1)Under the Simplified Method for calculating the taxable amount for an annuity:

a.The amount paid by the employee for the annuity is divided by a number based on the length of employment.

b.There are separate tables for "well" employees and "sick" employees.

c.The investment in the annuity is divided by a number based on the age of the older annuitant at the starting date of the annuity when there is more than one annuitant (a joint and survivor annuity).

d.The amount paid in by the employee to the plan is divided by a number based on the age of the employee (or the employee and spouse) at the starting date of the annuity.

e.The amount paid for the annuity by the employee is recovered first.

2)Linda received the following items in the current tax year. Which items must she include in her return?

a.200 shares of IBM stock from her father, worth $7,000

b.Qualified dividends on the IBM shares from her father of $250

c.A Christmas present from her mother that cost $200

d.A Christmas present from her mother that cost $200 and A $500 check as a Christmas gift from her boss

e.A $500 check as a Christmas gift from her boss

f.200 shares of IBM stock from her father, worth $7,000 and Qualified dividends of $250 on the IBM shares from her father

g.200 shares of IBM stock from her father, worth $7,000 and A Christmas present from her mother that cost $200

h.Qualified dividends of $250 on the IBM shares from her father and A $500 check as a Christmas gift from her boss

3)

Corporate dividends may qualify for special tax treatment. Which of the following statements is true regarding qualified dividends?

a.Qualified dividends are considered reductions to the taxpayer's basis

b.Qualified dividends are taxed at 0, 15, or 20 percent

c.Qualified dividends are taxed at ordinary income rates

d.Qualified dividends are excluded from gross income

4) If Craig and Michelle are married and reside in California, income from which of the following would not be considered community income?

a.Interest on investment property inherited by Michelle from her grandmother

b.Income from sale of property acquired during their marriage

c.Interest on their joint savings account

d.Rental income from a multi-apartment building purchased during their marriage

e.Craig's salary

f.All of these items listed would be considered community income.

5) Which of the following is not a feature of a Coverdell Education Savings Account?

a.Distributions are not taxable if used for qualified education expenses.

b.If a distribution in a year exceeds expenses, the excess is treated as part return of capital and part earnings.

c.Contributions cannot be made by an individual with no earned income.

d.Qualified expenses include those of private, elementary, and high school.

e.Contributions are limited to $2,000 and are not deductible.

f.Contributions are phased out at higher AGIs.

6) Anthony transfers to Luigi a life insurance policy with a face value of $100,000 and a cash surrender value of $10,000 in settlement of a debt. Luigi continues to pay the annual premiums of $1,000 on the policy. Five years later Anthony dies, and Luigi receives the $100,000. How much, if any, is taxable income to Luigi?

a.$85,000

b.$0

c.$90,000

d.$100,000

7) A wealthy family hires a live-in professional nanny for the children. Of the following paid by the family, what must the nanny include in income?

a.Room and board

b.Salary of $12,000 a year

c.Medical insurance

d.All of these listed items are correct.

e.None of these listed items are correct.