1.James has a 30% interest in the XY partnership. In the current year, the partnership has sales of $2,400,000, cost of goods sold of $1,300,000, and $300,000 in operating expenses. James withdrew $75,000 from the partnership during the year, but his partner did not withdraw anything.
a. James must report $240,000 gross income from the partnership for the year.
b. The partnership is taxable on $800,000 for the year and James must include $75,000 in gross income.
c. James must report $75,000 gross income from the partnership for the year.
d. James is not required to recognize any income from the partnership for the year.
e. None of the above.
2. Which of the following is a requirement for alimony deductions under post-1984 decrees and agreements:
a. The payor and the payee must not live in the same household at the time of the payments.
b. The decree must not specify that the payments are not alimony.
c. The payments must end on the death of the payee.
d. The payments must be in cash.
e. All of the above.
3.Freida made a $80,000 interest-free loan to her son, Georgio, who used the money to start a new business. Georgio's only sources of income were $50,000 from the business and $800 of interest on his checking account. The relevant Federal interest rate was 5%. Based on the above information:
a.Georgio's business net profit will be reduced by $4,000 (.05 X $80,000) of interest expense.
b. Freida must recognize $4,000 (.05 X $80,000) of imputed interest income on the below market loan.
c. Georgio's gross income must be increased by the $4,000 (.05 X $80,000) imputed interest income on the below market loan.
d. Georgio's interest income is increased by $800 and his interest expense is zero.
e. None of the above is correct.
4.Nebula, Inc. provides group term life insurance only to the officers of the corporation. Levi, a CEO, received $450,000 of coverage for the year at a cost to Nebula, Inc. of $1,800. The uniform premiums (based on Levi's age) are $3 a year for $1,000 of protection. How much must Levi include in gross income this year?
a. $1,800.
b. $1,350.
c. $1,200.
d. $-0-.
e. None of the above.
5.Huwett and Shantell were divorced. Their only marital property was a personal residence with a value of $400,000 and cost of $200,000. Under the terms of the divorce agreement, Shantell would receive the house and Shantell would pay Huwett $50,000 each year for 4 years. If Huwett should die, the remaining payments would be made to his estate. Huwett and Shantell lived apart when the payments were made to Huwett. The divorce agreement did not contain the word "alimony."
a. Huwett must recognize a $100,000 [$200,000 - $100,000)] gain on the sale of his interest in the house.
b. Huwett recognizes alimony income of $50,000 each year.
c. Shantell is allowed to deduct $50,000 each year for alimony paid.
d.Shantell is not allowed any alimony deductions.
e. None of the above.
6.Darrell, age 19, is a full-time student at State College and a candidate for a bachelor's degree. During 2010, he received the following payments:
Wages $7,000
State scholarship for ten months - tuition and books 5,500
- room and board 3,000
Loan from college financial aid office 4,500
Cash support from parents 2,000
Cash dividends 2,000
Cash prize awarded in a contest 250
$24,250
What is Darrell's adjusted gross income for 2010?
a. $7,250.
b. $10,250.
c. $12,250.
d. $14,250.
e. None of the above.
7.During the current year, Carl sustained a serious injury in the course of his employment. As a result of the injury sustained, he received the following payments during the year:
Worker's compensation $4,500
Reimbursement from his employer's accident and health plan for
medical expenses paid by Carl $2,000
Damages for physical personal injuries $5,000
What is the amount to be included in Carl's gross income for the current year?
a. $-0-.
b. $6,000.
c. $6,500.
d. $11,500.
e. None of the above.
8.Katrina is a full-time student at Eastern University and is claimed by her parents as a dependent. Her only source of income is a $11,750 scholarship ($250 for books, $6,500 for tuition, and $5,000 for room and board). Katrina's gross income for the year is:
a. $250.
b. $5,000.
c. $6,500.
d. $11,750.
e. None of the above.
9. Sandy is the manager of a motel. The employer gives Sandy the option of cash of $800 per month or rent-free housing. Sandy elects the rent-free housing and considers this a fringe benefit, since she would otherwise be required to pay $650 per month rent. The room that Sandy occupied normally rented for $60 per night, or $1,500 per month. On the average, 90% of the motel rooms were occupied. As a result of this rent-free use of a room, Sandy is required to include in gross income:
a. $0.
b. $700 per month.
c. $1,350 ($1,500 X .90 = $1,350) per month.
d. $1,500 per month.
e. None of the above.
10. Shaquille, a cash basis taxpayer, received the following compensation and fringe benefits in 2010:
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Salary
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$42,000
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|
Advance on 2011 salary
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$ 6,000
|
|
Disability income protection
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$ 1,000
|
|
Long-term care insurance premiums
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$ 4,000
|
The employer made the salary advance so that Shaquille could pay his son's college tuition that was due in December 2010. The wage continuation insurance is available to all employees and pays the employee three-fourths of the regular salary if the employee is sick or disabled. The long-term care insurance is available to all employees and pays $150 per day towards a nursing home or similar facility. What is Shaquille's gross income from the above?
a. $42,000.
b. $48,000.
c. $49,000.
d. $53,000.
e. None of the above.