38) Which of the following items will result in an inclusion in gross income?
C) Preparing a mechanic's tax return in exchange for the mechanic replacing the muffler on your car.
39) Which of the following is not excluded from income? (Assume that any amounts received by the taxpayer were kept.)
B) fair market value of prize won on a game show
40) During the year, Cathy received the following:
� Dividends of $4,000 from Lindsay Corporation. Cathy's father owned the stock and directed the corporation to send the dividends to Cathy.
� A car worth $30,000 for being the 1,000th customer at a car de
A) $30,000
41) Mae Li is beneficiary of a $70,000 insurance policy on her father's life. Upon his death, she elects to receive the proceeds in installments from the insurance company that carries the policy. She will receive $16,000 per year for five years. What are
D) $2,000 of the $16,000 payment is taxable each year.
42) Rebecca is the beneficiary of a $500,000 insurance policy on her husband's life. She elects to receive $52,000 per year for 10 years rather than receive the entire amount in a lump sum. Of the amount received each year
A) $2,000 is taxable income.
43) Britney is beneficiary of a $150,000 insurance policy on her father's life. Upon his death, she may elect to receive the proceeds in five yearly installments of $32,000 or may take the $150,000 lump sum. She elects to take the lump sum payment. What a
C) There is no taxable income.
44) Cameron is the owner and beneficiary of a $300,000 policy on the life of his mother. Cameron sells the policy to his brother, Parker, for $100,000. Parker subsequently pays premiums of $55,000. Upon his mother's death, how much of the insurance procee
C) $145,000
45) Greg is the owner and beneficiary of a $100,000 policy on the life of his mother. Greg gives the policy to his brother, Don. Don subsequently pays premiums of $40,000. Upon his mother's death, how much of the insurance proceeds must Don include in inc
A) $0
46) Over the years Rianna paid $65,000 in premiums on a life insurance policy with a face value of $100,000. Upon reaching 65, while still in good health, Rianna surrendered the policy and collected $95,000. In the year of collection, Rianna will report
B) $30,000 of taxable income.
47) David has been diagnosed with cancer and is expected to live less than 18 months. David is covered by a life insurance policy with a $400,000 face amount. David cashes in the policy early under a special option and receives 80% of the face amount or $
A) no income.
48) Julia suffered a severe stroke and has been admitted to a private hospital where she is expected to remain for the rest of her life. She is certified by a licensed health care practitioner as being a "chronically ill individual." Her hospital expenses
A) $0
49) Brad suffers from congestive heart failure and has been admitted to a nursing home where he is expected to spend the remainder of his life. His doctor has certified him as chronically ill. Brad receives $320 per day from his life insurance policy for
C) $32,000.
50) Bret carries a $200,000 insurance policy on his life and has paid premiums of $10,000 over the years. Dividends on the policy have totaled $8,500. Each year Bret has left the dividends with the insurance company. In the current year, the insurance com
C) $800.
51) Hope receives an $18,500 scholarship from State University. The university specifies that $8,500 is for tuition, books, supplies, and equipment, while $10,000 is for room and board. In addition, Hope works part-time at the campus library and earns $5,
B) $15,000.
52) Sarah receives a $15,000 scholarship from City University. The university specifies that $8,000 is for tuition, books, supplies, and equipment for classes. The other $7,000 is for room and board. Sarah works ten hours per week as a grader, for which s
C) $14,500.
53) Which of the following statements regarding qualified tuition programs is incorrect?
B) Distributions of income are taxed to the donor if the proceeds are not used for higher education expenses.
54) Which of the following statements regarding the qualified tuition plans (QTP) is incorrect?
B) Distributions made from the QTP for college tuition will be tax-free in addition to qualifying for the American Opportunity credit or lifetime learning credit.
55) Amanda, who lost her modeling job, sued her employer for age discrimination. She was awarded $75,000 in lost wages, $25,000 for emotional distress, and $150,000 punitive damages. The amount taxable is
D) $250,000.
56) Elisa sued her former employer for discrimination. She was awarded $200,000 for lost wages, $30,000 for medical expenses related to emotional distress resulting from the discrimination, and $300,000 in punitive damages. The amount taxable is
C) $500,000.
57) Derrick was in an automobile accident while he was going to work. The doctor advised him to stay home for eight months due to his physical injuries. The resulting lawsuit was settled and Derrick received the following amounts:
Compensatory damages for
C) $95,000
58) Linda was injured in an automobile accident caused by another driver. Her son, Matthew, was in the automobile but not physically injured. The other driver's insurance company was required by a court to pay Linda $75,000 to cover medical bills relating
B) $40,000
59) John is injured and receives $16,000 of income from a disability policy. John's employer paid 75% of the disability policy premiums and John paid the remainder. In addition, John's employer has paid all the $3,000 of premiums on a health policy that p
C) $12,000
60) Liza's employer purchased a disability income policy from an insurance company on behalf of all of its employees. The employer paid for two-thirds of the premiums, and the employees paid for the other one-third. Subsequently, Liza received $3,000 per
C) $12,000.
61) Nelda suffered a serious stroke and was admitted to a nursing home for 140 days. Nursing home charges, including physician fees and other related expenses were $33,000. Under Nelda's long-term care insurance contract, she received reimbursements of $3
A) $0
62) Sharisma suffered a serious stroke and was admitted to a nursing home for 140 days. Nursing home charges, including physician fees and other related expenses were $63,000. Under Sharisma's long-term care insurance contract, she received reimbursements
B) $9,800
63) Joe Black, a police officer, was injured in the line of duty. He received the following during the current year:
Salary $50,000
Workers' compensation 5,000
Compensatory damages for physical injury 18,000
Punitive damages for physical injury 14,000
Cas
B) $66,000
64) Richard is a key employee of Winn Corporation. The corporation provides Richard with $120,000 of group-term life insurance coverage. Only company executives receive life insurance coverage. The premium attributable to the coverage is $1,600. The unifo
D) $1,600
65) Miranda is not a key employee of AB Corporation. AB provides Miranda with group term life insurance coverage of $140,000. The premiums attributable to the excess coverage are $1,300. The uniform one-month group-term premium is one dollar per $1,000 of
B) $1,080
66) All of the following items are excluded from gross income except
D) disability income from an employer-financed policy.
67) Which one of the following fringe benefits allows for discrimination between highly compensated employees and other employees to be present?
D) working condition
68) An electronics store sold a home theater system to an employee for $300, even though the retail price was $500. The gross profit percentage is 40%. Such discounts are available to all employees. How much income should be recognized by the employee fro
A) $0
69) Michael is an employee of StayHere Hotels, Inc. in Washington, DC. On his vacation, Michael travels to San Francisco and stays at a StayHere Hotel for six nights free of charge. The regular rate for a hotel room at StayHere in San Francisco is $300 a
$0
70) Benefits covered by Section 132 which may be excluded from an employee's gross income do not include
C) employer-provided vehicle for personal use.
71) All of the following fringe benefits paid for by the employer may be excluded from an employee's gross income except
A) discounts on services of 25 percent.
72) All of the following are requirements for excluding employee achievement awards except for
D) if paid in cash, must be less than $400.
73) Healthwise Ambulance requires its employees to be on 24-hour call and consequently gives them $800 per month housing allowance and a $200 per month food allowance. Ron, an employee of Healthwise, receives a salary of $40,000 per year (this does not in
D) $52,000.
74) Which of the following item(s) must be included in the income of the respective employees?
B) The state of California highway patrol organization provides its officers with a daily meal allowance to compensate them for meals eaten at any location while they are on duty.
75) Lindsay Corporation made the following payments to the family of Luke Marshall, an employee who died during the year.
$5,000 for Luke's final paycheck that he failed to collect
$10,000 for accrued vacation days as required by the employment contract
$
C) $15,000
76) Fatima's employer funds childcare for all employees' children. She pays nothing for this service. The cost of Fatima's child care is $7,200 a year. How much of the child care benefits are taxable to Fatima?
B) $2,200
77) Chad and Jaqueline are married and have AGI of $150,000. In 2014 they adopted a child, while taking advantage of their employer's written adoption assistance program. The adoption cost $9,500, all of which was paid by the employer in accordance with t
D) $9,500
78) Ahmad's employer pays $10,000 in tuition this year for Ahmad to attend a graduate business program. How much of the employer-provided tuition is taxable to Ahmad?
B) $4,750
79) Carl filed his tax return, properly claiming the head of household filing status. Carl's employer paid or provided the following to Carl:
Wages $65,000
Fair market value of qualified dependent care services 4,000
Premiums for $50,000 qualified group t
A) $65,000
80) Rick chose the following fringe benefits under his employer's cafeteria plan. Which of his chosen benefits will be taxable?
A) $150 cash per pay period
81) Tim earns a salary of $40,000. This year, Tim's employer establishes a cafeteria plan under which Tim signed a salary reduction of $2,500 for which $1,500 is to cover his health insurance premiums and $1,000 is available to reimburse medical expenses.
A) $37,500
82) Jan has been assigned to the Rome office of ABC Corporation. She arrives in Rome on November 1, 2012 and does not return to the U.S. until March 5, 2015. During her stay in Rome, Jan earned $102,000 in 2014. Jan may exclude
C) $99,200.
83) Jeremy, an American citizen, earned $200,000 during 2014 while employed in Switzerland. Jeremy is entitled to the maximum foreign-earned income exclusion. Jeremy also incurred $40,000 of deductible expenses attributable to the foreign-earned income. J
C) $20,150
84) Melanie, a U.S. citizen living in Paris, France, for the last three years earns a salary of $110,000 in 2014. Melanie's housing costs are $24,000 per year, which is reasonable. How much can Melanie exclude from income?
C) $107,328
85) In 2013 Betty loaned her son, Juan, $10,000 to help him buy a car. In 2014, before he repaid the $10,000, Betty told Juan that she was "tearing up" the $10,000 note as a graduation present. How should Juan treat the amount forgiven?
D) excludable gift in year of forgiveness
86) For a taxpayer who is not insolvent nor under bankruptcy proceedings, the discharge of debt is generally
A) taxable.
87) Connor owes $4 million and has assets of only $1 million. He declares and files personal and business bankruptcy and his creditors approve a payment plan of $.25 per dollar. Connor has a net operating loss carryover of $2 million. The remaining 75 per
A) $0.
88) Exter Company is experiencing financial difficulties. It has assets worth $2 million, but owes liabilities of $2.1 million. It has a longstanding relationship with the bank. The bank has agreed to forgive $300,000 of debt principal. Because of this de
C) $200,000.
89) The discharge of certain student loans is excluded from income if all of the following are present except for
D) the loan forgiveness is based on age.
90) This year, Jason sold some qualified small business stock that he acquired in 2006. His basis in the stock was $95,000 and he sold it for a $30,000 gain. How much of Jason's gain is taxable?
B) $15,000
91) In September of 2014, Michelle sold shares of qualified small business stock for $1,000,000 that had a basis of $200,000. She had held the stock for 7 months. Forty-five days after the sale she purchased other qualified small business stock for $1,100
A) $ 0
92) In September of 2014, Michelle sold shares of qualified small business stock for $1,000,000 that had a basis of $200,000. She had held the stock for 7 months. Forty-five days after the sale she purchased other qualified small business stock for $1,100
B) $300,000
93) Bob, an employee of Modern Corp., receives a fringe benefit (in lieu of a salary increase) of $1,000. Bob is in a 33% tax bracket. The fringe benefit is nontaxable to Bob and is not deductible as an itemized deduction. Bob's after-tax savings from rec
B) $333.
94) After he was denied a promotion, Daniel sued his employer claiming sex discrimination. He was awarded $20,000 to cover medical bills he incurred because of the related emotional distress, $80,000 to punish his employer for discrimination, and $50,000
$80,000 + $50,000 = $130,000.