Gross Income and Exclusions

Points Awarded	100.00
Points Missed	0.00
Percentage	100.0%

1.    Interest income received by a cash basis taxpayer is generally reported in the tax year it is received.

A) True
B) False 

Table for Individual Question Feedback
Points Earned:	5.0/5.0
Correct Answer(s):	A

2. Which of the following gifts or prizes would be considered taxable income to the person receiving the gift?

A) $5,000 given to the taxpayer by his friend
B) A mobile home given to the taxpayer by his mother
C) A ski boat won by the taxpayer on the Price is Right
D) A Mustang GT given to the taxpayer by his brother
E) None of the above would be considered taxable 

Table for Individual Question Feedback
Points Earned:	5.0/5.0
Correct Answer(s):	C

3. If an employer claims a business deduction for group health insurance premiums paid on behalf of his employees, the amount must be included in the employees' gross income.

A) True
B) False

Feedback: Premiums for group health insurance paid on the behalf of an employee are excluded from the employee’s income and may be deducted by the employer.

Table for Individual Question Feedback
Points Earned:	5.0/5.0
Correct Answer(s):	B

4. Which of the following would result in life insurance proceeds that are taxable to the recipient?

A) A life insurance policy transferred by a shareholder to a corporation
B) A life insurance policy purchased by a corporation insuring an officer.
C) A life insurance policy in which the insured is the daughter of the taxpayer and the beneficiary is the taxpayer
D) A life insurance policy transferred to a creditor in payment of a debt
E) A life insurance policy purchased by a taxpayer insuring his or her business partner 

Table for Individual Question Feedback
Points Earned:	5.0/5.0
Correct Answer(s):	D

5. Susie received unemployment benefits in the current year.

A) All of the unemployment benefits are non-taxable.
B) All of the unemployment benefits are taxable.
C) The taxability of the unemployment benefits depends upon other income received for the year.
D) Half of the unemployment benefits are taxable and half are non-taxable. 

Table for Individual Question Feedback
Points Earned:	5.0/5.0
Correct Answer(s):	B

6. Seymore named his wife, Penelope, the beneficiary of a $100,000 insurance policy on his life. The policy provided that, upon his death, the proceeds would be paid at a rate of $4,000 per year plus interest over a 25-year period. Seymore died June 25, 2013, and in 2014 Penelope received a payment of $5,200 from the insurance company. What amount should she include in her gross income for 2014?

A) $200
B) $1,200
C) $4,000
D) $5,200
E) None of the above

Feedback: $5,200 - $4,000 (only the portion designated as interest income)​

Table for Individual Question Feedback
Points Earned:	5.0/5.0
Correct Answer(s):	B

7. Unemployment compensation is fully taxable to the individual receiving the compensation.

A) False
B) True 

Table for Individual Question Feedback
Points Earned:	5.0/5.0
Correct Answer(s):	B

8. Dividend income arising from stock received as a gift is excluded from gross income since the dividends are considered part of the gift.

A) True
B) False

Feedback: Dividend income arising from stock received as a gift is taxable.

Table for Individual Question Feedback
Points Earned:	5.0/5.0
Correct Answer(s):	B

9. For divorces after 1984, which of the following statements about alimony payments is not correct?

A) The payments must be in cash and must be received by the spouse (or former spouse)
B) The payments must not be designated in the written agreement as anything other than alimony
C) Divorced or legally separated parties can be members of the same household at the time the payments are made
D) The payor must have no liability to make payments for any period following the death of the spouse receiving the payments 

Table for Individual Question Feedback
Points Earned:	5.0/5.0
Correct Answer(s):	C

10. Which of the following may be excluded from income?

A) None of the above are excluded from gross income
B) All of the above are excluded from gross income
C) Premiums for health insurance paid by the employer
D) Payment for the loss of an arm
E) Reimbursement from the insurance company for a physical examination 

Table for Individual Question Feedback
Points Earned:	5.0/5.0
Correct Answer(s):	B

11. Which of the following amounts must be included in the gross income of the recipient?

A) Child support payments
B) Welfare payments
C) Gifts
D) Royalties
E) All of the above are included in gross income 

Table for Individual Question Feedback
Points Earned:	5.0/5.0
Correct Answer(s):	D

12. Anthony is a marine biologist who spends months living on a boat in the ocean studying the impact of runoff water a hundred miles off the coast as a part of his job. Which of the following sentences is the most accurate?

A) b & c are correct, not a.
B) All are correct.
Feedback: Meals and lodging were provided at the convenience of the employer. Additionally, Anthony could not reasonably return home each night.
C) Lodging is included in his income.
D) He may exclude meals from his income.
E) The fuel used to power the boat is excluded from his income.

Feedback: Meals and lodging were provided at the convenience of the employer. Additionally, Anthony could not reasonably return home each night.

Table for Individual Question Feedback
Points Earned:	5.0/5.0
Correct Answer(s):	A

13. In the tax law, the definition of gross income is:

A) All cash payments received for services performed
B) All income of any kind unless the income is earned illegally
C) All income from whatever source derived
D) All cash payments received unless excluded by the tax code 

Table for Individual Question Feedback
Points Earned:	5.0/5.0
Correct Answer(s):	C

14. As a Christmas thank you for being a good employee, Ed's TV Repair gave 62-year-old Edwina three shares of its stock worth $20 per share. Edwina then received dividends of $1 per share related to the stock. How much should be included in Edwina's gross income?

A) $0
B) $3
C) $60
D) $63
E) None of the above

Feedback: Gifts from an employer are almost always taxable income unless a service award meeting certain requirements.

Table for Individual Question Feedback
Points Earned:	5.0/5.0
Correct Answer(s):	D

15. Jerry and Sally were divorced under an agreement executed July 1, 2014. The terms of the agreement provide that Jerry will transfer to Sally his interest in a rental house worth $250,000 with a tax basis to Jerry of $80,000. What is the amount of the gain that must be recognized by Jerry on the transfer of the property and what is Sally's tax basis in the property after the transfer, respectively?

A) $170,000 and $250,000
B) $0 and $250,000
C) $170,000 and $170,000
D) $0 and $80,000
E) None of the above 

Table for Individual Question Feedback
Points Earned:	5.0/5.0
Correct Answer(s):	D

16. Noncash items received as income must be included in income at their fair market value.

A) False
B) True 

Table for Individual Question Feedback
Points Earned:	5.0/5.0
Correct Answer(s):	B

17. Payments made by an employer for health insurance on behalf of an employee are considered income to the employee at the time the payments are made.

A) False
B) True

Feedback: Health insurance premiums paid by a taxpayer’s employer are excluded from the taxpayer’s income.

Table for Individual Question Feedback
Points Earned:	5.0/5.0
Correct Answer(s):	A

18. Which of the following is not taxable income?

A) Welfare benefits
B) Income from relief of debt
C) Royalties
D) Interest
E) Dividends 

Table for Individual Question Feedback
Points Earned:	5.0/5.0
Correct Answer(s):	A

19. Dr. J's outstanding player award is not includible in income, since the award is in recognition of his outstanding performance.

A) True
B) False

Feedback: Awards are taxable income to the recipient unless they meet qualifications for certain employee length of service or safety awards.

Table for Individual Question Feedback
Points Earned:	5.0/5.0
Correct Answer(s):	B

20. Awards, bonuses, and gifts are all included in gross income.

A) True
B) False

Feedback: Gifts are excluded from gross income.

Table for Individual Question Feedback
Points Earned:	5.0/5.0
Correct Answer(s):	B