____ 1. Which, if any, of the following is a deduction for AGI?

a.	Alimony payments.
b.	Child support payments.
c.	Funeral expenses.
d.	Loss on the sale of a personal residence.
e.	Interest on home mortgage.

____ 2. During 2011, Esther had the following transactions:

Salary	$50,000
Bank loan (proceeds used to buy personal auto)	10,000
Alimony received	6,000
Child support received	12,000
Gift from aunt	20,000

Esthers AGI is:

a.	$32,000.
b.	$38,000.
c.	$44,000.
d.	$56,000.
e.	$64,000.

____ 3. Sylvia, age 17, is claimed by her parents as a dependent. During 2011, she had interest income from a bank savings account of $2,000 and income from a part-time job of $4,200. Sylvias taxable income is:

a.	$4,200 $4,500 = $0.
b.	$6,200 $5,700 = $500.
c.	$6,200 $4,500 = $1,700.
d.	$6,200 $950 = $5,250.
e.	None of the above.

____ 4. Kyle and Liza are married and under 65 years of age. During 2012, they furnish more than half of the support of their 18-year old daughter, May, who lives with them. May earns $15,000 from a part-time job, most of which she sets aside for future college expenses. Kyle and Liza also provide more than half of the support of their 20 year old son, Joe, who is not a student, but lives with them and works as a part-time cellist and composer. Joe earned income of $4,400. Lizas father, who died on January 3, 2011, at age 90, has for many years qualified as their dependent. How many personal and dependency exemptions should Kyle and Liza claim?

a.	Two.
b.	Three.
c.	Four.
d.	Five.
e.	None of the above.

____ 5. For purposes of determining gross income, which of the following is true?

a.	A taxpayer who finds a wallet full of money is not required to recognize income because someone will eventually ask for the return of the money.
b.	A mechanic completed repairs on an automobile during the year and collects money from the customer. The customer was not satisfied with the repairs and sued the mechanic for a refund. The mechanic cannot defer recognition of the income until the suit has been settled.
c.	Embezzlement proceeds are not included in the embezzlers gross income because the embezzler has an obligation to repay the owner.
d.	All of the above are true.
e.	None of the above is true.

____ 6. Jerry purchased a U.S. Series EE savings bond for $279. The bond has a maturity value in 10 years of $500 and yields 6% interest. This is the first Series EE bond that Jerry has ever owned.

a.	Jerry must report the interest income each year using the original issue discount rules.
b.	Jerry can report all of the $221 interest income in the year the bond matures.
c.	The interest on the bonds is exempt from Federal income tax.
d.	Jerry must report ($500 $279)/10 = $22.10 interest income each year he owns the bond.
e.	None of the above.

____ 7. Mike contracted with Kram Company, Mikes controlled corporation. Mike was a medical doctor and the contract provided that he would work exclusively for the corporation. No other doctor worked for the corporation. The corporation contracted to perform an operation for Rosa for $8,000. The corporation paid Mike $6,500 to perform the operation under the terms of his employment contract.

a.	Mikes gross income is $6,500.
b.	Mike must recognize the $8,000 gross income because he provided the service.
c.	Mike must recognize $8,000 gross income since the patient obviously wanted him to perform the operation.
d.	The Kram Company corporations gross income is $1,500.
e.	None of the above.

____ 8. The taxpayers marginal tax bracket is 25%. Which would the taxpayer prefer?

a.	$1.00 taxable income rather than $1.00 tax-exempt income.
b.	$.80 tax-exempt income rather than $1.00 taxable income.
c.	$1.25 taxable income rather than $1.00 tax-exempt income.
d.	$1.30 taxable income rather than $1.00 tax-exempt income.
e.	None of the above.

____ 9. Carin, a widow, elected to receive the proceeds of a $150,000 life insurance policy on the life of her deceased husband in 10 installments of $17,500 each. Her husband had paid premiums of $60,000 on the policy. In the first year, Carin collected $17,500 from the insurance company. She must include in gross income:

a.	$0.
b.	$2,500.
c.	$10,000.
d.	$25,000.
e.	None of the above.

____ 10. A scholarship recipient at State University may exclude from gross income the scholarship proceeds used to pay for:

a.	Only tuition.
b.	Tuition, books, and supplies.
c.	Tuition, books, supplies, meals, and lodging.
d.	Meals and lodging.
e.	None of the above.

____ 11. Barney is a full-time graduate student at State University. He serves as a research assistant for which he is paid $700 per month for 9 months and his $5,000 tuition is waived. In addition, he receives a $1,500 research grant to pursue his own research and studies. Barneys gross income from the above is:

a.	$0.
b.	$6,300.
c.	$11,300.
d.	$12,800.
e.	None of the above.

____ 12. Olaf was injured in an automobile accident and received $25,000 for his physical injury, $10,000 for his loss of income, and $50,000 punitive damages. As a result of the award, the amount Olaf must include in gross income is:

a.	$10,000.
b.	$50,000.
c.	$60,000.
d.	$85,000.
e.	None of the above.