Question 1

A cash basis taxpayer purchased a certificate of deposit for $1,000 on July 1,2014 that will pay $1,100 upon its maturity on June 30,2016.The taxpayer must recognize a portion of the income in 2015.

Accepted Answer

A) True 
 B)False

Question 2

Jerry purchased a U.S.Series EE savings bond for $744.The bond has a maturity value in 10 years of $1,000 and yields 3% interest.This is the first Series EE bond that Jerry has ever owned.

Accepted Answer

A)   Jerry can defer the interest income until the bond matures in 10 years.
B)   Jerry must report ($1,000 - $744) /10 = $25.60 interest income each year he owns the bond.
C)   The interest on the bonds is exempt from Federal income tax.
D)   Jerry can report all of the $256 as a capital gain in the year it matures.
E)   None of these.F) A) and B)
G) B) and C)

Question 3

Amber Machinery Company purchased a building from Ted for $250,000 cash and a mortgage of $750,000.One year after the transaction,the mortgage had been reduced to $725,000 by principal payments by Amber,but it was apparent that Amber would not be able to continue to make the monthly payments on the mortgage.Ted reduced the amount owed by Amber to $600,000.This reduced the monthly payments to a level that Amber could pay.Amber must recognize $125,000 income from the reduction in the debt by Ted.

Accepted Answer

A) True 
 B)False

Question 4

Carin,a widow,elected to receive the proceeds of a $150,000 life insurance policy on the life of her deceased husband in 10 installments of $17,500 each.Her husband had paid premiums of $60,000 on the policy.In the first year,Carin collected $17,500 from the insurance company.She must include in gross income:

Accepted Answer

A)   $0.
B)   $2,500.
C)   $10,000.
D)   $25,000.
E)   None of these.F) A) and D)
G) None of the above

Exam 4: Gross Income

A cash basis taxpayer purchased a certificate of deposit for $1,000 on July 1,2014 that will pay $1,100 upon its maturity on June 30,2016.The taxpayer must recognize a portion of the income in 2015.

Correct Answer
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Correct Answer
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Correct Answer
verified

Jerry purchased a U.S.Series EE savings bond for $744.The bond has a maturity value in 10 years of $1,000 and yields 3% interest.This is the first Series EE bond that Jerry has ever owned.

Correct Answer
verified

Exam 4: Gross Income

A cash basis taxpayer purchased a certificate of deposit for $1,000 on July 1,2014 that will pay $1,100 upon its maturity on June 30,2016.The taxpayer must recognize a portion of the income in 2015.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Jerry purchased a U.S.Series EE savings bond for $744.The bond has a maturity value in 10 years of $1,000 and yields 3% interest.This is the first Series EE bond that Jerry has ever owned.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified