15. Assume the same facts as in 14 above, except that there is no option to receive cash. What amount if any of the dividend will be included in Cole's gross income? a. $13,000 b. $9,600 . $15,000 e. None of the Above 16. Assume the same facts as in 15 above. What is Cole's total basis in the stock? a. $96,000 2.ecr @4B6.00 b. $130,000 C. $109,000 d. $13,000 e. None of the above 17. Ben was diagnosed with a terminal illness. His physician estimated that Ben would live no more than 18 months. After he received the doctor's diagnosis, Ben cashed in his life insurance policy to pay some medical bills. Ben had paid $12,000 in premiums on the policy, and he collected $50,000, the cash surrender value of the policy. Henry enjoys excellent health, but he cashed in his life insurance policy to purchase a new home. He had paid premiums of $12,000 and collected $50,000 from the insurance company a. b. Neither Ben nor Henry is required to recognize gross income. Both Ben and Henry must recognize $38,000 (s50,000-$12,000) of gross income. Henry must recognize $38,000 (s50,000-$12,000) of gross income, but Ben-ho s les d. Ben must recognize $38,000 (S50,000-$12,000) of gross income, but Henry e. None of the above. does not recognize any gross income. does not recognize any gross income. 18. In the case of interest income from state and Federal bonds: I. Interest on United States government bonds received by a state II. Interest on United States government bonds are not subject to Federal III. Interest received on bonds issued by State and A received by a 01 resident cannot be subject to that state's income income tax resident of State B cannot be subject to income tax in State B. F I is true, II and III are false. - I and II are true, and III is false. II and III are true, and I is false. I, II, and III are true. c. d. 11. Daniel, a cash basis taxpayer, purchased a bond on July 1, 2016, at par of $10,000 plus accrued interest of $300. On December 31, 2016, Daniel collected the $600 interest for the year. On January 1, 2017, Daniel sold the bond for $10,200. 5 Daniel must recognize $300 interest income for 2016 and a $200 gain on the sale of the bond in 2017 Daniel must recognize $600 interest income for 2016 and a $200 gain on the sale of the bond in 2017 Daniel must recognize $600 interest income for 2016 and a $100 loss on the sale of the bond in 2017 Daniel must recognize $300 interest income for 2016 and a $100 loss on the sale of the bond in 2017 None of the above. b. c. d. e. IRC Section 61(A) defines "gross income" as: a. 12. b. c. d. e. Except as otherwise provided..., gross income means all income from whatever source derived, including (but not limited to) Anything that increases ones wealth. Income from whatever source derived, without apportionment A change in net worth plus consumption None of the above. 13. Abigail and Darcy are married. In 2016 they sold there home, which they had purchased in 2011, and lived in it since 2012. They sold the house for $865,000. They purchased the house for $170,000 and made improvements costing $45,000. Abigail and Darcy immediately purchased another home for $900,000. What is their recognized gain in 2016 from the sale of the home assuming this is the only home they ever sold? A 40,000 a. $O. b. $650,000 e. None of the above. Question 14 through 16 14. Cole owns 2,000 shares of stock in Chase Corporation, worth $65 per share. The 2,000 shares were purchased in 2011 for $48 per share. In 2016, the corporation issues a 10% stock dividend to all common shareholders with an option of receiving either the stock or the cash cquivalent of $13,000. Cole selected the stock. Cole's gross income from the above is: 2,000 65% 13oot. a. $15,000 b. $9,600 513,000, d. e. $0 None of the above
