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Exam 6: Gross Income: Inclusions

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Question 61

Multiple Choice

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Mark purchased 2,000 shares of Darcy Corporation for $13,200.This year,Darcy declared a 10% nontaxable stock dividend,and Mark received 200 shares.After the dividend Mark's per share basis will be

A) $6.00.
B) $6.57.
C) $6.60.
D) $7.26.

E) A) and D)
F) B) and D)

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Question 62

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For federal income tax purposes,income is allocated between a husband and wife depending on the state of residence.

A) True
B) False

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Question 63

Multiple Choice

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Lori had the following income and losses during the current year: What is Lori's adjusted gross income (not taxable income) ?

Natasha is a single taxpayer with a 28% marginal tax rate.She received dividends this year as follows: How much of the $6,000 dividend income will be taxed at the 15% tax rate?

Under the tax concept of income,all realized income is recognized and subject to tax.

Under the economist's definition,unrealized gains,as well as gifts and inheritances,are income.

Ellen is a single taxpayer with qualified dividend income of $5,000,and itemized deductions of $13,000. Required: Determine Ellen's taxable income and tax liability in 2013,assuming the following salaries- a.$50,000. b.$100,000.

During 2013,Mark's employer withheld $2,000 from his wages for state income tax.Mark claimed the $2,000 as an itemized deduction on his 2013 federal income tax return.His total itemized deductions for 2013 were $6,000.Mark's taxable income for 2013 was a negative $20,000 due to substantial business losses.Mark received the $2,000 as a refund from the state during 2014.What amount must Mark include in income in 2014?

Under the terms of their divorce agreement,Humphrey transferred Corporation H stock to his former wife,Greta as a property settlement.At the time of the transfer,the stock had a basis to Humphrey of $40,000 and a fair market value of $55,000.What is the tax consequence of this transaction to Humphrey,and what is Greta's basis in the Corporation H stock?

Alex is a calendar year sole proprietor.He began business on December 1,this year.He uses the accrual method of accounting.Alex had the following collections in December: • Collected $7,000 in December,from clients who paid cash for services to be performed next year. • Collected $5,000 in December,for services performed during December; deposited in an operating account on December 31,this year. • Collected $12,000 in December; on accounts receivable for services performed in December; deposited in operating account on January 2,next year. What is the amount Alex must include in his income for December?

Norah,who gives music lessons,is a calendar year taxpayer using the cash basis method of accounting.On October 1 of this year,she received $1,200 for a one-year contract beginning on that date to provide 10 lessons.She gave 6 lessons this year.How much should Norah include in income this year?

Unemployment compensation is exempt from federal income tax.

AAA Corporation distributes an automobile to Alexandria,a shareholder,in lieu of a cash dividend.Alexandria must report the value of the automobile as dividend income.

Julia,age 57,purchases an annuity for $33,600.Julia will receive $400 per month for the rest of her life.The expected return multiple is 20.0.At age 88,the amount that Julia may exclude from income is

A taxpayer had the following income and losses in the current year: What is the taxpayer's adjusted gross income (not taxable income) ?

As a result of a divorce,Matthew pays Jasmine alimony of $75,000 in year one and $25,000 per year in subsequent years.How much is deductible by Matthew in year one?

Jan purchased an antique desk at auction.For two years,the desk sat in Jan's garage until she decided to restore it.This year,while cleaning and restoring the desk,Jan discovered $1,500 in a hidden compartment inside one drawer.With respect to the $1,500,Jan must

Under the cash method of accounting,income is reported in the year the taxpayer actually or constructively receives the income.

Income from illegal activities is taxable.

Edward,a single taxpayer,has AGI of $50,000 which includes $1,000 of qualified dividends.Edward has $7,000 of itemized deductions.What is his 2013 federal income tax?