____ 1. Arguably, free parking places provided to employees by their employers might be excluded from taxable income on the grounds that

a.such items neither satisfy the economic definition of income nor fall within the definition of the income for tax purposes.

b.any gain obtained by the employee is secondary or incidental to the employer's business purpose that is served by granting such benefit.

c.the value of the benefit obtained by the employee is not determinable.

d.the benefit obtained by the employee is not in the form of cash.

____2. In which of the following situations would the taxpayer not be considered in constructive receipt of income in 2019? Assume that all of the taxpayers use the cash method of accounting.

a.Al is a self-employed accountant. On December 27, 2019, he received a check for $2,000 for preparing the November financial statements of one of his clients. Due to illness, he was unable to deposit the check until January 5, 2020.

b.Ben entered into a contract to sell his rental property on December 3, 2019. On that date, the down payment, a check for $1,000, was placed in an escrow account. Ben received the check when the transaction closed on January 20, 2020.

c.Sugar Ray fought Rocky on December 25, 2019, a Christmas fight shown on television all over the world. On December 28, the fight promoters gave Sugar Ray's agent, Don Queen, a check for $5 million representing his prize money for the fight. Don delivered the check to Sugar Ray on January 12, 2020.

d.On December 20, 2019, Mr. Big received stock worth $10,000 as a bonus from the corporation for which he worked. He did not sell the stock until January 5, 2020.

e.All of the taxpayers above are in constructive receipt of the income items.

____ 3. Which of the following businesses must use the accrual method of accounting to account for all or a part of its operations?

a.F Gas Corporation (a C-corporation), a chain of 10 gas stations owned and operated by F. The corporation has average annual gross receipts of $33 million annually.

b.The Clinic. This corporation is owned and operated by 80 physicians who provide a variety of health care services to the citizens of Houston. Annual billings to insurance companies and patients monthly exceed $30 million.

c.Whitewater Rafting of Idaho is a partnership owned by B and T. Gross receipts for the past several years have averaged $100,000.

d.D Drilling, a partnership owned by J and A. The partnership operates oil drilling rigs all over the world. Annual gross receipts consistently exceed $28 million.

e.More than one of the above and these are __________.

____ 4. The cash method of accounting may not be used by

a.a solely owned personal service corporation in the management consulting business.

b.an individual engaged as a sole proprietor in a service business (inventory is not the principal business activity) whose average annual gross receipts for all prior years exceed $36 million.

c.a partnership of attorneys that has average annual gross receipts of $30 million.

d.b and c.

e.All of the above may use the cash method.

____ 5. R, a cash basis taxpayer, wanted to defer income from 2019 to 2020. Which of the following will serve that purpose?

a.Purchase of a Treasury Bill in November 2019 that matures in February 2020.

b.A signed agreement (a deferred compensation agreement) with his employer that the latter will pay him part of his 2019 salary in 2020.

c.Delay cashing his last salary check for 2019 until 2020.

d.a and b.

e.a and c.