Individual Taxation MCQs

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Fuller was the owner and beneficiary of a $200,000 life insurance policy on a parent. Fuller sold the policy to Decker, for $25,000. Decker paid a t...






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Seymour Thomas named his wife, Penelope, the beneficiary of a $100,000 (face amount) insurance policy on his life. The policy provided that upon his...






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Under a cafeteria plan maintained by an employer,






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David Autrey was covered by an $80,000 group-term life insurance policy of which his wife was the beneficiary. Autreys employer paid the entire cos...






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Howard O’Brien, an employee of Ogden Corporation, died on June 30, 2012. During July, Ogden made employee death payments (which do not represent t...






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John Budd files a joint return with his wife. Budds employer pays 100% of the cost of all employees group-term life insurance under a qualified pl...






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During the current year Hal Leff sustained a serious injury in the course of his employment. As a result of this injury, Hal received the following ...






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James Martin received the following compensation and fringe benefits from his employer during 2012: Salary $50,000 Year-end bonus 10,000 Medical i...






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On February 1, 2013, Hall learned that he was bequeathed 500 shares of common stock under his fathers will. Halls father had paid $2,500 for the s...






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In 2012, Gail Judd received the following dividends from Benefit Life Insurance Co., on Gails life insurance policy (Total dividends received have ...






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Amy Finch had the following cash receipts during 2012: Dividend from a mutual insurance company on a life insurance policy $500 Dividend on listed ...






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During 2011, Karen purchased 100 shares of preferred stock of Boling Corp. for $5,500. During 2013, Karen received a stock dividend of ten additiona...






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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...






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In a tax year where the taxpayer pays qualified education expenses, interest income on the redemption of qualified US Series EE Bonds may be exclude...






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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 o...






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Charles and Marcia are married cash-basis taxpayers. In 2012, they had interest income as follows: $500 interest on federal income tax refund. ...






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Clark bought Series EE US Savings Bonds in 2013. Redemption proceeds will be used for payment of college tuition for Clarks dependent child. One of...






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Daniel Kelly received interest income from the following sources in 2013: New York Port Authority bonds $1,000 Puerto Rico Commonwealth bonds 1,800...






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In 2012 Uriah Stone received the following interest payments: Interest of $400 on refund of federal income tax for 2010. Interest of $300 on awa...






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In 2012 Uriah Stone received the following interest payments: Interest of $400 on refund of federal income tax for 2010. Interest of $300 on awa...






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For the year ended December 31, 2012, Don Raff earned $1,000 interest at Ridge Savings Bank on a certificate of deposit scheduled to mature in 2013....






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Which payment(s) is (are) included in a recipients gross income? I. Payment to a graduate assistant for a part-time teaching assignment at a unive...






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Majors, a candidate for a graduate degree, received the following scholarship awards from the university in 2013: $10,000 for tuition, fees, books...






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In July 1997, Dan Farley leased a building to Robert Shelter for a period of fifteen years at a monthly rental of $1,000 with no option to renew. At...






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Bob and Sue Stewart were divorced in 2010. Under the terms of their divorce decree, Bob paid alimony to Sue at the rate of $50,000 in 2010, $20,000 ...






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Which of the following conditions must be present in a divorce agreement for a payment to qualify as deductible alimony? I. Payments must be in cash...






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Darr, an employee of Sorce C corporation, is not a shareholder. Which of the following would be included in a taxpayers gross income?






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With regard to the inclusion of social security benefits in gross income for the 2013 tax year, which of the following statements is correct?






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Perle, a dentist, billed Wood $600 for dental services. Wood paid Perle $200 cash and built a bookcase for Perles office in full settlement of the ...






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John and Mary were divorced in 2011. The divorce decree provides that John pay alimony of $10,000 per year, to be reduced by 20% on their childs 18...






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Clark filed Form 1040EZ for the 2011 taxable year. In July 2012, Clark received a state income tax refund of $900, plus interest of $10, for overpay...






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Hall, a divorced person and custodian of her twelve-year-old child, submitted the following information to the CPA who prepared her 2012 return: Th...






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Lee, an attorney, uses the cash receipts and disbursements method of reporting. In 2012, a client gave Lee 500 shares of a listed corporations stoc...






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In 2008, Ross was granted an incentive stock option (ISO) by her employer as part of an executive compensation package. Ross exercised the ISO in 20...






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Ed and Ann Ross were divorced in January 2012. In accordance with the divorce decree, Ed transferred the title in their home to Ann in 2012. The hom...






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Income in respect of a cash-basis decedent






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The following information is available for Ann Drury for 2012: Salary . . . . . . . . . . . . . . . . $36,000 Premiums paid by employer on group-t...






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Mr. and Mrs. Alvin Charak took a foster child, Robert, into their home in 2012. A state welfare agency paid the Charaks $3,900 during the year for r...






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Pierre, a headwaiter, received tips totaling $2,000 in December 2012. On January 5, 2013, Pierre reported this tip income to his employer in the req...






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With regard to the alimony deduction in connection with a 2013 divorce, which one of the following statements is correct?






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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 futu...






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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 deduct...






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Lake Corp., an accrual-basis calendar-year corporation, had the following 2012 receipts: Advanced rental payments where the lease ends in 2014 $125,...






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Paul Bristol, a cash-basis taxpayer, owns an apartment building. The following information was available for 2012: An analysis of the 2012 bank de...






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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 apartmen...






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Royce Rentals, Inc., an accrual-basis taxpayer, reported rent receivable of $25,000 and $35,000 in its 2012 and 2011 balance sheets, respectively. D...






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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 ...






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A cash-basis taxpayer should report gross income






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






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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 inco...






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Axis Corp. is an accrual-basis calendar-year corporation. On December 13, 2012, the Board of Directors declared a 2% of profits bonus to all employe...






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On December 1, 2012, Michaels, a self-employed cash-basis calendar-year taxpayer, borrowed $100,000 to use in her business. The loan was to be repai...






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Blair, CPA, uses the cash receipts and disbursements method of reporting. In 2012, a client gave Blair 100 shares of a listed corporations stock in...






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Unless the Internal Revenue Service consents to a change of method, the accrual method of tax reporting is generally mandatory for a sole proprietor...






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Alex Burg, a cash-basis taxpayer, earned an annual salary of $80,000 at Ace Corp. in 2012, but elected to take only $50,000. Ace, which was financia...






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Which of the following taxpayers may use the cash method of accounting for tax purposes?






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The uniform capitalization method must be used by I. Manufacturers of tangible personal property. II. Retailers of personal property with $2 million...






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Mock operates a retail business selling illegal narcotic substances. Which of the following item(s) may Mock deduct in calculating business income? ...






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Banks Corp., a calendar-year corporation, reimburses employees for properly substantiated qualifying business meal expenses. The employees are prese...






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Which of the following costs is not included in inventory under the Uniform Capitalization rules for goods manufactured by the taxpayer?






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Under the uniform capitalization rules applicable to property acquired for resale, which of the following costs should be capitalized with respect t...






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In the case of a corporation that is not a financial institution, which of the following statements is correct with regard to the deduction for bad ...






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Ram Corp.s operating income for the year ended December 31, 2012, amounted to $100,000. Included in Rams 2012 operating expenses is a $6,000 insur...






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Earl Cook, who worked as a machinist for Precision Corp., loaned Precision $1,000 in 2010. Cook did not own any of Precisions stock, and the loan w...






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During the 2012 holiday season, Palo Corp. gave business gifts to seventeen customers. These gifts, which were not of an advertising nature, had the...






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Cobb, an unmarried individual, had an adjusted gross income of $200,000 in 2012 before any IRA deduction, taxable social security benefits, or passi...






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The rule limiting the deductibility of passive activity losses and credits applies to






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Don Wolf became a general partner in Gata Associates on January 1, 2012, with a 5% interest in Gatas profits, losses, and capital. Gata is a distri...






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With regard to the passive loss rules involving rental real estate activities, which one of the following statements is correct?






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If an individual taxpayers passive losses relating to rental real estate activities cannot be used in the current year, then they may be carried






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Aviation Corp. manufactures model airplanes for children. During 2012, Aviation purchased $570,000 of production machinery to be used in its busines...






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Which of the following conditions must be satisfied for a taxpayer to expense, in the year of purchase, under Internal Revenue Code Section 179, the...






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Krol Corp., a calendar-year taxpayer, purchased used furniture and fixtures for use in its business and placed the property in service on November 1...






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On June 29, 2012, Sullivan purchased and placed into service an apartment building costing $360,000 including $30,000 for the land. What was Sulliva...






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Data Corp., a calendar-year corporation, purchased and placed into service used office equipment during October 2012. No other equipment was placed ...






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Under the modified accelerated cost recovery system (MACRS) of depreciation for property placed in service after 1986,






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With regard to depreciation computations made under the general MACRS method, the half-year convention provides that






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During August 2012, Roe Corp. purchased and placed in service a machine to be used in its manufacturing operations. This machine cost $600,000. What...






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Easel Co. has elected to reimburse employees for business expenses under a nonaccountable plan. Easel does not require employees to provide proof of...






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Adams owns a second residence that is used for both personal and rental purposes. During 2012, Adams used the second residence for 50 days and rente...






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Charles Gilbert, a corporate executive, incurred businessrelated unreimbursed expenses in 2012 as follows: Entertainment $900 Travel 700 Education...






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Richard Putney, who lived in Idaho for five years, moved to Texas in 2012 to accept a new position. His employer reimbursed him in full for all dire...






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Which one of the following statements concerning Roth IRAs is not correct?






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What is the maximum amount of adjusted gross income that a taxpayer may have for 2013 and still qualify to roll over the balance from a traditional ...






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Which one of the following statements concerning an education IRA (Coverdell Education Savings Account) is not correct?






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For 2012, Val and Pat White (both age 40) filed a joint return. Val earned $55,000 in wages and was covered by his employers qualified pension plan...






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Davis, a sole proprietor with no employees, has a Keogh profit-sharing plan to which he may contribute 15% of his annual earned income. For this pur...






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Ronald Birch, who is single and age 28, earned a salary of $70,000 in 2012 as a plumber employed by Lupo Company. Birch was covered for the entire y...






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Sol and Julia Crane (both age 43) are married and will file a joint return for 2012. Sol earned a salary of $140,000 in 2012 from his job at Troy Co...






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Paul and Lois Lee, both age fifty-three, are married and will file a joint return for 2013. Their 2013 adjusted gross income is expected to be $85,0...






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In 2013, contributions to a defined contribution qualified retirement plan on behalf of a self-employed individual whose income from self-employment...






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Which allowable deduction can be claimed in arriving at an individuals 2013 adjusted gross income?






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Which one of the following statements concerning the deduction for interest on qualified education loans is not correct?






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Dale received $1,000 in 2013 for jury duty. In exchange for regular compensation from her employer during the period of jury service, Dale was requi...






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During 2012, George (age nine and claimed as a dependency exemption by his parents) received dividend income of $3,700, and had wages from an after-...






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Which of the following requirements must be met in order for a single individual to qualify for the additional standard deduction? Must be age 65 or...






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Carroll, an unmarried taxpayer age 41 with an adjusted gross income of $100,000, incurred and paid the following unreimbursed medical expenses for 2...






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Charlene and Gene Blair, age 51, are married and filed a joint return for 2012. Their medical related expenditures for 2012 included the following: ...






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In 2012, Wells paid the following expenses: Premiums on an insurance policy against loss of earnings due to sickness or accident $3,000 Physical th...






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Mr. and Mrs. Sloan incurred the following expenses on December 15, 2012, when they adopted a child: Childs medical expenses $5,000 Legal expenses ...