Arguably, free parking places provided to employees by their employers might be excluded from taxable income on the grounds that

a. such items neither satisfy the economic definition of income nor fall within the definition of the income for tax purposes.

b. any gain obtained by the employee is secondary or incidental to the employer's business purpose that is served by granting such benefit.

c. the value of the benefit obtained by the employee is not determinable.

d. the benefit obtained by the employee is not in the form of cash.

In which of the following situations would the taxpayer not be considered in constructive receipt of income in 2015? Assume that all of the taxpayers use the cash method of accounting.

a. Al is a self-employed accountant. On December 27, 2015, he received a check for $2,000 for preparing the November financial statements of one of his clients. Due to illness, he was unable to deposit the check until January 5, 2016.

b. Ben entered into a contract to sell his rental property on December 3, 2015. On that date, the down payment, a check for $1,000, was placed in an escrow account. Ben received the check when the transaction closed on January 20, 2016.

c. Sugar Ray fought Rocky on December 25, 2015, a Christmas fight shown on television all over the world. On December 28, the fight promoters gave Sugar Ray's agent, Don Queen, a check for $5 million representing his prize money for the fight. Don delivered the check to Sugar Ray on January 12, 2016.

d. On December 20, 2015, Mr. Big received stock worth $10,000 as a bonus from the corporation for which he worked. He did not sell the stock until January 5, 2016.

e. All of the taxpayers above are in constructive receipt of the income items.

Which of the following businesses must use the accrual method of accounting to account for all or a part of its operations?

a. F Gas Corporation, a chain of 10 gas stations owned and operated by F. The corporation has average annual gross receipts of $13 million annually.

b. The Clinic. This corporation is owned and operated by 80 physicians who provide a variety of health care services to the citizens of Houston. Annual billings to insurance companies and patients monthly exceed $20 million.

c. Whitewater Rafting of Idaho is a partnership owned by B and T. Gross receipts for the past several years have averaged $100,000.

d. D Drilling, a partnership owned by J and A. The partnership operates oil drilling rigs all over the world. Annual gross receipts consistently exceed $8 million.

e. More than one of the above and these are __________.

The cash method of accounting may not be used by

a. a solely owned personal service corporation in the management consulting business.

b. an individual engaged as a sole proprietor in a service business (inventory is not the principal business activity) whose average annual gross receipts for all prior years exceed $6 million.

c. a partnership of attorneys that has average annual gross receipts of $7 million.

d. b and c.

e. All of the above may use the cash method.

R, a cash basis taxpayer, wanted to defer income from 2015 to 2016. Which of the following will serve that purpose?

a. Purchase of a Treasury Bill in November, 2015 that matures in February, 2016.

b. A signed agreement (a deferred compensation agreement) with his employer that the latter will pay him part of his 2015 salary in 2016.

c. Delay cashing his last salary check for 2015 until 2016.

d. a and b.

e. a and c.

Ralph, a cash basis taxpayer, owns a five-story office building that he leases to various tenants. During the year, he signed a three-year lease with a tenant and received a check of $6,000 for the following:

Rent for November 1, 2015 to October 1, 2016 $5,000

Advance rent for last three months of lease 600

Security deposit (refundable) 400

For the current year, 2015, Ralph must report income of

a. $6,000.

b. $5,600.

c. $5,000.

d. $832.

e. some other amount.

In April, 1976, P purchased Series E bonds at a cost of $5,000. She did not report the income annually. When the bonds mature in 2015 P will receive $40,000 and will have to report a gain of $35,000. P's tax planning options include

a. shifting the $35,000 of income to a year of her choice by exchanging the Series E bonds for Series EE and redeeming them at that later date.

b. shifting the $35,000 of income to a year of her choice by exchanging the Series E bonds for Series HH and redeeming them at a later date.

c. There are no remedies: P must report the gain as taxable income.

d. a and b.

The application of Code 7872 to interest-free or below-market loans has certain tax consequences for the lender and borrower. They include

a. the borrower may be allowed an itemized deduction for the interest hypothetically paid to the lender.

b. the lender is not required to report the hypothetical payment as interest income until the loan is repaid.

c. the lender treats the hypothetical payment as earned income.

d. the lender is deemed to have made a completed gift of the loan amount.

Several useful techniques permit an individual taxpayer to postpone income recognition. They include all the following, except

a. cash investments in X, Inc. bonds.

b. installment sales of property.

c. deferred compensation arrangements.

d. income on Treasury bills.

e. all of the above permit deferral.

"Substantial tax benefits await the self-sufficient (e.g., an individual who can repair his own automobile is better off from a tax perspective than someone who cannot). "Select the correct comment on this statement.

a. The above statement is valid, since such an individual may barter his or her services for those of another and pay no tax on the services furnished to him.

b. The above statement is valid because the concept of taxable income would exclude the benefit derived from repairing one's own automobile.

c. The above statement is valid because the form of benefit principle enables a taxpayer to exclude gains received in a certain form.

d. The above statement is false---no tax benefits await the self-sufficient.