[1] Gary and Gladys invest in bonds. In the current year, they received the following interest:
- California general revenue bonds $ 800
- New York City sanitation fund bonds 1,000
- Seattle School District bonds 400
- AT&T 20-year bonds 600
The state and local bonds are neither private activity bonds nor arbitrage bonds. How much interest income may Gary and Gladys exclude from gross income on their joint return?
A. $0
B. $800
C. $1,800
D. $2,200
[2] Which of the following distributions is nontaxable?
A.Mutual fund distribution from its net realized long-term capital gains in the amount of $1,000. You have an adjusted basis of $10,000 in the mutual fund.
B. Return of capital distribution from a utility company in the amount of $2,000. You have a zero basis in this stock.
C. Dividend on insurance policy in the amount of $1,000. As of the date of this dividend, your net premiums exceed the total dividends by $3,500.
D. Your $25,000 share of ordinary income earned in the current year by an S corporation.
[3] Which of the following bonds can be a tax-exempt bond if issued in the current year so that the interest therefrom may be excluded from gross income?
A. $1 million of bonds issued by a municipality with 50% of the proceeds to be used by a private developer to create an industrial neighborhood of offices and warehouses. The developer will use sales and rents to repay 50% of the bond issue.
B.$1 million of bonds issued by a city with 50% of the proceeds to be invested in higher-yielding corporate bonds.
C. $1 million of bonds issued by a state with all the proceeds to be used to finance student loans.
D. $1 million of bonds issued by a city with all the proceeds to be used to help finance a sports stadium owned by a nongovernment company.
[4] In December 2013, Fred and Tina, a married couple, cashed qualified Series EE U.S. Savings Bonds, which they had purchased in January 2012. The proceeds were used to help pay for their son's 2013 college tuition. They received gross proceeds of $3,500, representing principal of $3,000 and interest of $500. The qualified higher educational expenses they paid during 2013 totaled $2,100. Their modified adjusted gross income for 2013 was $110,000. How much of the $500 interest can Fred and Tina exclude from income for 2013?
A. $200
B. $350
C. $300
D. $500
[5] Which of the following is not excluded from gross income of the recipient taxpayer?
A. Workers' compensation benefits.
B. Payments in lieu of wages (while not able to work due to an injury) from an insurance policy paid for by the taxpayer.
C. Payments in lieu of wages (while not able to work due to an injury) from an insurance policy paid for by the taxpayer's employer.
D. Lump-sum payment from an insurance policy for loss of a hand in an automobile accident.
[6] In Year 1, John incurred $2,000 of medical expenses but was able to deduct only $500 of them because of the medical deduction floor. In Year 2, John received a reimbursement from his insurance company (he pays his own premiums) of $1,600 of his Year 1 medical expenses. How much of the insurance reimbursement can John exclude?
A. $0
B. $1,100
C. $1,500
D. $1,600
[7] Mrs. R is covered under her employer's medical insurance policy. The annual premium for Mrs. R's coverage is $2,000, of which Mrs. R's employer pays 75%. Mrs. R pays the rest. In the current year, Mrs. R received reimbursement of $200 from the insurance
company in excess of her actual medical expenses. What amount must Mrs. R include in her gross income?
A. $0
B. $50
C. $150
D. $200
8] Ivan Turner, a truck driver, was injured in an accident in the course of his employment in the current year. As a result of injuries sustained, he received the following payments inthe current year:
- Damages for back injuries $5,000
- Workers' compensation 500
- Reimbursement from his employer's accident
- and health plan for medical expenses paid by
- Turner in the current year (the employer's contribution to the plan was $475 in the current year) 750
The amount to be included in Turner's gross income for the current year should be
A. $5,000
B. $750
C. $475
D. $0
[9] Rudy retired on disability in July of the current year. He had earned wages of $20,000 before his retirement and received $10,000 in disability benefits after his retirement. The disability benefits were received from an accident and health insurance plan that waspaid for by Rudy's employer. He also received a lump-sum payment for accrued annual leave of $5,000, which was paid in the current year due to his disability retirement in that year. How much income should Rudy report in the current year?
A. $20,000
B. $25,000
C. $30,000
D. $35,000
[10] In 2013, Pete Smith receives $330 per day in benefits from a qualified long-term care insurance contract. He can substantiate that he actually incurred $330 of unreimbursed long-term care services each day. How much can he exclude from gross income for 2013?
A. $0
B. $113,150
C. $116,800
D. $120,450