Need to select one correct answers for each question as follows:

A characteristic of FICA is that:

It is imposed only on the employer.

It applies when one spouse works for the other spouse.

It provides a modest source of income in the event of loss of employment.

It is administered by both state and Federal governments.

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Question 27 pts

Allowing a domestic production activities deduction for certain manufacturing income can be justified:

As mitigating the effect of the annual accounting period concept.

By economic considerations.

As promoting adminstrative feasibility.

Based on the wherewithal to pay concept.

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Question 37 pts

A characteristic of FUTA is that:

It is imposed on both employer and employee.

IT is imposed solely on the employee.

Compliance requires following guidelines issued by both state and Federal regulatory authorities.

It is applicable to spouses of employees but not to any children under age 18.

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Question 47 pts

Which, if any, of the following is a deduction from AGI?

Alimony payments.

Child supporty payments.

Unreimbursed employee expenses.

Loss on the sale of a pesonal automobile.

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Question 57 pts

Which, if any, of the following is a deduction for AGI?

Alimony payments.

Interest on home mortgage.

Unreimbursed employee expenses.

Charitable contributions.

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Question 67 pts

A qualifying child cannot include:

A nonresident alien.

A married son who files a joint return.

An uncle.

A daughter who is away at college.

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Question 77 pts

For purposes of determining gross income, which of the following is true?

A taxpayer who finds a wallet full of money is not required to recognize income because someone will eventually ask for the return of the money.

A mechanic completed repairs on an automobile during the year and collects money from the customer. The customer was not satisfied with the repairs and sued the mechanic for a refund. The mechanic cannot defer recognition of the income until the suit has been settled.

Embezzlement proceeds are not included in the embezzlers gross income because the embezzler has an obligation to repay the owner.

All of the above are true.

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Question 87 pts

The annual increase in the cash surrender value of a life insurance policy:

Is taxed when the individual dies and the heirs collect the insurance proceeds.

Must be included in gross income each year under the original issue discount rules. Reduces the deduction for life insurance expense.

Reduces the deduction for life insurance expense.

Is not included in gross income each year because of the substantial restrictions on gaining access to the policys value.

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Question 97 pts

With respect to the prepaid income from services, which of the following is true?

The treatment of prepaid income is the same for tax and financial accounting.

A cash basis taxpayer can spread the income over the period services are to be provided if all of the services will be completed by the end of the tax year following the year of receipt.

An accrual basis taxpayer can spread the income over the period services are to be provided if all of the services will be completed by the end of the tax year following the year of receipt.

An accrual basis taxpayer can spread the income over the period services are to be provided on a contract for three years or less.

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Question 107 pts

The Blue Utilities Company paid Sue $1,500 for the right to lay an underground electric cable across her property anytime in the future.

Sue must recognize $1,500 gross income in the current year if the company did not install the cable during the year.

Sue must recognize $1,500 gross income in the current year regardless of whether the company installed the cable during the year.

Sue must recognize $1,500 gross income in the current year, and when the cable is installed she must reduce her cost basis in the land by $1,500.

Sue is not required to recognize gross income from the receipt of the funds, but she must reduce her cost basis in the land by $1,500.

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Question 117 pts

The employees of Mauve Accounting Services are permitted to use the copy machine for personal purposes, provided the privilege is not abused. Ed is the president of a civic organization and uses the copier to make several copies of the organizations agenda for its meetings. The copies made during the year would have cost $125 at a local office supply.

Ed must include $125 in his gross income.

Ed may exclude the cost of the copies as a no-additional cost fringe benefit.

Ed may exclude the cost of the copies only if the organization is a client of Mauve.

Ed may exclude the cost of the copies as a de minimis fringe benefit

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Question 127 pts

Which of the following must be capitalized by a business?

Replacement of a windshield of a business truck which was broken in an accident.

Repair of a roof of a building used in business.

Amount paid for a covenant not to compete.

Only a. and c. must be capitalized.

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Question 137 pts

Paul is the manager of a motel. As a condition of his employment, Paul is required to live in a room on the premises so that he is there in case of emergencies. Paul considers this a fringe benefit, since he would otherwise be required to pay $600 per month rent. The room that Paul occupied normally rents for $60 per night, or $1,500 per month. On the average, 90% of the motel rooms were occupied. As a result of this rent-free use of a room, Paul is required to include in gross income.

$600 per month.

$2,100 per month.

$0

none of the above

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Question 147 pts

Which of the following is not a requirement for an alimony deduction?

The payments must be in cash.

The paynentse must cease upon theh death of the payee.

The payments must be pursuant to a legal obligation to provide support.

The payor and payee must not live in the same household at the time of the payments.

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Question 157 pts

Sharons automobile slid into a ditch. A stranger pulled her out. Sharon offered to pay $25, but the stranger refused. Sharon slipped the $25 in the strangers truck when he was not looking.

The $25 is a nontaxable gift received by the stranger because Sharon was not legally required to pay him.

The $25 is a nontaxable gift because the stranger did not ask to receive it.

The $25 is taxable compensation for services rendered.

The $25 is a nontaxable service award.

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Question 167 pts

A scholarship recipient at City University must include in gross income the scholarship proceeds used to pay for:

Only tuition.

Tuition, books, and supplies, but not meals and lodging.

Books, supplies, meals, and lodging.

Meals and lodging.

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Question 177 pts

Barney, a full-time graduate student, receives a full tuition waiver ($5,500 during the year) and a monthly stipend for 9 months of $500 from State University for performing research for the university as a graduate assistant ($4,500 during the year). In addition, he receives a $2,000 research grant to pursue his own research and studies. Barneys gross income from the above is:

$0

$4,500

$10,000

$12,000

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Question 187 pts

Theresa sued her former employer for age, race, and gender discrimination. She claimed $250,000 in damages for loss of income and $500,000 in punitive damages. She settled the claim for $600,000. As a result of the settlement, Theresa must include in gross income:

$0

$400,000 [$500,000/($250,000 + $500,000) $600,000].

$500,000

$600,000

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Question 197 pts

Which of the following are deductions for AGI?

Qualified moving expenses.

Reimubursed employee business expenses.

Alimony.

a, b, and c

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Question 207 pts

Which of the following is correct?

A personal casualty loss is classified as a deduction from AGI.

Real estate taxes on a taxpayers personal residence are classified as deductions from AGI.

An expense associated with rental property is classified as a deduction from AGI.

Only a. and b. are correct.

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Question 2112 pts

Two months after the burglary of his personal residence, Eric is audited by the IRS. Among the items taken in the burglary was a shoe box containing approximately $50,000 in cash. Eric is the owner and operator of a cash-and-carry liquor store. Eric wonders why he was audited. Can you help explain?

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Question 2212 pts

Ted was shopping for a new computer. He found one that met his needs and agreed to purchase it for $1,200. After he had paid for the computer, he discovered a rebate coupon inside the packaging. He filled out the required form and sent it to the manufacturer. The next week he received a $100 check from the manufacturer. How much should Ted include in gross income?

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Question 2312 pts

Identify the factors that should be considered in determining whether a transaction is a bona fideloan or a gift.

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Question 2412 pts

Amy is the sole shareholder of Garnet Corporation. During the year, Amy leases a building to Garnet for a monthly rental of $40,000. If the fair rental value of the building is $30,000, what are the income tax consequences to the parties involved?

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Question 2512 pts

Mel is not quite sure whether an expenditure he made is a deduction for AGI or a deduction fromAGI. Since he plans to choose the standard deduction option for the year, does the distinction matter? Explain.