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ACCT 3013 TAX CHAPTER 5 LEARNSMART EXAM QUESTIONS AND ANSWERS
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ACCT 3013 TAX CHAPTER 5 LEARNSMART EXAM QUESTIONS AND ANSWERS...
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Sam traded a parcel of land for a tractor and a car. He had purchasedthe land five years earlier for $16,000. The market value of the car and
tractor is $20,000. What is the amount of gross income resulting from
this transaction?
a. $4,000
b. $20,000
c. $0
d. $16,000 - ANSWER A
Mary has received the following income and fringe benefits during the
current year: a $73,000 salary; $600 in employer-provided disability
premiums; $5,000 in workers; compensation; $1,200 in corporate bond
interest; a $23,000 car won on a game show; and a $1,200 health
insurance reimbursement for medical expenses paid during the year.
Which of these amounts should Mary include in her gross income?
a. $1,200 health insurance reimbursement
b. $1,200 corporate bond interest
c. $5,000 workers' compensation
d. $600 disability premiums
e. $73,000 salary - ANSWER B/E
Gross income means all income from _______ _________ __________
- ANSWER Whatever/Source/ Derived
Which of the following statements is correct concerning a gift?
a. A gift is included in the gross income of the person giving the gift
b. A gift is included in the gross income of the person receiving the gift
c. A gift may be subject to "gift tax" which is paid by the person receiving
the gift
d. A gift may be subject to "gift tax" which is paid by the person giving
the gift - ANSWER D
,In general, when a taxpayer's debt is discharged by a lender, the
taxpayer's gross income will _____ the amount forgiven. - ANSWER
Increase
Which of the following cash receipts are taxable to the recipient?
a. Gambling winnings
b. Prizes
c. Child support
d. Loan Proceeds
e. Awards - ANSWER A/B/E
For below-market-loans, the discounted interest rate is treated as
interest _____ to the lender and interest _____ to the borrower. -
ANSWER Income/Expense
Which of the following types of imputed income are NOT included in
gross income (i.e. are NOT taxable)?
a. A bargain purchase between a father and his son
b. An employer's $12,000 loan to an employee with no interest on the
note
c. Employee discounts of 25% on services - ANSWER A
A bargain purchase between family members is generally deemed to be
a gift, thus nontaxable to the recipient
Chad has received the following income and benefits during the current
year: $65,000 salary, $4,800 employer-provided health insurance,
$1,500 municipal bond interest, $2,000 dividend income, $500 from a
partnership, and a $10,000 judgement for lost wages due to an age
discrimination lawsuit. What amounts should Chad include in his gross
income?
a. $2,000 dividend income
b. $500 partnership income
c. $4,800 health insurance
d. $1,500 municipal bond interest
e. $10,000 judgement
f. $65,000 salary - ANSWER A/B/E/F
, Frick and Frack are equal partners in F&F Industries. The company
generated net income of $60,000 during the year and distributed $7,000
cash to both Frick and Frack. How much income should Frack report on
his individual income tax return due to the partnership interest? -
ANSWER $30,000
Distributions to partners are not taxable. Only the portion of the net
income allocable to the partner is taxable.
Which of the following fringe benefits provided by an employer is NOT
excluded from gross income?
a. Medical insurance
b. Group life insurance coverage in excess of $50,000
c. Qualified transportation expenses
d. De minimis (or small) benefits - ANSWER B
Which of the following rules must be met for a taxpayer to be able to
exclude the gain on the sale of a personal residence?
a. The taxpayer must NOT have used the gain exclusion provision in the
five years prior to the sale
b. The taxpayer may use the exclusion on a vacation home or second
home if NOT used for the principal residence
c. The exclusion is $500,000 for taxpayers who are married filing jointly
d. The taxpayer must have owned the residence for at least two years of
the five year period prior to the sale
e. The taxpayer must have used the property as a personal residence
for a total of two or more years during the five year period prior to the
sale - ANSWER C/D/E
Which of the following statements is CORRECT regarding the
recognition of income?
a. Income is realized for the return of the capital received in a sales
transaction
b. Income is realized when a taxpayer receives a refund of an amount
that was not deducted in a prior period
c. Income may be in the form of cash, property, or services in a
transaction - ANSWER C
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