Accounting 150 - Principles of Income Taxation » Fall 2020 » Chapter 5 Quiz
Need help with your exam preparation?
Get Answers to this exam for $6 USD.
Get Answers to all exams in [ Accounting 150 - Principles of Income Taxation ] course for $25 USD.
Existing Quiz Clients Login here
Question #1
Geoff purchased a life annuity for $4,800 that will provide him $100 monthly payments for as long as he lives. Based on IRS tables, Geoff’s life expectancy is 240 months. How much of the first $100 payment will George include in his gross income?
A.
$100
B.
$80
C.
$20
D.
$48
E.
None of the choices are correct.
Question #2
Bonnie and Howard got divorced in 2018. Under the terms of the decree Bonnie will pay Howard $100,000 in cash in each of the next ten years (or until Howard’s death or remarriage). In addition, Bonnie pays $30,000 per year to support their daughter, Kristina, until she turns 19 years old. What amount (if any) is included in Howard’s gross income this year?
A.
$100,000
B.
$30,000
C.
$130,000
D.
None of the payments are included in Howard’s gross income.
E.
$115,000
Question #3
This year Bill purchased 1,000 shares of Cain common stock for $12 per share. At year-end the Cain shares were worth $32 per share. What amount must Bill include in income this year?
A.
None of the choices are correct - Bill has not realized any gain.
B.
$20,000
C.
$32,000
D.
Bill can deduct $12,000 because his cost is a return of capital.
E.
$12,000
Question #4
This year, Karl had the following capital gains (losses) from the sale of his investments: $6,000 LTCG, $30,000 STCG, ($12,000) LTCL, and ($18,000) STCL. What is the amount and nature of Karl’s capital gains and losses?
A.
$6,000 net long-term capital loss
B.
$12,000 net short-term capital gain
C.
$6,000 net short-term capital gain
D.
None of the choices are correct.
E.
$6,000 net short-term capital loss
Question #5
Identify the rule that determines whether a taxpayer must include in income a refund of an amount deducted in a previous year:
A.
Constructive receipt.
B.
None of the choices are correct.
C.
Tax benefit rule.
D.
Claim of right rule.
E.
Return of capital principle.
Question #6
Larry received $4,250 from disability insurance that he purchased earlier this year from an insurance provider. Larry is allowed to exclude the $4,250 from his gross income.
A.
TRUE
B.
FALSE
Question #7
Generally, a portion of each payment from a purchased annuity represents a return of capital.
A.
FALSE
B.
TRUE
Question #8
Identify the rule that determine whether a married taxpayer must recognize income earned by their spouse:
A.
Tax benefit rule.
B.
None of the choices are correct.
C.
Residence of the married couple in a community property law state and tax benefit rule.
D.
Residence of the married couple in a community property law state.
E.
Claim of right.
Question #9
The capital gains (losses) netting process for taxpayers without 25 or 28 percent capital gains requires them to (1) net short-term gains and losses, (2) net long-term gains and losses, and (3) net the outcome of steps (1) and (2) if they are of similar sign.
A.
FALSE
B.
TRUE
Question #10
Worker’s compensation benefits received from a state-sponsored workers’ compensation plan are taxable.
A.
TRUE
B.
FALSE
Question #11
Shelly is a student who has received an academic scholarship to the University. The scholarship paid $4,000 for tuition, $500 for fees, and $400 for books. What amount must Shelly include in her gross income?
A.
$4,000
B.
$4,500
C.
Zero - None of the benefits are includable in gross income
D.
$4,900
E.
$4,400
Question #12
Gross income includes all realized income that is recognized during the year.
A.
TRUE
B.
FALSE
Question #13
A taxpayer who receives money when taking out a bank loan will include the amount borrowed in their gross income under the all-inclusive definition of income.
A.
TRUE
B.
FALSE
Question #14
The cash method of accounting requires taxpayers to recognize income when they receive it in the form of cash, property, or services.
A.
FALSE
B.
TRUE
Question #15
Dave and Jane file a joint return. They sell a capital asset at a $140,000 loss. Even though they have no capital gains, $3,000 of the loss can still be deducted in the current year if they have at least $3,000 of ordinary income.
A.
TRUE
B.
FALSE
Need help with your exam preparation?
Get Answers to this exam for $6 USD.
Get Answers to all exams in [ Accounting 150 - Principles of Income Taxation ] course for $25 USD.
Existing Quiz Clients Login here