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1
If a person sells his or her car to a friend for a note receivable, this person has income that needs to be reported.
A)True
B)False
2
In general, an individual must recognize income on his or her tax return if the transaction has economic benefit, the transaction has reached a conclusion and the income from the transaction is tax-exempt income.
A)True
B)False
3
If Peter, an attorney, agrees to provide legal services to a friend in exchange for the friend agreeing to fix his car, Peter and his friend will have to report income on this transaction at fair market value.
A)True
B)False
4
Receipt of property or services does not trigger income recognition for tax purposes.
A)True
B)False
5
Banks, savings and loans and credit unions report interest income to taxpayers on Form 1099-INT.
A)True
B)False
6
When an individual's marginal ordinary income tax rate is 25% or more, the taxation rate on qualified dividends is 15%.
A)True
B)False
7
Payments received by a taxpayer for unemployment compensation are not taxable.
A)True
B)False
8
If an employee receives a prize or award from his or her employer, the award is included in the W-2 income.
A)True
B)False
9
A de minimis benefit is one whose value is so small that keeping track of which employees received the benefit is administratively impractical.
A)True
B)False
10
Taxpayers are not required to "impute interest" on a deferred payment contract for which no interest, or a low rate of interest, is stated.
A)True
B)False
11
On December 30, 2007, John agreed to repair a damaged house wall and started to work on that date. He will finish and get paid for the job in January of 2008. John needs to record the income received from his work in the year:
A)2007.
B)2008.
C)Half in 2007 and the other half in 2008.
D)He does not have to report the income at all.
12
Income may be realized in the form of:
A)Money.
B)Services.
C)Property.
D)All of the above.
13
Under the cash method, an individual reports income when:
A)income is received or constructively received.
B)income is earned.
C)income is received or earned.
D)income is accrued.
14
Interest income on Series EE and Series I U.S. Savings Bonds can be reported:
A)only at the maturity date of the bond issue.
B)only on an annual basis.
C)either at the maturity date or on an annual basis.
D)No need to report; this type of interest income is always tax-exempt income.
15
An individual must complete Schedule 1 (Form 1040A) or Schedule B (Form 1040) if the following situation occurs:
A)Receive interest income of $1,400.
B)Receive interest as a nominee of $1,000.
C)Receive interest income of $1,600.
D)Receive interest income of $500.
16
When an individual's marginal ordinary income tax rate is less than 25%, the tax rate on qualified dividends is:
A)5%
B)15%
C)10%
D)20%
17
Items that must be reported on line 21 (Other Income) of the Form 1040 include:
A)Capital gains.
B)Tax exempt dividends.
C)Wages.
D)Jury duty pay.
18
Corporate distributions to shareholders that represent a nontaxable return of capital are those that are:
A)made from current year's profit of the corporation.
B)made from accumulated retained earnings of the corporation.
C)made from the excess of earnings and profits of the corporation.
D)made from the bank account of the corporation.
19
Tax-exempt interest includes the following items, except:
A)interest on bonds issued by any state.
B)interest on bonds issued by the local government to build a convention center.
C)interest on bonds issued by the District of Columbia.
D)interest on municipal bonds.
20
The following corporate dividends are not taxable to the shareholders:
A)Cash dividends.
B)Property dividends.
C)Stock split
D)None of the above.
21
Corporate and mutual fund payers are required to provide shareholders a Form ________ that indicates the amount of dividends in box 1a.
A)1099-DIV.
B)1098-DIV.
C)1099-DVI.
D)1098-INT.
22
A married, filing jointly taxpayer's lower limit of provisional income for Social Security purposes is:
A)$44,000
B)$25,000
C)$34,000.
D)$32,000.
23
An example of other type of nontaxable income is:
A)Holiday bonus.
B)Child support payment.
C)Alimony payment.
D)Vacation pay.
24
Employers paid premium on life insurance are not taxable to employees if the coverage does not exceed:
A)$50,000
B)$51,000
C)$52,500
D)$100,000
25
The exclusion for dependent care assistance plans cannot exceed __________ for a taxpayer who is married but filing as "married filing separately".
A)$2,000
B)$3,500
C)$5,200
D)$2,500
26
Working condition fringes include:
A)Professional organization dues by paid by the employer.
B)The use of an employer-provided vehicle for business purposes.
C)Bonus earned by the employee.
D)A and B.
27
Compensation for sickness or injury which is exempt from income includes:
A)Unemployment compensation.
B)Damages (other than punitive damages) received as a result of personal physical injuries or sickness.
C)Wages for sick days paid by an employer.
D)All of the above.
28
The amount of savings bond interest exempt from tax is phased out when an individual is married and his or her modified AGI reaches:
A)$98,400.
B)$30,000.
C)$128,400.
D)$65,600.
29
Modified AGI is adjusted gross income plus:
A)deduction of tuition and fees.
B)deduction for moving expenses.
C)itemized deductions.
D)standard deduction.
30
The imputed interest rules do not apply to the following:
A)Sales of property for $3,000 or less.
B)Sales in which all payments are due in six months or less.
C)Gift loans over $12,000 in which interest is forgone is in the form of a gift.
D)All of the above.





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