14. Which of the following is a fringe benefit excluded from income?

a. A mechanic at Denises employer, a car rental company, provides $1,000 of repairservices to Denises personal car for free

b. Alfa-Bet, a high-tech corporation, pays for each employees membership at the24 Hour Biceps Gym closest to each Alfa-Bet office

c. Quickchat Inc. gives each employee a $10 giftcard to the local coffee shop onNational Coffee Day

d. Hedaya, a doctoral student at Ivy University, receives a full tuition waiver whileserving as research assistant

15. Which of the following will result in the recognition of gross income?

a. Gails employer allows her to set aside $4,000 from her wages to cover the costof daycare for Gails 4-year-old daughter. Gails daycare costs are $4,300 forthe year.

b. Hannah purchases a new sofa from her employer, Sofas-R-Us, for $1,200. The costof the sofa to the furniture store is $1,100 and the sofa normally sells for $1,700.

c. Jaydens employer purchases her commuting pass for the subway at a cost of$325 per month.

d. Havana is a lawyer. The law firm she works for pays for her subscription toLawyers Weekly, a trade magazine for attorneys.

e. None of the above will result in recognition of gross income.

16. In 2022, the limit for contributions to a health care flexible spending account is:

a. $500

b. $1,200

c. $2,850

d. $5,000

17. Verucas employer offers both a dependent care flexible spending account (FSA) anda dependent care assistance program in which employees can receive occasional de-pendent care at no cost. In 2022, the maximum total amount Veruca can exclude fromher gross income for both dependent care programs is:

a. $0

b. $2,850

c. $5,000

d. $10,000

18. Which of the following transportation-related costs paid by an employer to or on be-half of an employee cannot be excluded from gross income?

a. Providing bus passes to employees for a $20 discount.

b. Paying for the parking of only senior executives at a cost of $250 per month.

c. Paying the occasional ride-sharing fare for an employee that has worked overtimelate into the evening.

d. Paying $10 per month for bicycle storage for employees that bike to work.

19. Air Suppliers Inc. provides group term insurance to all its employees for policies up to$250,000. Michelle, an Air Suppliers employee, has a $100,000 policy. The cost of thepolicy is $50 per month, all of which is paid by Air Suppliers. Which of the follow-ing best describes how much gross income Michelle will recognize for this employeebenefit?

a. Michelle will recognize no gross income.

b. Michelle will recognize gross income for the value of the life insurance above$50,000.

c. Michelle must recognize the annual cost of the policy ($600) as gross income.

d. Michelle will recognize no gross income but if she dies, the beneficiary will paytaxes on the life insurance benefits paid

20. Which of the following fringe benefits can be offered to only executives and remainexcluded from employee gross income?

a. Parking

b. Group term life insurance up to $50,000

c. De minimis cafeteria provided meals

d. Employee discounts

21. Which of the following prizes or awards is not taxable?

a. A crystal paperweight worth $125 given to an employee for achieving 10 years ofservice to the company

b. Prizes from a television game show

c. Awards for superior performance on the job

d. A $100 gift card received as a prize in a raffle run by the local school parent-teacher organization

e. All of the above are taxable

22. Huihana receives four tickets to the local professional football game for achievingtwenty years of employment with her employer. The tickets cost the employer $390and have a market value of the same on the date awarded. Huihana is in the highesttax bracket for single taxpayers. How much gross income will Huihana recognize onthe receipt of the tickets?

a. $390

b. $200

c. $25

d. $0

e. $50 or $59.50 including the net investment income tax

23. A 67-year-old taxpayer retires this year and receives the first payment on a quali-fied annuity that was purchased several years ago. The taxpayers investment in theannuity is $94,500, and the annuity pays $1,000 per month for the remainder of thetaxpayers life. Based on IRS mortality tables, the taxpayer is expected to live anothertwenty years. If the taxpayer receives $4,000 in annuity payments in the current year,the nontaxable portion calculated using the simplified method is:

a. $0

b. $1,500

c. $1,800

d. $4,000

e. None of the above

24. Amara has an annuity and over time has recovered her entire investment but itcontinues to pay her $450 per month. Amara should recognize how much of eachmonthly payment as gross income?

a. $0

b. Some amount greater than $450

c. Some amount between $0 and $450

d. $450

25. Which of the following might result in life insurance proceeds that are taxable to therecipient?

a. A life insurance policy in which the insured is the son of the taxpayer and thebeneficiary is the taxpayer

b. A life insurance policy transferred by a partner to the partnership

c. A life insurance policy transferred to a creditor in payment of a debt

d. A life insurance policy purchased by a taxpayer insuring his or her spouse

e. A life insurance policy purchased by a corporation insuring

26. Lupita dies in 2022 but has a $1 million life insurance policy that lists her spouse, MBakuas the beneficiary. MBaku elects to receive all $1 million in a lump sum and spends$200,000 immediately on a new yacht. MBakus gross income from the life insurance is

:a. $0

b. $200,000

c. $800,000

d. $1,000,000

27. Rebecca, a single taxpayer, owns a Series I U.S. Savings Bond that increased in valueby $46 during the year. She makes no special election. How much income mustRebecca recognize this year?

a. $0

b. $46

c. $23

d. $0 if in first 5 years or $46 thereafter

28. Interest from which of the following types of bonds is included in federal taxable income?

a. State of California bond

b. City of New Orleans bond

c. Bond of the Commonwealth of Puerto Rico

d. U.S. Treasury Bond

e. All of the above are excluded from income

29. Which of the following best describes the treatment of U.S. obligation interestincome?

a. Excluded from federal and state gross income

b. Excluded from federal gross income but included for most states

c. Included in federal gross income but excluded for most states

d. Included in gross income for federal and state purposes

30. In 2022,Yui, a single mother, redeems Series EE bonds and uses the total proceeds($6,700 par value and $1,300 interest) to pay for her daughters college education.If Yuis 2022 AGI is $75,000, how much of the proceeds from the redemption of theEE bonds can she exclude?

a. $0

b. $1,300

c. $6,700

d. $8,000

31. On September 22, 2022, Jerry purchases a corporate bond. The bond pays interesteach sixth months on June 30 and December 31 of each year. On December 31, 2022,Jerry receives an interest payment of $400. The amount of interest Jerry will need toinclude in gross income is

:a. None

b. Exactly $400

c. More than $400

d. Less than $400

32. A bond is issued in 2020 at its face value of $10,000 with an interest rate of 5 percent.In 2022, the bond is sold when prevailing interest rates have increased. When recog-nizing gross income from the interest on the bond, the buyer of the bond in 2022 willhave to consider:

a. market bond discount

b. original issue discount

c. market bond premium

d. in-kind dividends.

33. Helen loans her son Ricky, $25,000 to help with the purchase of a car and other per-sonal expenses. Due to her affection for her son, Helen charges Ricky zero interest.Which of these statements best describes the result of this below-market loan?

a. Ricky will have interest income.

b. Helen will have interest income and an offsetting gift to Ricky.

c. Helen will have interest expense since she is out the interest she could have earned.

d. Ricky will have interest income since he is better off by not having to pay interest.

34. Nomi is in the highest individual tax bracket and receives $375 in qualified dividendsfrom Omega Corp. Nomis tax liability (not including any net investment income tax)with respect to these dividends is

:a. $0

b. $277.20

c. $100.00

d. $75.00

e. $50.00

35. The distinction between qualified dividends and ordinary dividends is:

a. There is no distinction.

b. Ordinary dividends are taxed at preferential rates.

c. Qualified dividends are taxed at preferential rates and are a subset of ordinarydividends.

d. Qualified dividends are excluded from gross income.

36. Which of the following gifts would probably be taxable to the person receiving the gift?

a. One thousand dollars given to a taxpayer by his or her father

b. An acre of land given to a taxpayer by a friend

c. A car given to a loyal employee by her supervisor when she retired to recognizeher faithful service

d. A Mercedes-Benz given to a taxpayer by his cousin

e. An interest in a partnership given to a taxpayer by his or her uncle

37. Kelly receives a $40,000 scholarship to Ivy University. She uses $35,000 on tuitionand books and $5,000 for rent while at school. How much gross income will Kellyrecognize, if any?

a. $0

b. $5,000

c. $10,000

d. $30,000

e. $40,000

38. Hillary gets divorced in 2020 and is required to pay her ex-spouse $200 per monthuntil her son reaches 18 years of age in seven years and $120 per month thereafter.How much of her 2021 payments are deductible as alimony?

a. $0

b. $2,400

c. $1,440

d. $960

39. Donald and Michelle are divorced in the current year. As part of the divorce settlement,Michelle transfers a plot of land in Long Island, NY to Donald. Michelles basis in the prop-erty was $20,000 and the market value of the property was $250,000 when transferred.Donald holds the property through the end of the year in hopes of building a residence onit. How much income do Michelle and Donald recognize in the current year?

a. $0 for Michelle and $20,000 for Donald

b. $230,000 for Michelle and $20,000 for Donald

c. $230,000 for Michelle and $0 for Donald

d. $0 for both Michelle and Donald

e. $0 for Michelle and $250,000 for Donald