Individual Taxation Paper 5

1

In 2013, Joan accepted and received a $10,000 award for outstanding civic achievement. Joan was selected without any action on her part, and no future services are expected of her as a condition of receiving the award. What amount should Joan include in her 2013 adjusted gross income in connection with this award?






2

In 2012, Emil Gow won $5,000 in a state lottery. Also in 2012, Emil spent $400 for the purchase of lottery tickets. Emil elected the standard deduction on his 2012 income tax return. The amount of lottery winnings that should be included in Emil’s 2012 taxable income is






3

Lake Corp., an accrual-basis calendar-year corporation, had the following 2012 receipts:
Advanced rental payments where the lease ends in 2014 $125,000
Lease cancellation payment from a five-year lease tenant 50,000
Lake had no restrictions on the use of the advanced rental payments and renders no services. What amount of income should Lake report on its 2012 tax return?






4

Paul Bristol, a cash-basis taxpayer, owns an apartment building. The following information was available for 2012:
• An analysis of the 2012 bank deposit slips showed recurring monthly rents received totaling $50,000.
• On March 1, 2012, the tenant in apartment 2B paid Bristol $2,000 to cancel the lease expiring on December 31, 2012.
• The lease of the tenant in apartment 3A expired on December 31, 2012, and the tenant left improvements valued at $1,000. The improvements were not in lieu of any rent required to have been paid.
In computing net income from that apartment building for 2012, Bristol should report gross income of






5

Emil Gow owns a two-family house that has two identical apartments. Gow lives in one apartment and rents out the other. In 2012, the rental apartment was fully occupied and Gow received $7,200 in rent. During the year ended December 31, 2012, Gow paid the following:
Real estate taxes $6,400
Painting of rental apartment 800
Annual fire insurance premium 600
In 2012, depreciation for the entire house was determined to be $5,000. What amount should Gow include in his adjusted gross income for 2012?






6

Royce Rentals, Inc., an accrual-basis taxpayer, reported rent receivable of $25,000 and $35,000 in its 2012 and 2011 balance sheets, respectively. During 2012, Royce received $50,000 in rent payments and $5,000 in nonrefundable rent deposits. In Royce’s 2012 corporate income tax return, what amount should Royce include as rent revenue?






7

John Budd is single, with no dependents. During 2012, John received wages of $11,000 and state unemployment compensation benefits of $2,000. He had no other source of income. The amount of state unemployment compensation benefits that should be included in John’s 2012 adjusted gross income is






8

A cash-basis taxpayer should report gross income






9

Which of the following taxpayers may use the cash method of accounting?






10

In 2012, Stewart Corp. properly accrued $5,000 for an income item on the basis of a reasonable estimate. In 2013, after filing its 2012 federal income tax return, Stewart determined that the exact amount was $6,000. Which of the following statements is correct?






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