1. This question will test your ability to research a tax issue and reach a conclusion. Jackie Jones filed a lawsuit to recover damages for personal injuries Jackie sustained in an auto accident in 2020. In 2021, a jury awarded Jackie $1.62 million in damages. Included in this amount was $500,000 for lost wages, $500 for medical expenses, and $620,000 in punitive damages. Jackie wants to know how much of the damages are taxable. a. All payments received in a lawsuit are nontaxable. b. All payments received in a lawsuit are taxable. c. Only the punitive damages are taxable. d. Only the amounts received for lost wages and punitive damages are taxable.

2. This question will test your ability to research a tax issue. Jackson recently paid a tattoo artist $2,000 for an arm tattoo. Jackson asks you if the $2,000 is deductible as a medical expense. Find a Revenue Ruling from 1982 addressing this issue. This issue is addressed in _____________________ and the payment is _________________. a. Situation 1 of the Revenue Ruling and is not deductible. b. Situation 2 of the Revenue Ruling and is deductible. c. Situation 3 of the Revenue Ruling and is not deductible. d. Situation 4 of the Revenue Ruling and is deductible.

3. This question will test your ability to research a tax issue and reach a conclusion. Marina is a full-time college student and her parents will claim her as a dependent on their 2021 tax return. Marinas only income for 2021 is $10,000 she made playing slot machines in the Las Vegas airport while waiting for her connecting flight. The winnings are considered unearned income. Marina is not concerned about paying taxes on her winnings because she believes she is entitled to a standard deduction of $12,550 for a single taxpayer, which will offset the income and result in a zero tax liability. She asks you to confirm that her reasoning is correct. a. Yes, Marina is entitled to the full $12,550. b. No, Marina is only entitled to a standard deduction of $10,000. c. No, Marina is only entitled to a standard deduction of $1,100. d. No, Marina is not entitled to a standard deduction at all because she is a dependent.

4. This question will test your ability to research an issue in the Federal Tax Coordinator Analysis (FTC) and understand the paragraph system used in the FTC. Using a keyword search, locate a paragraph in Chapter L of the Federal Tax Coordinator Analysis dealing with the deductibility of the cost of work clothing by nurses. What are the last two numbers of the paragraph? For example, the last two number of paragraph L-6412 is 12. a. 53. b. 06. c. 08. d. 52.