1) Max received an extension of time to file his 2018 income tax return. He did not pay any amount due with his extension. He finally filed his return on May 3, with a $900 balance due. How much must he pay in failure-to-file and failure-to-pay penalties?

A) None, as long as he timely filed for the extension.

B) A failure-to-pay penalty of 0.5%, but no failure-to-file penalty.

C) A failure-to-file penalty of 5% plus a 0.5% failure-to-pay penalty for an overall total of 5.5%.

D) A $210 penalty, since his return was due after January 1, 2018.

2) Which of the following income items is NOT subject to income tax on a 2018 return?

a) Bank interest in the amount of $100.

b) Birthday gift in the amount of $2,500.

c) Alimony received in the amount of $5,000.

d) Income from an illegal activity.