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| 1 | |
If a taxpayer is economically better off because of a transaction, the person must normally record income. |
| | A) | True |
| | B) | False |
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| 2 | |
Receipt of property or services will trigger income recognition. |
| | A) | True |
| | B) | False |
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| 3 | |
A taxpayer must report in income imputed interest on a loan made below market interest rate. |
| | A) | True |
| | B) | False |
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| 4 | |
Welfare payments received by a taxpayer must be reported in income. |
| | A) | True |
| | B) | False |
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| 5 | |
A taxpayer does not have to report part of an original issue discount (OID) as income every year. |
| | A) | True |
| | B) | False |
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| 6 | |
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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| 7 | |
If Max, a roofer, decides to fix the roof of his neighbor, Charles, in exchange for Charles to provide bookkeeping services for his business, then ____________ must report income on the tax return. |
| | A) | Charles |
| | B) | Charles and Max |
| | C) | Max |
| | D) | Either Charles or Max |
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| 8 | |
When a taxpayer reports income when received, this is called the ________ method. |
| | A) | Accrual basis of accounting |
| | B) | Income tax progressive |
| | C) | Deferred |
| | D) | Cash receipts and disbursements |
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| 9 | |
Which type of interest received is taxable and must be reported on the tax return? |
| | A) | Tax exempt interest |
| | B) | Interest on a savings account |
| | C) | Interest on municipal bonds |
| | D) | B and C |
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| 10 | |
When an individual's marginal ordinary income tax rate is less than 25%, the tax rate on qualified dividends is ________. |
| | A) | 10%. |
| | B) | 15% |
| | C) | 5% |
| | D) | 20%. |
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| 11 | |
Patrick, a single taxpayer, claimed $150 of state tax as an itemized deduction on his 2006 tax return. The total itemized deduction on his tax return was $5,250. In 2007, he received a $25 refund from the state. What is the amount Patrick has to report on his 2007 tax return? |
| | A) | $25 |
| | B) | $150 |
| | C) | $0 |
| | D) | $100 |
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| 12 | |
The taxability of Social Security benefits depends on the provisional income and ________. |
| | 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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| 13 | |
What is the taxable amount reported on the tax return if a taxpayer received $9,500 in Social Security benefits and $100 in interest income? |
| | A) | $4,750 |
| | B) | $4,850 |
| | C) | $0 |
| | D) | $4,800 |
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| 14 | |
The following income item is not taxable: |
| | A) | Jury duty |
| | B) | child support |
| | C) | Unemployment compensation |
| | D) | Alimony |
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| 15 | |
Discount offered to employees on services cannot exceed ________ of the normal selling price. |
| | A) | 20% |
| | B) | 10% |
| | C) | 75% |
| | D) | 5% |
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| 16 | |
Esther is a student at a state university. In 2007, she received a scholarship of $7,000 for tuition and fees and an assistantship for $3,000. What is the amount that Esther must report in income? |
| | A) | $10,000 |
| | B) | $3,000 |
| | C) | $0 |
| | D) | $7,000 |
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| 17 | |
Under a dependent care assistance plan, the exclusion for a head of household taxpayer cannot exceed his or her earned income and: |
| | A) | $5,000 |
| | B) | $2,500 |
| | C) | $5,250 |
| | D) | $5,150 |
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| 18 | |
The following items under compensation for sickness or injury are exempt from income and do not have to be reported on the taxpayer's tax return: |
| | A) | Sick pay |
| | B) | Workers' compensation payments |
| | C) | Welfare payments |
| | D) | B and C |
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| 19 | |
The imputed interest rules do not apply to 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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| 20 | |
With OID instruments, taxpayers report annually a portion of the OID as: |
| | A) | Dividend income |
| | B) | Capital gain |
| | C) | Interest income |
| | D) | Tax exempt interest income |
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