CCH Federal Taxation Comprehensive Topics 2021
1st Edition Smith Solutions Manual / TEST BANK
Which one of the following will result in an accruable expense for an accrual-basis taxpayer?
An invoice dated prior to year-end but the repair completed after year-end
A repair completed prior to year-end but not invoiced
A repair completed prior to year-end and paid upon completion
A signed contract for repair work to be done and the work is to be completed at a later date -
ANSWER:A repair completed prior to year-end but not invoiced
Kant, a cash-basis individual, owns and operates an office building. Kant received the following
payments during the current year:
Current rents $30,000Advance rents for the next year 10,000Security deposits held in a segregated
account 5,000Lease cancellation payments 15,000
What amount is included in gross income?
$40,000
$60,000
$55,000
$30,000 - ANSWER:$55,000
Tom Lewis, an individual taxpayer, had the following income items in Year 5:
Unemployment compensation
College scholarship in which funds were used exclusively for tuition and books
,Which of the items are included in Tom's gross income on Tom's Year 5 tax return? - ANSWER:I only
A tax year generally must end on the last day of a month, except in the case of a: - ANSWER:52- or 53-
week year.
Which of the following taxpayers is required to use a calendar year? - ANSWER:A taxpayer that keeps no
records
On March 23, Year 6, Tom Lewis sold 50 shares of ABC Corp. stock at a $3,500 loss. He had purchased
the stock three years earlier. He repurchased 50 shares of ABC Corp. on April 15, Year 6. Tom had no
other stock transactions for the year. Select the appropriate tax treatment for the capital loss. -
ANSWER:Not deductible
reasoning:
A loss sustained upon a sale or other disposition of stock or securities is not allowed if, within a period
beginning 30 days before the date of the sale or disposition and ending 30 days after that date, the
taxpayer has acquired, or has entered into a contract or option to acquire, substantially identical stock
or securities. This is known as the "wash sale rules."
Which payment(s) is (are) included in a recipient's gross income?
Payment to a graduate assistant for a part-time teaching assignment at a university. Teaching is not a
requirement toward obtaining the degree.
A grant to a Ph.D. candidate for his or her participation in a university-sponsored research project for
the benefit of the university - ANSWER:Both I and II
Lane, Inc., an S corporation, pays single coverage health insurance premiums of $4,800 per year and
family coverage premiums of $7,200 per year for each eligible employee. Mill is a 10% shareholder-
employee in Lane. On Mill's behalf, Lane pays Mill's family coverage under the health insurance plan.
What amount of insurance premium is includible in Mill's gross income? - ANSWER:$7,200
, DAC Foundation awarded Kent $75,000 in recognition of lifelong literary achievement. Kent was not
required to render future services as a condition to receive the $75,000. What condition(s) must have
been met for the award to be excluded from Kent's gross income?
Kent was selected for the award by DAC without any action on Kent's part.
Pursuant to Kent's designation, DAC paid the amount of the award either to a governmental unit or to a
charitable organization. - ANSWER:Both I and II
Tom Lewis, a single taxpayer, received a $3,200 state tax refund in Year 5 for prior-year overpayments.
Tom's state withholding for Year 4 was $3,500. Tom's Year 4 taxable income was $35,000. Tom did not
itemize deductions and instead took his standard deduction for Year 4. How much should Tom include in
gross income for Year 5 as a result of the state tax refund? - ANSWER:not deductible
Porter was unemployed for part of the year. He received $35,000 of wages, $4,000 from a state
unemployment compensation plan, and $2,000 from his former employer's company-paid supplemental
unemployment benefit plan. What is the amount of Porter's gross income? - ANSWER:$41,000
Tom Lewis, a single taxpayer, received $8,400 in gross receipts from his rental property. The expenses
for the residential rental property were:
Bank mortgage interest $1,200Real estate taxes 700Insurance 500MACRS depreciation 3,500
Tom's total income on his individual tax return will be increased by what amount as a result of the rental
activities? - ANSWER:2,500
Reasoning:
Gross Receipts $8,400
less: mortgage interest (1,200)
real estate taxes (700)
insurance (500)
1st Edition Smith Solutions Manual / TEST BANK
Which one of the following will result in an accruable expense for an accrual-basis taxpayer?
An invoice dated prior to year-end but the repair completed after year-end
A repair completed prior to year-end but not invoiced
A repair completed prior to year-end and paid upon completion
A signed contract for repair work to be done and the work is to be completed at a later date -
ANSWER:A repair completed prior to year-end but not invoiced
Kant, a cash-basis individual, owns and operates an office building. Kant received the following
payments during the current year:
Current rents $30,000Advance rents for the next year 10,000Security deposits held in a segregated
account 5,000Lease cancellation payments 15,000
What amount is included in gross income?
$40,000
$60,000
$55,000
$30,000 - ANSWER:$55,000
Tom Lewis, an individual taxpayer, had the following income items in Year 5:
Unemployment compensation
College scholarship in which funds were used exclusively for tuition and books
,Which of the items are included in Tom's gross income on Tom's Year 5 tax return? - ANSWER:I only
A tax year generally must end on the last day of a month, except in the case of a: - ANSWER:52- or 53-
week year.
Which of the following taxpayers is required to use a calendar year? - ANSWER:A taxpayer that keeps no
records
On March 23, Year 6, Tom Lewis sold 50 shares of ABC Corp. stock at a $3,500 loss. He had purchased
the stock three years earlier. He repurchased 50 shares of ABC Corp. on April 15, Year 6. Tom had no
other stock transactions for the year. Select the appropriate tax treatment for the capital loss. -
ANSWER:Not deductible
reasoning:
A loss sustained upon a sale or other disposition of stock or securities is not allowed if, within a period
beginning 30 days before the date of the sale or disposition and ending 30 days after that date, the
taxpayer has acquired, or has entered into a contract or option to acquire, substantially identical stock
or securities. This is known as the "wash sale rules."
Which payment(s) is (are) included in a recipient's gross income?
Payment to a graduate assistant for a part-time teaching assignment at a university. Teaching is not a
requirement toward obtaining the degree.
A grant to a Ph.D. candidate for his or her participation in a university-sponsored research project for
the benefit of the university - ANSWER:Both I and II
Lane, Inc., an S corporation, pays single coverage health insurance premiums of $4,800 per year and
family coverage premiums of $7,200 per year for each eligible employee. Mill is a 10% shareholder-
employee in Lane. On Mill's behalf, Lane pays Mill's family coverage under the health insurance plan.
What amount of insurance premium is includible in Mill's gross income? - ANSWER:$7,200
, DAC Foundation awarded Kent $75,000 in recognition of lifelong literary achievement. Kent was not
required to render future services as a condition to receive the $75,000. What condition(s) must have
been met for the award to be excluded from Kent's gross income?
Kent was selected for the award by DAC without any action on Kent's part.
Pursuant to Kent's designation, DAC paid the amount of the award either to a governmental unit or to a
charitable organization. - ANSWER:Both I and II
Tom Lewis, a single taxpayer, received a $3,200 state tax refund in Year 5 for prior-year overpayments.
Tom's state withholding for Year 4 was $3,500. Tom's Year 4 taxable income was $35,000. Tom did not
itemize deductions and instead took his standard deduction for Year 4. How much should Tom include in
gross income for Year 5 as a result of the state tax refund? - ANSWER:not deductible
Porter was unemployed for part of the year. He received $35,000 of wages, $4,000 from a state
unemployment compensation plan, and $2,000 from his former employer's company-paid supplemental
unemployment benefit plan. What is the amount of Porter's gross income? - ANSWER:$41,000
Tom Lewis, a single taxpayer, received $8,400 in gross receipts from his rental property. The expenses
for the residential rental property were:
Bank mortgage interest $1,200Real estate taxes 700Insurance 500MACRS depreciation 3,500
Tom's total income on his individual tax return will be increased by what amount as a result of the rental
activities? - ANSWER:2,500
Reasoning:
Gross Receipts $8,400
less: mortgage interest (1,200)
real estate taxes (700)
insurance (500)
