Question 1

Flora Company owed $95,000,a debt incurred to purchase land that serves as security for the debt.

Accepted Answer

A)  If Flora had borrowed the funds from a bank,the bank accepts $85,000 in full payment of the debt,and Flora is solvent after the transfer,Flora does not recognize income,but the company must reduce the cost of the land by $10,000.
B)  If Flora had borrowed the funds from a bank,and the bank accepts $85,000 in full payment of the debt,when the value of the property is $80,000,Flora can deduct a loss.
C)  If Flora transfers to the bank other property,with a basis of $90,000 and a fair market value of $95,000,in full payment of the debt,Flora can recognize a $5,000 loss.
D)  If the $95,000 is owed to the person who sold the property to Flora,and the creditor accepts $85,000 in full payment for the debt,Flora does not recognize gain but must reduce its basis in the land.
E)  None of these.F) A) and B)
G) A) and E)

Question 2

Employees of a CPA firm located in Maryland may exclude from gross income the meals and lodging provided by the employer while they were on an audit in Delaware.

Accepted Answer

A) True 
 B)False

Question 3

A U.S.citizen who works in France from February 1,2014 until January 31,2015 is eligible for the foreign earned income exclusion in 2014 and 2015.

Accepted Answer

A) True 
 B)False

Question 4

Assuming a taxpayer qualifies for the exclusion treatment,the interest income on educational savings bonds:

Accepted Answer

A)  Is gross income to the person who purchased the bond in the year the interest is earned.
B)  Is gross income to the student in the year the interest is earned.
C)  Is included in the student's gross income in the year the savings bonds are sold or redeemed to pay educational expenses.
D)  Is not included in anyone's gross income if the proceeds are used to pay college tuition.
E)  None of these.F) None of the above
G) C) and D)

Question 5

Sonja is a United States citizen who has worked in Spain for the past 10 months.She received $8,000 a month as compensation.Her employer has offered to extend Sonja's contract to work in Spain for another 6 months at the same rate of pay.If she rejects the offer,she can return to the United States and receive a salary of $10,000 per month.While working in Spain,she is subject to the Spain income tax,which is approximately 11% of her gross pay.The marginal tax rate on her income taxed in the United States is 25%.Compare Sonja's after­tax income assuming she remains in Spain with her after-tax income if she returns to the United States.

Accepted Answer

If Sonja returns to the United States,sh...

Question 6

Workers' compensation benefits are included in gross income if the employer also pays the employee while the employee is recovering from his or her injury.

Accepted Answer

A) True 
 B)False

Question 7

Barney is a full-time graduate student at State University.He serves as a teaching assistant for which he is paid $700 per month for 9 months and his $5,000 tuition is waived.The university waives tuition for all of its employees.In addition,he receives a $1,500 research grant to pursue his own research and studies.Barney's gross income from the above is:

Accepted Answer

A)  $0.
B)  $6,300.
C)  $11,300.
D)  $12,800.
E)  None of these.F) B) and D)
G) D) and E)

Question 8

Stuart owns 300 shares of Turquoise Corporation stock and 2,000 shares of Blue Corporation stock.During the year,Stuart received 150 shares of Turquoise as a result of a 1 for 2 stock split.The value of the shares received was $4,800.Stuart also received 100 shares of Blue Corporation stock as a result of a 5% stock dividend.Stuart did not have the option of receiving cash from Blue.The additional shares he received had a value of $7,200.Stuart's gross income from the receipt of the additional Turquoise and Blue shares is:

Accepted Answer

A)  $0.
B)  $4,800.
C)  $7,200.
D)  $12,000.
E)  None of these.F) B) and C)
G) A) and D)

Question 9

The Royal Motor Company manufactures automobiles.Non-management employees of the company can buy a new automobile for Royal's cost plus 2%.The automobiles are sold to dealers at cost plus 20%.Generally,management employees of Local Dealer,Inc. ,are allowed to buy a new automobile from the company at the dealer's cost.Which of the following statements is correct?

Accepted Answer

A)  The non-management employees who buy automobiles at a discount are not required to recognize income from the purchase.
B)  None of the employees who take advantage of the fringe benefits described above are required to recognize income.
C)  Employees of Royal are required to recognize as gross income 18% (20% - 2%) of the cost of the automobile purchased.
D)  All of these.
E)  None of these.F) A) and C)
G) A) and B)

Question 10

In December 2014,Todd,a cash basis taxpayer,paid $1,200 of fire insurance premiums for the calendar year 2015 on a building he held for rental income.Todd deducted the $1,200 of insurance premiums on his 2014 tax return.He had $150,000 of taxable income that year.On June 30,2015,he sold the building and,as a result,received a $500 refund on his fire insurance premiums.As a result of the above:

Accepted Answer

A)  Todd should amend his 2014 return and claim $500 less insurance expense.
B)  Todd should include the $500 in 2015 gross income in accordance with the tax benefit rule.
C)  Todd should add the $500 to his sales proceeds from the building.
D)  Todd should include the $500 in 2015 gross income in accordance with the claim of right doctrine.
E)  None of these.F) C) and D)
G) D) and E)

Question 11

Louise works in a foreign branch of her employer's business.She earned $5,000 per month throughout the relevant period.

Accepted Answer

A)  If Louise worked in the foreign branch from May 1,2013 until October 31,2014,she may exclude $40,000 from gross income in 2013 and exclude $50,000 in 2014.
B)  If Louise worked in the foreign branch from May 1,2013 until October 31,2014,she cannot exclude anything from gross income because she was not present in the country for 330 days in either year.
C)  If Louise began work in the foreign country on May 1,2013,she must work through November 30,2014 in order to exclude $55,000 from gross income in 2014 but none in 2013.
D)  Louise will not be allowed to exclude any foreign earned income because she made less than $97,600.
E)  None of these.F) A) and E)
G) None of the above

Question 12

Martha participated in a qualified tuition program for the benefit of her son.She invested $6,000 in the fund.Four years later her son withdrew $8,000,the entire balance in the program,to pay his college tuition.

Accepted Answer

A)  Martha is not required to include the $2,000 ($8,000 - $6,000) in her gross income when the funds are used to pay the tuition.
B)  Martha's son must include the $2,000 ($8,000 - $6,000) in his gross income when the funds are used to pay the tuition.
C)  Martha must include $8,000 in her gross income.
D)  Martha's son must include $8,000 in his gross income.
E)  None of these.F) A) and D)
G) C) and D)

Question 13

If a scholarship does not satisfy the requirements for a gift,the scholarship must be included in gross income.

Accepted Answer

A) True 
 B)False

Question 14

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 organization's agenda for its meetings.The copies made during the year would have cost $150 at a local office supply.

Accepted Answer

A)  Ed must include $150 in his gross income.
B)  Ed may exclude the cost of the copies as a no-additional cost fringe benefit.
C)  Ed may exclude the cost of the copies only if the organization is a client of Mauve.
D)  Ed may exclude the cost of the copies as a de minimis fringe benefit.
E)  None of these.F) A) and E)
G) B) and E)

Exam 5: Gross Income: Exclusions

A U.S.citizen who works in France from February 1,2014 until January 31,2015 is eligible for the foreign earned income exclusion in 2014 and 2015.

Correct Answer
verified

Correct Answer
verified

If a scholarship does not satisfy the requirements for a gift,the scholarship must be included in gross income.

Correct Answer
verified

Correct Answer
verified

Assuming a taxpayer qualifies for the exclusion treatment,the interest income on educational savings bonds:

Correct Answer
verified

Martha participated in a qualified tuition program for the benefit of her son.She invested $6,000 in the fund.Four years later her son withdrew $8,000,the entire balance in the program,to pay his college tuition.

Correct Answer
verified

Workers' compensation benefits are included in gross income if the employer also pays the employee while the employee is recovering from his or her injury.

Correct Answer
verified

Employees of a CPA firm located in Maryland may exclude from gross income the meals and lodging provided by the employer while they were on an audit in Delaware.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Louise works in a foreign branch of her employer's business.She earned $5,000 per month throughout the relevant period.

Correct Answer
verified

Correct Answer
verified
If Sonja returns to the United States,sh...
View Answer

Correct Answer
verified

Flora Company owed $95,000,a debt incurred to purchase land that serves as security for the debt.

Correct Answer
verified

Exam 5: Gross Income: Exclusions

A U.S.citizen who works in France from February 1,2014 until January 31,2015 is eligible for the foreign earned income exclusion in 2014 and 2015.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If a scholarship does not satisfy the requirements for a gift,the scholarship must be included in gross income.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Assuming a taxpayer qualifies for the exclusion treatment,the interest income on educational savings bonds:

Correct AnswerverifiedShow Answer

Martha participated in a qualified tuition program for the benefit of her son.She invested $6,000 in the fund.Four years later her son withdrew $8,000,the entire balance in the program,to pay his college tuition.

Correct AnswerverifiedShow Answer

Workers' compensation benefits are included in gross income if the employer also pays the employee while the employee is recovering from his or her injury.

Correct AnswerverifiedShow Answer

Employees of a CPA firm located in Maryland may exclude from gross income the meals and lodging provided by the employer while they were on an audit in Delaware.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Louise works in a foreign branch of her employer's business.She earned $5,000 per month throughout the relevant period.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedIf Sonja returns to the United States,sh...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Flora Company owed $95,000,a debt incurred to purchase land that serves as security for the debt.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
If Sonja returns to the United States,sh...
View Answer

Correct Answer
verified

Correct Answer
verified