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Exam 5: Gross Income and Exclusions

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Question 41

Multiple Choice

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Bernie is a former executive who is retired.This year Bernie received $250,000 in pension payments and $10,000 of social security payments.What amount must Bernie include in his gross income?

A) $250,000
B) $255,000
C) $258,500
D) $260,000
E) Zero

F) B) and E)
G) C) and E)

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Question 42

Multiple Choice

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Nate is a partner in a partnership that received $5,000 of interest income this year.Nate's share of the interest is $1,000,and he should report this income on his individual return as:

A) business income.
B) income from a partnership.
C) interest income.
D) dividend income because the partnership intends to organize next year as a limited liability company.
E) All of the choices are correct.

F) A) and B)
G) B) and E)

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Question 43

True/False

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When a carpenter provides $100 of services in exchange for $100 of groceries,the carpenter has realized $100 of income.

The maximum amount of net capital losses individuals may deduct against their ordinary income per year is:

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 account.How much gross income would Jack report if he files married-separate from Jill?

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 granddaughter.What amount must Dora's granddaughter include in her gross income?

Shaun is a student who has received an academic scholarship to State University.The scholarship 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 income?

Interest earned on a city of Denver bond is excluded from gross income (for federal tax purposes).

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 interest on the savings bonds from her gross income?

Samantha was ill for four months this year.Samantha missed work during this period,but disability insurance paid $18,000 of disability pay to replace her missed salary.Samantha shares the cost of the insurance with her employer.This year Samantha's employer paid $2,200 in disability premiums for Samantha as a nontaxable fringe benefit and Samantha paid the remaining $1,100 of premiums from her salary.What amount of the disability pay must Samantha include in her gross income (Round final answer to the nearest whole dollar) ?

This year Kelsi received a $1,900 refund of state income taxes that she paid last year.Last year Kelsi claimed itemized deductions of $7,450 including $2,800 of state income taxes.How much of the refund,if any,must Kelsi include in gross income if the standard deduction last year was $6,350?

Suzanne received 20 ISOs (each option gives her the right to purchase 20 shares of stock for $12 per share)at the time she started working when the stock price was $13 per share.Three years later,when the share price was $23 per share,she exercised all of her options.If Suzanne holds the shares for two additional years and sells them when the market price is $30,how much gain will Suzanne recognize on the sale and how much tax will she pay assuming her marginal tax rate is 35 percent?

Mike received the following interest payments this year.What amount must Mike include in his gross income (for federal tax purposes) ? $\begin{array}{ll}\text { Bond }&\text { Interest. }\\\text { General Motors}&\$1,450 \\\text { City of New York}&900 \\\text { State of New Jersey}&1,200 \\\text { U.S. Treasury}&850\end{array}$

Ms.Fresh bought 1,000 shares of Ibis Corporation stock for $5,000 on January 15,2011.On December 31,2018 she sold all 1,000 shares of her Ibis stock for $4,500.Based on a hot tip from her friend,she bought 1,000 shares of Ibis stock on January 23,2019 for $3,000.What is Ms.Fresh's recognized loss on her 2018 sale and what is her basis in her 1,000 shares purchased in 2019?

Helen is a U.S.citizen and CPA,who moved to London,England three years ago to work for a British company.This year,she spent the entire year in London and earned a salary of $110,000.How much of her salary will she be allowed to exclude from gross income in the U.S.?

Kevin bought 200 shares of Intel stock on January 1,2018 for $50 per share with a brokerage fee of $100.Then,Kevin sells all 200 shares for $75 per share on December 12,2018.The brokerage fee on the sale was $150.What is the amount of the gain/loss Kevin must report on his 2018 tax return?

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?

Kevin provided services to several clients this year who paid with different types of property.Which of the following payments is not included in Kevin's gross income?

This fall Angelina,age 35,plans to attend college.To fund her tuition she cashed in Series EE savings bonds with a redemption value of $24,000 and an original cost of $16,800.Angelina plans on spending $7,200 of the proceeds to pay tuition.The redemption proceeds are Angelina's only source of income.What amount of interest must Angelina include in gross income this year?

Sam,age 45,saved diligently for his college education by putting part of his pay into U.S.Series EE saving bonds.Sam purchased the bonds for $6,500,and this year he redeemed the bonds for $7,200.He has no other income this year.What amount must Sam include in his gross income?