1. Income may be recognized from cancellation of debt in which instance below?
The debt canceled was intended as a gift.
The debt was canceled by a purchase price reduction.
The debt would have been deductible by the taxpayer if paid.
Debt canceled was from the mortgage on a taxpayer's second home.
2. What action may be taken (subject to certain rules) when the IRS offsets a married couple's joint refund because one spouse defaulted on a federally-guaranteed student loan?
The non-defaulting spouse should request innocent spouse relief.
The taxpayers should submit a joint offer in compromise.
The defaulting spouse should request a certificate of non-attachment.
The non-defaulting spouse should request relief as an injured spouse.
3. Phillip purchased shares of Cisco stock as follows: 54 shares for $1,542.49 in 2009, 67 shares for $1,798.59 in 2010, and 98 shares for $2,415.37 in 2012. He sold 133 shares of Cisco in 2015 and did not identify which shares he sold. What basis should he use for computing gain or loss? *
$3,355
$3,497
$3,548
$3,637
4. Which of the following elements of innocent spouse relief is the most difficult to prove?
A joint return must have been filed.
The joint return must contain an understatement of tax attributable to an erroneous item of the other spouse.
The spouse seeking relief must establish that he or she did not know, and did not have any reason to know, when he or she signed the return that there was an understatement of tax.
The requesting spouse must elect innocent spouse relief no later than two years after the IRS begins collection activity against that spouse.
5. Generally, how long does an IRS wage levy last?
One pay period.
Until the tax liability is paid or the levy source no longer pays money to the taxpayer.
One year.
One month.