. The brokerage fee on sale was $150. 50000/2=25000 25000 x .28 (tax rate) =7000 A: $3000 STCG 2000 -9000= (7000) LTCL 25000-15000= 10000 STCG E: offset against ordinary income of $3,000 (max amount) and NST- CL carry for- ward of $4200 (10,000-7200-3000) A: $0 LTCL and $3500 basis $500 realized loss; considered a wash sale because reac- quired stock with- in 30 days of sale, so loss is not de- ductible. $500 nondeductible loss + $3000 pur- chase price = $3500 basis in Ibis shares B: $4750 Amount Realized = (200 shares × $75) - $150 = $14,850; What is the amount of the gain/loss Kevin must report on his 2015 tax return? 65. Brandon and Jame Forte file MFJ and decide to itemize their deductions. The Forte's income for the year consist of $120,000 in salary, $1000 interest income, $1500 non-qualifying dividend, and $1000 LTCG. The Forte's expenses for the year consist of $3000 investment interest expense and $900 tax preparation fees. Assuming the Forte's marginal tax rate is 30%, what is the amount of investment interest expense deduction for the year? 66. Doug and Sue Click file a joint tax return and de- cide to itemize their deductions. The Click's income for the year consists of $90,000 in salary , $2000 interest income, $800 LTCL. The Click's expenses for the year consist of $1500 investment interst expense. Assuming that the Click's marginal tax rate is 35%, what is the amount of their investment interest expense for the year? 67. Bob Brain files a single tax return and decided to itemize his deductions. Bob's income for the year consists of $75,000 in salary, $3000 LTCG, and $1500 interest income. Bob's expenses for the Adjusted Basis = (200 shares × $50) + $100 = $10,100; Gain = $14,850 - $10,100 = $4,750 C:$2500 1500 + 1000 B: $1500 gives you the answer in the question E: None Miscellaneous item- ized deductions do year consists of $800 investment advice fees, $700 not exceed floor unreimbursed employee business expenses (a mis- cellaneous itemized deduction), and $250 tax re- turn prep fees. What is Bob's actual deduction for miscellaneous itemized deductions? 68. Alain Mire files a single tax return and has adjust- ed gross income of $304,000. His net investment income is $53000. What is the additional tax that Alain will pay on his net investment income for the years? B: $2014 net investment income is lesser of 1) net investment 69. Michelle is an active participant in the rental con- dominum property she owns. During the year, the property generates a ($15,000) loss; however, she has sufficient tax basis and at-risk amounts to absorb the loss. If Michelle has $115,000 salary , $10,000 LTCG, $3000 of dividends, and no addition- al sources of income or deductions, how much loss can she deduct? 70. Miley, a single taxpayer, plans on reporting $28,450 of taxable income this year (all of her income is from a part-time job). She is 71. Jamie is single. In 2015, she reported $100,000 of taxable income, including a LTCG of $5000. What is her gross tax liability, rounded to the nearest whole dollar? 72. The Olympians have 3 kids. The kiddie tax applies to unearned income received by which of the fol- lowing children? income- $53,000 or 2) his MAGI less the threshold of $200,000 ($304,000-200,000=104 C: $11,000 $25,000 (ex- ception) - $14,000 (phase-out: ($128,000 - $100,000) x .5) = $11,000. C: $1600 C: $20,421 95000 taxable in- come --> $19671.25 ordinary income tax liability 5000 of LTCG x .15 =750 19671.25+750=20421 A: Poseidon under age of 24, and doesn't support him- self 73. During 2015, Montoya (age 15) received $2200 from D: $1750 a corporate bond. He also received $600 interest from a saving account est. for him by his parents. 2200+600-1050 Montoya lives with his parents and is their depen- dent. What is his taxable income? (1050 is standard deduction for depen- dents on another tax return) 74. During 2015, Jasmine (age 12) received $2400 from D: $357 a corporate bond. She also received $600 interest from a savings account est. for her by her parents. taxable income --> Jasmine lives with her parents and is their depen- dent. Assuming her parents' marginal tax rate is 28%, what is Jasmine's gross tax liability? 75. Montague (age 15) is claimed as a dependent by his parents Matt and Mary. In 2015, Montague received $5000 of qualified dividends and he received $800 from a part time job. What is his taxable income for 2015? 76. In 2015, Maia (who files as HOH) reported regular taxable income of $115,000. She itemized her de- 1950 (3000-1050) 3000-2100=900 (net unearned income 900x.28=252 1950-900=1050 (re- maining taxable in- come) 1050x.1=105 105+252=357 C: $4650 D: $126000 ductions, deducting $8000 in charitable contribu- $115,000+3000+4000+4 tions and $3000 in state income taxes. She claimed exemptions for herself and her son, Hermes, ($4000 example 8-7 in book each). What is Maia alternate minimum taxable in- come? 77. Persephone has a regular tax liability of $12,475 and a tentative minimum tax of $11,500. Given just this info, what is her alternative minimum tax liabil- ity for the year? A: 0 regular tax liabili- ty exceeds tentative minimum tax 78. Asteria earned a $25,500 salary as an employee in 2015. How much should her employer have with- held from her paycheck for FICA taxes? 79. Baker is single and earned $225,000 of salary in 2015. How much should his employer have with- held from his paycheck for FICA taxes? 80. Rhi and Jay are filing MFJ in 2015. They have 6 chil- dren for whom they may claim the child tax credit. Their AGI was $123,440. What amount of child tax credit may they claim for 2015? 81. Trudy is Jocelyn's friend. Trudy looks after Joce- lyn's 4 year old son during the day so Jocelyn can go to work. During the year, Jocelyn paid Trudy $4000 to care for her son. What is the amount of Jocelyn's child and dependent care credit if her AGI for the year was $36,000? C: $1951 25,500 x(.062+.0145) A: 10,835 $118,500 (SS maxi- mum) x.062=$7347 $200,000x.0145=$2900 $25,000x .0235= 587.5 A: $5300 123,440-110,000(phase 13000/1000=13, 13001 or >= 14 14x50=700 (amount to be phased out) 6000-700 B: $810 less of 3 amounts A) total amount of dependent care ex- penditures for the year B) 3000 for one qp or 6000 for 2 or more qualifying persons C)The taxpayer's earned income in- cluding wage, salary, or other taxable em- ployee compensa- tion, or net earn- ings from self-em- 82. Kaelyn's mother, Judy, looks after Kaelyn's four year old twins so she can go to work. Since Judy is a relative, Kaelyn mad sure, for tax purposes, to pay her mother the going rate for child care ($6300 for the year). What is the amount Kaelyn's child and dependent care credit if her AGI for the year was $36,000? 83. Carolyn has an AGI of $38,000 (all from earned income), two qualifying children, and is filing as a head of household. What amount of earned income credit is she entitled to? 84. Sally is a cash basis tax payer and a member of the Valley Barter club. This yr Sally provided 100 hrs of sewing services to the barter club in exchange for 2 football playoff tickets. which of the following is a true statement? a. sally need not recognize and gross income un- less she sells the football tickets b. sally 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 ployment. Married taxpayers must file a joint tax return and the amount of earned income for purposes of the de- pendent care cred- it limitation is the earned income of the lesser-earning spouse 3000x.27=810 A: $1440 6000x.24 B: $1359 c. sally is taxed on the value of the foot- ball tickets even if she cannot attend the game( gross in- come includes the value of property re- ceived in exchange for services) 85. Identify the rule that determines whether a taxpayer must include in income of a refund amount deduct- ed in a previous year: a. tax refund rule b. constructive receipt c. return of capital principle d. tax benefit rule d. tax benefit rule 86. Identify the rule dictating that on a sale of an asset a c. return of capital taxpayer need only include the incremental gain in gross income rather than the entire proceeds from the sale: a. tax benefit rule b. constructive receipt c. return of capital principle d. wherewithal to pay 87. Dave is a plumber who uses the cash method of ac- counting. This year Dave requested that his clients make their checks payable to his son Steve. This yr Steve received checks in the amount of $62,000 for Daves plumbing services. Which of the following is a true statement? 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 88. Ophra is a cash basis taxpayer who is employed in the publishing industry. This year her employer in- formed her that because of her outstanding perfor- mance she is entitled to a free world cruise. Ophra asked her employer to issue the cruise tickets to her parents, and he complied with this request. Identify the principle that will determine whether Ophra or her parents are taxed on the value of the principle a.(the assignment of income is not effec- tive for tax purposes) a.(Ophra cannot as- sign earned income) cruise tickets: a. assignment of income b. constructive receipt c. return of capital principle d. wherewithal to pay 89. Which of the following is a true statement about the first payment received from a purchase annuity? a. the payment is included in gross income b. a portion of the payment is a return of capital c. the payment can only be taxed in the year AFTER the annuity was purchased d. the payment is not taxed until the annuity pay- ments cease altogether 90. George purchased a life annuity for $3,200 that will provide him $80 monthly payments for as long as he lives. Based on the IRS tables, georges life ex- pectancy is 100 months. how much of the first $80 payment will George include in his gross income? 91. Fran purchased an annuity that provides $12,000 quarterly payments for the next 10 yrs. the annuity was purchased at a cost of $300,000. How much of the first quarterly payment will Fran include in her gross income? 92. Berney and Betty got divorced this year. in the divorce decree betty agreed to transfer 100 shares of common stock worth $50,000 and pay barney b. (a portion of the first payment from a purchased annu- ity will be a return of capital depend- ing upon the amount paid for the invest- ment and the ex- pected number of payments to be re- ceived) $42( 3200/100=32 return of capital per payment. hence 48 of the 80 is included in gross income) $4,500 ( [300000/(4- x10)]=7500 return of capital per payment) $24,000(alimony payments are in cash pursuant to a $24,000 per year for five years(or until barnes death divorce and do not or remarriage) What amount (if any) is included in Barneys gross income this year? 93. Hal Gore won a $1 million prize for special con- tributions to environmental research. this prize is awarded for public achievement and hal directed survive the death of the recipient) $600,000( awards for scientific or pub- lic achievement are the awarding organization to transfer $400,000 of the award to the environmental protection agency. How much of the prize should Hal include in his gross income? 94. Ethan competed in the annual autism marathon this year and won a $25,000 prize for fastest wheel- chair entrant. ethan indicated that he would trans- fer the prize to the local hospital. how much of the prize should ethan include in his gross income? 95. Deb has found it very difficult to repay her loans. Because of these difficulties, the bank decided to forgive one of her most recent loans, an amount of $45,000. After the loan was discharged, Deb had total assets of $232,000 and her remaining loans total $217,000. What amount must Deb include in her gross income? 96. Graham has accepted an offer to do graduate work in the chemistry dept of the state university. the chemistry dept offered graham a $5,000 tuition re- duction and $3,500 toward the cost of room and meals. under the terms of the scholarship graham must work in the chemistry labs during the summer as a research assistant. what amount must graham include in his gross income 97. Irenes husband passed away this year. after his death irene received $250,000 of proceeds from excluded only if the payor of the award transfers the award to a governmental unit or a public char- ity) $25,000( the prize must be associat- ed with scientific, lit- erary, or charitable achievement to be excluded) $15,000 ( a dis- charge of indebted- ness is NOT tax- able if the taxpay- er is insolvent before AND after the debt forgiveness. if the discharge of indebt- edness makes the taxpayer solvent the taxpayer recognizes taxable income to the extent of his sol- vency) $3,500 zero-none of the benefits are included life insurance on her husband, and she inherited her husbands stock portfolio worth $750,000. what amount must irene include in her gross income? 98. Pam recently was sickened by eating spoiled peanut butter. she successfully sued the manufac- turer for her medical bills ($3,700), her emotion- al distress ($6,000-she now fears peanut butter), and punitive damages ($44,000). what amount must pam include in her gross income? 99. Hank is a U.S. citizen and is doing a 3-6 yr assign- ment as a sales executive in Paris for a French com- pany which begins this year. Hank earned $109,500 working for the french company this year but only lived in France for 340 days. what amount of hanks $109,500 salary this year will be allowed to exclude from gross income in the U.S.? 100. If Lindley, on 4/15 requests an extension to fire her tax return, the latest she pay her tax due without in gross income( tax- payers exclude in- heritances and life insurance proceeds from gross income) $44,000(the tax laws specify that any pay- ments (other than punitive damages) on account of a per- sonal injury or phys- ical sickness are nontaxable, dam- ages taxpayers re- ceive for emotion- al distress associ- ated with a physi- cal injury are also excludable. Puntitive damages are fully taxable however be- cause they are in- tended to punish the harm doer rather than to compensate the taxpayer for in- juries) $94,400( 101300- x[340/365]=94361.64 ro a. April 15th penalty is: a. April 15th b. October 15th c. August 15th d. November 15th e. None of these 101. Bill filed his 2014 tax return on March 15th, 2015. The basic statue of limitations for IRS assessment on Bill's 2014 tax return should end: a. March 15th, 2017 b.April 15th, 2017 c. March 15th, 2018 d. April 15, 2018 e. None of these 102. Tyrone claimed a large amount of charitable con- tributions as a tax deduction relative to taxpayers with similar levels of income. If Tyrone's tax re- turn is chosen for audit because of his charitable contributions which audit program likely identified Tyrone's tax return audit? a. DIF system b. Deduction detective c. Document perfection d. Information matching e. None of these 103. The income tax base for an individual tax base for an individual tax return is: a. Realized income from whatever source derived b. Gross Income c.Taxable income d. Adjusted gross income d. April 15th, 2018 a. DIF system c. Taxable income e. Adjusted gross income minus from AGI deduc- tions 104. Joanna received $60,000 compensation from her employer, the value of her stock in ABC company appreciated by $ 5,000 during the year (but she did not sell any of the stock), she received $30,000 of the life insurance proceeds from the death of her husband. What is the amount of Joanna's gross income from these terms? a. $60,000 b. $65,000 c. $85,000 d. $90,000 105. Which of the following statements regarding per- sonal and dependency exemption is FALSE? a. A married couple filing jointly may claim two personal exemptions b. To qualify as a dependent of another, an individ- ual must be a resident of the United States c. An individual who qualifies as a dependent of an- other tax payer may not claim a personal exemption d. The personal exemption and the dependency ex- emption are the same amount 106. For filing status purposes, the taxpayer's marital status is determined a. Based on the largest percentage of time spent b. at the beginning of the year c. at the end of the year d. as of the middle of the year e. none of these 107. Miguel, a widower whose wife died in 2012, main- tains a household for himself and his 10 yr. old daughter who qualifies as his dependent. Miguel a. $60,000 b. To qualify as a dependent of anoth- er, an individual must be a resident of the United States c. at the end of the year c. Head of House- hold did not remarry. What is the most favorable filing status that Miguel qualifies for in 2015? a. Single b. Qualifying Widower c. Head of Household d. Married, filing separately 108. Hal Gore received a $1 million prize for special contributions to environmental research. This prize is awarded for public achievement, and Hal immedi- ately directed the awarding organization to transfer $400,000 of the award to the Environmental Protec- tion Agency, a qualified organization. How much of the prize should Hal include in his gross income? a. $400,000 b. $600,000 c. $1 million d. None of these because all prizes are exclude e. None of these because prizes from charities are exclude 109. During January 2012, Dora made a gift of stock to her granddaughter. At the time of the gift, the stock was worth $15,000. In July 2012, a $500 dividend was declared on the stock and paid to Dora's grand- daughter. What amount must Dora's granddaugh- ter include in her gross income if she still owned the stock on December 31, 2012 and it was worth $17,000? a. $2,000 b. $15,000 c. $15,500 d. $2,500 e. None of these 110. Pam recently was sickened by eating spoiled peanut butter. She successfully sued the manufac- b. $600,000 e. None of these a. $44,000 turer for her medical bills ($3,700), her emotional distress ($6,000 -she now fears peanut butter), and punitive damage ($44,000). What amount must Pam include in her gross income? a. $44,000 b. $50,000 c. $47,700 d. $9,700 e. Zero - None of these benefits is included in gross income 111. Gross Income includes a. all income from whatever source derived unless excluded by law b. excluded income c. deferred income d. all realized income e. all of these 112. Irene's husband passed away this year. After his death. Irene received $250,000 of the proceeds from life insurance on her husband, and she inherited her husband's stock portfolio worth $750,000 and his Rolex watch worth $5,000. What amount must Irene include in her gross income? a. $0 b. $1,005,000 c. $755,000 d. $750,000 e. $250,000 113. Acme published a story about Paul and as a result Paul sued Acme for damage to his reputation, emo- tional distress, and punitive damages. Paul won an award for $20,000 for damages, $5,500 for emotion- al distress, and $50,000 for punitive damages. What a. all income from whatever source de- rived unless exclud- ed by law a. $0 d. $70,000 amount must Paul include in his gross income? a. $5,500 b. $20,00 c. $50,000 d. $70,000 e. All of these benefits are included in gross income 114. Identify the rule dictating that on a sale of an asset a c. Return of capital taxpayer need only include the incremental gain in gross income rather than the entire proceeds from the sale. a. Tax Benefit rule b. Constructive receipt c. Return of capital principle d. Wherewithal to pay e. None of these 115. To calculate realized gain or loss on the sale of an asset, the sales price is reduced by which of the following? a. Tax basis of the property b. Selling expenses c. Amount realized d. Tax basis of the property and Selling expenses e. All of these 116. Which of the following statements about alimony payments is true? a. To qualify as alimony, payments must be made in cash b. Alimony payments are includible in gross in- come of the recipient c. To qualify as alimony, payments cannot continue after the death of the recipient d. To qualify as alimony, payments must be made principle d. Tax basis of the property and Selling expenses e. All of these under a written agreement or divorce decree that does not designate that payments as "nonalimony" or child support e. All of these 117. Which of the following courts is the only court that provides for a jury trial? a. Tax Court b. U.S. Court of Federal Claims c. U.S. District Court d. U.S. Circuit Court of Appeals e. None of these 118. In June of 2010, Edgar's wife Cathy died and Edgar did not remarry during the year. What is his filing status by 2010 (assuming he and his wife did not have any dependents)? a. Married filed jointly b. Single c. Qualifying widower d. Head of household c. U.S. District Court a. Married filed joint- ly 119. 119. [Show Less]