Question 1

Brian, a calendar-year taxpayer, purchased an annuity contract which started paying him $54 each month on June 1, of the current year. The annuity cost him $2,400, and it has an expected return of $7,200. How much of this annuity is includable in gross income for the current year?

		$126
		$648
		$0
		$252
		$378

4 points

Question 2

On November 1, 2016, a cash basis investor pays $10,208 for bonds. The bonds pay $250 interest on June 1 and December 1. Included in the purchase price is $208 of accrued interest. On December 1, 2016, the corporation pays the investor $250. What amount does the investor include in gross income in 2016?

		$208
		$0
		$84
		$250
		$42

4 points

Question 3

Social Security benefits received during the year:

		are fully taxable for all recipients
		are tax-free for all recipients
		may be fully taxable for some recipients
		may be partially taxable for some recipients

4 points

Question 4

An employee receives $100 in tips during March. She reports the tips to her employer. Which of the following statements is correct regarding tips?

		The employer adds the $100 to the employee's wages and withholds income, social security, and Medicare taxes on the amount.
		The employer reports the $100 as allocated tips on the employee's W-2.
		The employer adds the tips to the employee's wages and withholds income taxes, but not social security or Medicare taxes, on the amount.
		The employer adds the tips to the employee's wages and withholds social security and Medicare taxes, but not income taxes, on the amount.

4 points

Question 5

Joyce is self-employed and uses the calendar year and the accrual method of accounting. She reports the following activities for December:

	Received $10,000 from clients for services to be performed next year
	Received $30,000 for services performed in December
	Reports $15,000 in accounts receivable for work performed in December
	Received $2,000 for services performed in November

What amount must Joyce include in gross income for December?

		$47,000
		$42,000
		$57,000
		$45,000
		$55,000

4 points

Question 6

A corporation issues a 30-year, $10,000 bond for less than face value (at a discount). At the time the bond is issued, the tax law will consider the OID to be de minimis if it does not exceed:

		$25
		$10
		$375
		$125
		$750

4 points

Question 7

Thomas, age 8, received taxable interest of $1,850 and dividends of $2,550 during the year. He has no other income, and no itemized deductions. Thomas is a dependent of his parents, who have taxable income of $72,000. How much of Thomas' income will be taxed at his parents' tax rate?

		$3,350
		$400
		$0
		$4,400
		$2,300

4 points

Question 8

Without regard to any AGI limitation, alimony is:

		Deductible for the spouse paying it; taxable for the spouse receiving it
		Not deductible for the spouse paying it; taxable for the spouse receiving it
		Not deductible for the spouse paying it; not taxable for the spouse receiving it
		Deductible for the spouse paying it; not taxable for the spouse receiving it

4 points

Question 9

Tips of $10 are:

		Taxable
		Not taxable

4 points

Question 10

Dan's taxable income falls in the 15% tax bracket. Included in his taxable income is $5,000 of ordinary dividends, of which $2,000 are qualified dividends. The amount of tax Dan will pay on his qualified dividends is:

		$200
		$0
		$100
		$300
		$250

4 points

Question 11

By law, Darryl is required to make monthly alimony and child support payments of $2,000 and $3,000, respectively. During the year, Darryl pays a total of $50,000 to his ex-wife. What amount must the ex-wife include in gross income?

		$0
		$50,000
		$26,000
		$24,000
		$14,000

4 points

Question 12

Which of the following items is taxable to the employee receiving them?

I	Sales Commissions
II	Holiday bonus of $2,000
III	Sick pay
IV	Vacation pay
V	Wages

		I, II, IV, V
		I, III, IV, V
		III, IV, V
		I, II, III, IV, V
		I, II, V

4 points

Question 13

As part of their divorce agreement, Harry transfers to Mary, his former spouse, GM stock with a market value of $30,000. Harry had $20,000 invested in the stock. How does this transfer affect Harry, and what is Mary's basis in the stock?

		Harry has no gain or loss, and Mary's basis is $20,000.
		Harry has no gain or loss, and Mary's basis is $30,000.
		Harry has a gain of $10,000, and Mary's basis is $20,000.
		Harry has a gain of $10,000, and Mary's basis is $30,000.

4 points

Question 14

An unmarried taxpayer itemized deductions in 2015. The taxpayer's itemized deductions were $6,850; the standard deduction amount was $6,300. Included in the taxpayer's itemized deductions were $3,700 of state income tax withheld. In 2016, the taxpayer receives an $800 refund check from the state government. What amount must the taxpayer include in gross income in 2016?

		$550
		$800
		$750
		$1,600
		$0

4 points

Question 15

On August 1 of the current year, an unmarried taxpayer retires and begins receiving monthly pension checks in the amount of $2,200. During her working years, the taxpayer contributed $5,720 to her employer's pension plan with after-tax dollars. Using the taxpayer's age at the time the payments begin, the taxpayer's number of expected monthly payments is 260. Of the $11,000 in pension benefits the taxpayer received during the current year, what amount must she include in gross income?

		$5,280
		$0
		$11,000
		$3,080
		$10,890

4 points

Question 16

Employees are required to report the amount of tips they receive to their employer when their tips for the month exceed:

		$0.
		$20.
		$25.
		$100.
		$10.

4 points

Question 17

A single taxpayer with modified AGI of $227,000 has $31,500 of net investment income. The taxpayer's net investment income (NII) tax is:

		$4,725
		$1,026
		$1,197
		$0
		$171

4 points

Question 18

John pays his former wife Rose $3,100 in alimony and $400 in child support each month. Assuming John makes all 12 payments during the year, how much of the $42,000 must Rose include in gross income:

		$0
		$42,000
		$4,800
		$37,200

4 points

Question 19

Joan's taxable income falls in the 33% tax bracket. Included in her taxable income is $20,000 of ordinary dividends, of which $15,000 are qualified dividends. The amount of tax Joan will pay on her qualified dividends is:

		$4,950
		$6,200
		$2,250
		$3,000
		$4,650

4 points

Question 20

A 10-year-old who lives with her parents has $5,300 in interest income for the year. The child's net unearned income is:

		$3,200
		$0
		$1,400
		$4,250
		$5,300

4 points

Question 21

Without regard to any AGI limitation, child support is:

		Deductible for the spouse paying it; taxable for the spouse receiving it
		Not deductible for the spouse paying it; taxable for the spouse receiving it
		Not deductible for the spouse paying it; not taxable for the spouse receiving it
		Deductible for the spouse paying it; not taxable for the spouse receiving it

4 points

Question 22

On July 1, 2015, a dance studio received $3,600 for 72 dance lessons to be given over the next 3 years. Thirty lessons were given in both 2015 and 2016. The remaining 12 lessons were given in 2017. The studio (which uses the accrual method) includes what amount in gross income in 2016?

		$2,100
		$0
		$1,500
		$1,200
		$1,800

4 points

Question 23

Choose the statement that applies to Andy, a 14-year-old child, who earned $2,200 mowing lawns during the summer. Andy also had interest income of $400.

		Andy's parents must include the $400 of interest income on their tax return.
		The $400 of unearned income is taxed at his parents' tax rate.
		Andy must file his own return.
		Form 8615 is used to compute Andy's income tax.
		All of the above.

4 points

Question 24

Over the years, Kevin has made nondeductible contributions to his traditional IRA totaling $50,000. The ending balance of his IRA at the end of the year is $70,000. During the year, Kevin withdrew $10,000 from his IRA, which is not subject to the 10% penalty. How much of his withdrawal is taxable?

		$3,750
		$10,000
		$0
		$6,250