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Exam 3: Gross Income: Inclusions

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Question 1

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As a result of a divorce,Michael pays Judy $75,000 in year one and $25,000 per year in subsequent years.How much of the $75,000 in year one is properly characterized as alimony and will not be recaptured later?

A) $25,000
B) $35,000
C) $40,000
D) $75,000

E) B) and C)
F) B) and D)

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Question 2

Multiple Choice

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During 2013,Mark's employer withheld $2,000 from his wages for state income tax.Mark claimed the $2,000 as an itemized deduction on his 2013 federal income tax return.His total itemized deductions for 2013 were $6,000.Mark's taxable income for 2013 was a negative $20,000 due to substantial business losses.Mark received the $2,000 as a refund from the state during 2014.What amount must Mark include in income in 2014?

A) $0
B) $1,000
C) $2,000
D) $6,000

E) All of the above
F) C) and D)

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Question 3

Multiple Choice

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In addition to Social Security benefits of $8,000,Mr.and Mrs.Wells have adjusted gross income of $32,000 and tax-exempt interest of $1,000 and will file a joint return.The taxable portion of their social security benefits will be

The requirements for a payment to be considered as alimony include all of the following except

Adanya's marginal tax rate is 39.6% and she is trying to decide whether to invest in tax-exempt bonds which pay 5% interest or taxable bonds paying 7% interest.The bonds have equivalent risk.Which of the bonds would yield the highest amount of income after taxes?

Raoul sells household items on an Internet website.He receives $3,340 cash and a pair of high-power binoculars from this activity during the year.What tax issues should Raoul consider?

Earnings of a minor child are taxed to the child regardless of the state's property law system.

Ms.Marple's books and records for 2013 reflect the following information: What is the amount Ms.Marple should include in her gross income in 2013?

Lily had the following income and losses during the current year: What is Lily's adjusted gross income (not taxable income) ?

A cash-basis taxpayer can defer income recognition by refusing to accept payment.

Under the terms of a divorce agreement dated January 1,2013,Edmond was to pay his wife Donna $3,000 per month in alimony and $500 per month in child support.Payments began on 1/1/13.In addition,Donna received the family residence with a cost basis of $210,000 and a fair market value of $260,000. a.What is the amount that Donna must include in income for the twelve-month period ended December 31,2013? b.What is the basis in the home which Donna received as a result of the divorce?

Homer Corporation's office building was destroyed by fire.Homer collected insurance of $250,000,which equaled the building's basis,and $150,000 for profits lost during the time the company was rebuilding the office building.What is the amount taxable this year?

Under the terms of their divorce agreement,Humphrey transferred Corporation H stock to his former wife,Greta as a property settlement.At the time of the transfer,the stock had a basis to Humphrey of $40,000 and a fair market value of $55,000.What is the tax consequence of this transaction to Humphrey,and what is Greta's basis in the Corporation H stock?

Mark purchased 2,000 shares of Darcy Corporation for $13,200.This year,Darcy declared a 10% nontaxable stock dividend,and Mark received 200 shares.After the dividend Mark's per share basis will be

Gwen's marginal tax bracket is 25%.Gwen pays alimony of $24,000 per year.Gwen's after tax cost for the $24,000 payment is

Gross income may be realized when a taxpayer receives economic benefit even if no cash is received.

Hoyt rented office space two years ago to Harris,receiving the first and last months' rent plus a security deposit of $1,000.In early January of this year,Harris moves and Hoyt refunds $250 of the deposit and keeps the remainder to cover $500 which is spent for repairs to the office space and one week of unpaid rent that amounts to $250.How would this information be reflected on Hoyt's tax return this year?

As a result of a divorce,Matthew pays Jasmine alimony of $75,000 in year one and $25,000 per year in subsequent years.How much is deductible by Matthew in year one?

Under the cash method of accounting,income is reported in the year the taxpayer actually or constructively receives the income.

With respect to alimony and property settlements in a divorce or separation,all of the following are true with the exception of