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Exam 3: Gross Income: Inclusions

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Question 1

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Gross income is limited to amounts received in the form of cash.

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Question 2

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The portion of a taxpayer's wages that are garnished by court order and forwarded to pay a delinquent bank loan are not taxable income to the taxpayer.

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Question 3

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Jeannie, a single taxpayer, retired during the year, to take over the management of some rental property. She had the following items of income and expense: What is Jeannie's adjusted gross income for the year?

Ms. Marple's books and records for 2014 reflect the following information: What is the amount Ms. Marple should include in her gross income in 2014?

Bridget owns 200 shares of common stock of Jones Corporation. During the current year, Jones gives its shareholders the choice of receiving cash of $2 per share or one additional share of Jones common stock for each 5 shares of stock owned. The stock has a fair market value of $10 per share. Bridget chooses to take the additional shares of stock. How much income does Bridget have from the stock dividend?

Lily had the following income and losses during the current year: What is Lily's adjusted gross income (not taxable income) ?

With respect to alimony and property settlements in a divorce or separation, all of the following are true with the exception of

Which of the following advance payments cannot qualify for income tax deferral?

Alex is a calendar year sole proprietor. He began business on December 1, this year. He uses the accrual method of accounting. Alex had the following collections in December: • Collected $7,000 in December, from clients who paid cash for services to be performed next year. • Collected $5,000 in December, for services performed during December; deposited in an operating account on December 31, this year. • Collected $12,000 in December; on accounts receivable for services performed in December; deposited in operating account on January 2, next year. What is the amount Alex must include in his income for December?

Unemployment compensation is exempt from federal income tax.

Which of the following bonds do not generate tax-exempt Federal income?

Interest on the obligations of the U.S. government, states, territories, and U.S. possessions and their political subdivisions are tax-exempt.

Gains realized from property transactions are included in gross income unless a nonrecognition rule applies.

Natasha is a single taxpayer with a 28% marginal tax rate. She received distributions of earnings this year as follows: How much of the $6,000 distribution will be taxed at the 15% tax rate?

Julia owns 1,000 shares of Orange Corporation. This year, Orange declared a 10% stock dividend. There was no option for shareholders to receive cash. When Julia received 100 shares of Orange stock, it had a fair market value of $50 a share. How much income does Julia have from the dividend?

Todd and Hillary, husband and wife, file separate returns. Todd and Hillary live in a community property state that considers separate property income to be community income. Todd's salary is $82,000 and Hillary's salary is $80,000. Hillary receives dividend income of $7,000 from stock inherited from her parents. Todd receives interest income of $5,000 from bonds purchased with his salary after marriage. Todd and Hillary receive $10,000 dividend income from stock they purchased jointly. Todd's income would be

Billy, age 10, found an old baseball glove while exploring his new home. His father, Al, took the glove to a dealer in baseball memorabilia who verified that the glove belonged to Babe Ruth. Al sold the glove for $75,000. What tax issues should Al consider?

Examples of income which are constructively received include all of the following except

Which of the following constitutes constructive receipt in 2014 ? a. A check received on December 29, 2014. The check was postdated January 5, 2015. b. A check received on January 4, 2015. It had been mailed on December 29, 2014. c. A rent check, received on December 31, 2014, by the manager of an apartment complex. The manager normally collects rent for the owner who is out of town. d. A salary check received at 5:30 p.m. on December 31, 2014, after all banks are closed. e. A paycheck received on December 26, 2014. The check was not honored by the bank because the employer's account did not have sufficient funds

In order to be treated as alimony for tax purposes, payments must be made in cash.