Individual Taxation Paper 2

1

Amy Finch had the following cash receipts during 2012:
Dividend from a mutual insurance company on a life insurance policy $500
Dividend on listed corporation stock;
payment date by corporation was 12/30/11, but Amy received the dividend in the mail on 1/2/12 875
Total dividends received to date on the life insurance policy do not exceed the aggregated premiums paid by Amy. How much should Amy report for dividend income for 2012?






2

During 2011, Karen purchased 100 shares of preferred stock of Boling Corp. for $5,500. During 2013, Karen received a stock dividend of ten additional shares of Boling Corp. preferred stock. On the date the preferred stock was distributed, it had a fair market value of $60 per share. What is Karen’s basis in the ten shares of preferred stock that she received as a dividend?






3

Micro Corp., a calendar-year accrual-basis corporation, purchased a five-year, 8%, $100,000 taxable corporate bond for $108,530 on July 1, 2012, the date the bond was issued. The bond paid interest semiannually. Micro elected to amortize the bond premium. For Micro’s 2012 tax return, the bond premium amortization for 2012 should be
I. Computed under the constant yield to maturity method.
II. Treated as an offset to the interest income on the bond.






4

In a tax year where the taxpayer pays qualified education expenses, interest income on the redemption of qualified US Series EE Bonds may be excluded from gross income. The exclusion is subject to a modified gross income limitation and a limit of aggregate bond proceeds in excess of qualified higher education expenses. Which of the following is (are) true?
I. The exclusion applies for education expenses incurred by the taxpayer, the taxpayer’s spouse, or any person whom the taxpayer may claim as a dependent for the year.
II. “Otherwise qualified higher education expenses” must be reduced by qualified scholarships not includible in gross income.






5

During 2013 Kay received interest income as follows:
On US Treasury certificates $4,000
On refund of 2011 federal income tax 500
The total amount of interest subject to tax in Kay’s 2013 tax return is






6

Charles and Marcia are married cash-basis taxpayers. In 2012, they had interest income as follows:
• $500 interest on federal income tax refund.
• $600 interest on state income tax refund.
• $800 interest on federal government obligations.
• $1,000 interest on state government obligations.
What amount of interest income is taxable on Charles and Marcia’s 2012 joint income tax return?






7

Clark bought Series EE US Savings Bonds in 2013. Redemption proceeds will be used for payment of college tuition for Clark’s dependent child. One of the conditions that must be met for tax exemption of accumulated interest on these bonds is that the






8

Daniel Kelly received interest income from the following sources in 2013:
New York Port Authority bonds $1,000
Puerto Rico Commonwealth bonds 1,800
What portion of such interest is tax exempt?






9

In 2012 Uriah Stone received the following interest payments:
• Interest of $400 on refund of federal income tax for 2010.
• Interest of $300 on award for personal injuries sustained in an automobile accident during 2009.
• Interest of $1,500 on municipal bonds.
• Interest of $1,000 on United States savings bonds (Series HH).
What amount, if any, should Stone report as interest income on his 2012 tax return?






10

In 2012 Uriah Stone received the following interest payments:
• Interest of $400 on refund of federal income tax for 2010.
• Interest of $300 on award for personal injuries sustained in an automobile accident during 2009.
• Interest of $1,500 on municipal bonds.
• Interest of $1,000 on United States savings bonds (Series HH).
What amount, if any, should Stone report as interest income on his 2012 tax return?






Result

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