Question 1.1. (TCO A) Which of the following constitutes tax evasion? (Points : 5)

Arranging your affairs to keep your tax liability as low as possible under the tax law Avoiding taxes Failing to disclose a tax liability from a completed transaction Trying to minimize your tax liability

Question 2.2. (TCO C) Which of the following items is not subject to federal income tax? (Points : 5)

The interest on California State bonds Gambling winnings A $5,000 birthday gift from a family member Both the interest on California State bonds and the $5,000 birthday gift from a family member

Question 3.3. (TCO B) Mark Mayer, a cash-basis taxpayer, leased property on June 1, 2016 to Perry Purly at $325 a month. Perry paid Mark $325 as a security deposit, which will be returned at the end of the lease. In addition, Perry paid $650 in advance rent, which is to be applied as rent to the last 2 months in the lease term. The lease is to run for a 2-year period. What is Mark's rental income for 2016? (Points : 5)

$1,950 $2,275 $2,600 $2,925

Question 4.4. (TCO G) On June 3, 2016, Leon Wren, an electrician, was injured in an accident during the course of his employment. As a result of injuries sustained, he received the following payments during 2016. Damages for personal injuries: $8,000 Worker's compensation: $3,000 Reimbursement from his employer's accident and health plan for medical expenses paid by Wren: $1,200 The amount to be included in Wren's 2016 gross income should be _____. (Points : 5)

$0 $1,200 $3,000 $12,200

Question 5.5. (TCO F) For individual taxpayers, deductible losses for tax purposes do not include _____. (Points : 5)

business losses investment losses personal losses personal casualty or theft losses

Question 6.6. (TCO C) Joe is a sole proprietorship. He desires to be taxed as a corporation. What does he need to do? (Points : 5)

Write a letter to the IRS requesting the change File Form 2553 File Form 8832 Simply file Form 1120

Question 7.7. (TCO F) Debbie is a 50% owner in MAE Inc., an S corporation. MAE Inc. had the following results from operations in 2016: Ordinary business income of $40,000, charitable contributions of $5,000, Long-term capital gain of $3,000. How much income should Debbie report on Schedule E? (Points : 5)

None. The income is reported on the Corporations Form 1120S only. $20,000 $35,000 $17,250