AC 371 Chapter 5 Learnsmart
Sam traded a parcel of land for a tractor and a car. He had purchased the land five
years earlier for $16,000. The market value of the car and tractor is $20,000. What is
the amount of gross income resulting from this transaction?
a. $4,000
b. $20,000
c. $0
d. $16,000 - Answer A
Mary has received the following income and fringe benefits during the current year: a
$73,000 salary; $600 in employer-provided disability premiums; $5,000 in workers;
compensation; $1,200 in corporate bond interest; a $23,000 car won on a game show;
and a $1,200 health insurance reimbursement for medical expenses paid during the
year. Which of these amounts should Mary include in her gross income?
a. $1,200 health insurance reimbursement
b. $1,200 corporate bond interest
c. $5,000 workers' compensation
d. $600 disability premiums
e. $73,000 salary - Answer B/E
Gross income means all income from _______ _________ __________ - Answer
Whatever/Source/ Derived
Which of the following statements is correct concerning a gift?
a. A gift is included in the gross income of the person giving the gift
b. A gift is included in the gross income of the person receiving the gift
c. A gift may be subject to "gift tax" which is paid by the person receiving the gift
d. A gift may be subject to "gift tax" which is paid by the person giving the gift - Answer
D
In general, when a taxpayer's debt is discharged by a lender, the taxpayer's gross
income will _____ the amount forgiven. - Answer Increase
Which of the following cash receipts are taxable to the recipient?
a. Gambling winnings
b. Prizes
c. Child support
d. Loan Proceeds
e. Awards - Answer A/B/E
For below-market-loans, the discounted interest rate is treated as interest _____ to the
lender and interest _____ to the borrower. - Answer Income/Expense
Which of the following types of imputed income are NOT included in gross income (i.e.
are NOT taxable)?
a. A bargain purchase between a father and his son
b. An employer's $12,000 loan to an employee with no interest on the note
, AC 371 Chapter 5 Learnsmart
c. Employee discounts of 25% on services - Answer A
A bargain purchase between family members is generally deemed to be a gift, thus
nontaxable to the recipient
Chad has received the following income and benefits during the current year: $65,000
salary, $4,800 employer-provided health insurance, $1,500 municipal bond interest,
$2,000 dividend income, $500 from a partnership, and a $10,000 judgement for lost
wages due to an age discrimination lawsuit. What amounts should Chad include in his
gross income?
a. $2,000 dividend income
b. $500 partnership income
c. $4,800 health insurance
d. $1,500 municipal bond interest
e. $10,000 judgement
f. $65,000 salary - Answer A/B/E/F
Frick and Frack are equal partners in F&F Industries. The company generated net
income of $60,000 during the year and distributed $7,000 cash to both Frick and Frack.
How much income should Frack report on his individual income tax return due to the
partnership interest? - Answer $30,000
Distributions to partners are not taxable. Only the portion of the net income allocable to
the partner is taxable.
Which of the following fringe benefits provided by an employer is NOT excluded from
gross income?
a. Medical insurance
b. Group life insurance coverage in excess of $50,000
c. Qualified transportation expenses
d. De minimis (or small) benefits - Answer B
Which of the following rules must be met for a taxpayer to be able to exclude the gain
on the sale of a personal residence?
a. The taxpayer must NOT have used the gain exclusion provision in the five years prior
to the sale
b. The taxpayer may use the exclusion on a vacation home or second home if NOT
used for the principal residence
c. The exclusion is $500,000 for taxpayers who are married filing jointly
d. The taxpayer must have owned the residence for at least two years of the five year
period prior to the sale
e. The taxpayer must have used the property as a personal residence for a total of two
or more years during the five year period prior to the sale - Answer C/D/E
Which of the following statements is CORRECT regarding the recognition of income?
a. Income is realized for the return of the capital received in a sales transaction
Sam traded a parcel of land for a tractor and a car. He had purchased the land five
years earlier for $16,000. The market value of the car and tractor is $20,000. What is
the amount of gross income resulting from this transaction?
a. $4,000
b. $20,000
c. $0
d. $16,000 - Answer A
Mary has received the following income and fringe benefits during the current year: a
$73,000 salary; $600 in employer-provided disability premiums; $5,000 in workers;
compensation; $1,200 in corporate bond interest; a $23,000 car won on a game show;
and a $1,200 health insurance reimbursement for medical expenses paid during the
year. Which of these amounts should Mary include in her gross income?
a. $1,200 health insurance reimbursement
b. $1,200 corporate bond interest
c. $5,000 workers' compensation
d. $600 disability premiums
e. $73,000 salary - Answer B/E
Gross income means all income from _______ _________ __________ - Answer
Whatever/Source/ Derived
Which of the following statements is correct concerning a gift?
a. A gift is included in the gross income of the person giving the gift
b. A gift is included in the gross income of the person receiving the gift
c. A gift may be subject to "gift tax" which is paid by the person receiving the gift
d. A gift may be subject to "gift tax" which is paid by the person giving the gift - Answer
D
In general, when a taxpayer's debt is discharged by a lender, the taxpayer's gross
income will _____ the amount forgiven. - Answer Increase
Which of the following cash receipts are taxable to the recipient?
a. Gambling winnings
b. Prizes
c. Child support
d. Loan Proceeds
e. Awards - Answer A/B/E
For below-market-loans, the discounted interest rate is treated as interest _____ to the
lender and interest _____ to the borrower. - Answer Income/Expense
Which of the following types of imputed income are NOT included in gross income (i.e.
are NOT taxable)?
a. A bargain purchase between a father and his son
b. An employer's $12,000 loan to an employee with no interest on the note
, AC 371 Chapter 5 Learnsmart
c. Employee discounts of 25% on services - Answer A
A bargain purchase between family members is generally deemed to be a gift, thus
nontaxable to the recipient
Chad has received the following income and benefits during the current year: $65,000
salary, $4,800 employer-provided health insurance, $1,500 municipal bond interest,
$2,000 dividend income, $500 from a partnership, and a $10,000 judgement for lost
wages due to an age discrimination lawsuit. What amounts should Chad include in his
gross income?
a. $2,000 dividend income
b. $500 partnership income
c. $4,800 health insurance
d. $1,500 municipal bond interest
e. $10,000 judgement
f. $65,000 salary - Answer A/B/E/F
Frick and Frack are equal partners in F&F Industries. The company generated net
income of $60,000 during the year and distributed $7,000 cash to both Frick and Frack.
How much income should Frack report on his individual income tax return due to the
partnership interest? - Answer $30,000
Distributions to partners are not taxable. Only the portion of the net income allocable to
the partner is taxable.
Which of the following fringe benefits provided by an employer is NOT excluded from
gross income?
a. Medical insurance
b. Group life insurance coverage in excess of $50,000
c. Qualified transportation expenses
d. De minimis (or small) benefits - Answer B
Which of the following rules must be met for a taxpayer to be able to exclude the gain
on the sale of a personal residence?
a. The taxpayer must NOT have used the gain exclusion provision in the five years prior
to the sale
b. The taxpayer may use the exclusion on a vacation home or second home if NOT
used for the principal residence
c. The exclusion is $500,000 for taxpayers who are married filing jointly
d. The taxpayer must have owned the residence for at least two years of the five year
period prior to the sale
e. The taxpayer must have used the property as a personal residence for a total of two
or more years during the five year period prior to the sale - Answer C/D/E
Which of the following statements is CORRECT regarding the recognition of income?
a. Income is realized for the return of the capital received in a sales transaction
