1. Which of the following items are excluded from Gross Income? a. Life insurance proceeds b. Rewards c. Inheritances d. Gifts 2. The difference between a tax deduction and a tax credit is that: a. A credit reduces taxable income, and a deduction reduces the actual tax amount. b. A tax credit is deposited directly into the taxpayer's bank account, a deduction is not. c. A deduction reduces taxable income, and a credit reduces the actual tax amount. d. Tax credits are only used when applying for a loan. 3. Which of the following is not true about municipal bond interest? a. Municipal bonds are loans made by the public to state and local governments b. Municipal bond interest is not taxable on Tuesdays c. Municipal bonds generally pay a lower interest rate than commercial bonds d. Municipal bond interest is taxed at the lower capital gain rate. 4. The difference between Adjusted Gross Income and Taxable income is: a. Deduction for Adjusted Gross Income b. Standard deductions or itemized deductions c. Tax prepayments d. All of the above 5. Which of the following is false about gifts and inheritances? a. Taxpayers are allowed to exclude gifts from their gross income b. Gifts are only gifts when given to immediate family c. Tax on gifts are paid by the gift giver. d. Income earned on the gifted property is generally taxable