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| 1.
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For tax purposes, one of the requirements to recognize income is: |
| | A) | The income cannot be tax exempt |
| | B) | The transaction does not have to be completed |
| | C) | The transaction does not have to have an economic benefit |
| | D) | None of the above |
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| 2.
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Max, a roofer, decides to fix the roof of his neighbor, Charles, in exchange for Charles providing bookkeeping services for his business. Who must report income on his tax return? |
| | A) | Charles |
| | B) | Charles and Max |
| | C) | Max |
| | D) | Either Charles or Max |
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| 3.
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A taxpayer who reports income when received is using which method of accounting? |
| | A) | Accrual |
| | B) | Income tax |
| | C) | Deferred |
| | D) | Cash receipts and disbursements |
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| 4.
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Which type of interest income is taxable and must be reported? |
| | A) | Tax exempt interest |
| | B) | Interest on a savings account |
| | C) | Interest on municipal bonds |
| | D) | B and C |
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| 5.
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When an individual's marginal ordinary income tax rate is less than 25%, the tax rate on qualified dividends is: |
| | A) | 5% |
| | B) | 10% |
| | C) | 15% |
| | D) | 20% |
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| 6.
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Patrick, a single taxpayer, claimed a $150 itemized deduction for state income tax on his 2005 tax return. His total itemized deductions in 2005 were $5,100. In 2006, he received a $25 refund from the state. What amount of income must Patrick report on his 2006 tax return? |
| | A) | $0 |
| | B) | $25 |
| | C) | $125 |
| | D) | $150 |
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| 7.
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The taxability of social security benefits depends on provisional income and the |
| | A) | Dependency exemptions of the taxpayer |
| | B) | Standard deduction of the taxpayer |
| | C) | Itemized deductions of the taxpayer |
| | D) | Filing status of the taxpayer |
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| 8.
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What is the taxable amount of social security income if a taxpayer's only sources of income were $9,500 of social security benefits and $100 of interest? |
| | A) | $0 |
| | B) | $4,750 |
| | C) | $9,500 |
| | D) | None of the above |
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| 9.
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Which of the following is not taxable? |
| | A) | Jury duty |
| | B) | Child support |
| | C) | Unemployment compensation |
| | D) | Alimony |
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| 10.
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A discount offered to employees on services cannot exceed ________ of the normal selling price. |
| | A) | 5% |
| | B) | 10% |
| | C) | 20% |
| | D) | 75% |
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| 11.
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Esther is a student at a state university. In 2006, she received a scholarship of $7,000 for tuition and fees and an assistantship of $3,000. What amount must Esther report in income? |
| | A) | $0 |
| | B) | $3,000 |
| | C) | $7,000 |
| | D) | $10,000 |
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| 12.
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Under a dependent care assistance plan, the exclusion for a head of household taxpayer cannot exceed his or her earned income and: |
| | A) | $5,250 |
| | B) | $5,150 |
| | C) | $5,000 |
| | D) | $2,500 |
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| 13.
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Which of the following items are exempt from income as compensation for sickness or injury and do not have to be reported as income? |
| | A) | Sick pay |
| | B) | Workers' compensation payments |
| | C) | Welfare payments |
| | D) | B and C |
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| 14.
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Imputed interest rules do not apply to which of the following? |
| | A) | Sales in which all payments are due in 6 months or less |
| | B) | Sales of property for $3,000 or less |
| | C) | Certain carrying charges |
| | D) | All of the above |
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| 15.
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With OID instruments, taxpayers annually report a portion of the OID as: |
| | A) | Dividend income |
| | B) | Capital gain |
| | C) | Interest income |
| | D) | Tax exempt interest income |
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