Gross Income

Question 1

Compensation for Services

Answer 1

Taxable
Wages
Tips
Bonuses and Commissions
Jury Duty
Unemployment
Bargain Purchases on employer merchandise
Employer expense reimbursements
Foreign Earned Income if pass test
Unearned Income

Question 2

Foreign earned income

May elect to exclude up to $99,200 if pass either test:

Answer 2

Bona Fide Residence Test

• US Citizen or Resident Alien
• Uninterrupted period
• Entire TAX year

Physical Presence Test

• US Citizen or Resident Alien
• 330 Full days (can be interrupted)
• in ANY 12 month period

Question 3

Material Fringe Benefits

Answer 3

Taxable

-using company car

Question 4

Immaterial Fringe benefits

Answer 4

Not taxable
•	Qualified Employee discounts
•	Working condition fringe benefit
•	Deminimus fringe benefits
•	Meals
•	Use copier or Xerox machine

Question 5

Premium on GTL Insurance in excess of $50,000

Answer 5

Taxable

• Group not Individual
• Term not Whole

Question 6

Health and Medical Insurance coverage is generally

Answer 6

Not Taxable

Question 7

Death benefits on GTL Insurance

Answer 7

Not Taxable

Question 8

Medicare and Welfare

Answer 8

Not Taxable

Question 9

Prizes and Awards

Answer 9

Taxable if:

1. over $400
2. Services are required
3. Selection of Prize or award was because of actions of recipient

Question 10

Gambling Winnings

Answer 10

Taxable

-not netted with Gambling losses

Question 11

Gambling Losses only deducted if

Answer 11

Itemized on Sch. A

-not subject to 2%

Question 12

Scholarships and Fellowships

Answer 12

Taxable if:
1. Compensation for Services
2. Not a degree candidate
3. Spent on non-qualified expenses 
      (room board living expense)

Question 13

Taxable interest

Answer 13

Zero coupon bond accrued interest
Bond purchased at a discount accrued interest
US obligations interest
Series HH savings bonds
Bank deposit income
corporate bond interest
condemnation award interest
dividend from life insurance interest
interest received as beneficiary of estate or trust
interest on an annuity contract
installment sale payment of interest
Foreign source interest income
Federal refund interest
state refund interest

Question 14

Non Taxable interest

Answer 14

Non zero coupon bond interest
Bonds purchased at a discount accrued interest
State or Muni bond interest
Series EE savings bond interest
Interest from Pship
interest from Scorp
Interest on VA dividends
Frozen Deposit interest income

Question 15

Interest income generally reported on

Answer 15

1099-INT

Question 16

Interest income greater than $600

Answer 16

Must be itemized on Sch. B

Question 17

*might be able to deduct expenses in earning interest income on

Answer 17

SCHEDULE A if choose to itemize

Question 18

*When to report interest income depends on whether you are:

Answer 18

• Cash basis TP
  Report upon actual or constructive receipt
  - Accrual basis TP
  Report when earned, regardless of receipt

Question 19

State and Local Refund

Answer 19

Taxable if itemized in prior year

Not Taxable if did not itemize in prior year

Question 20

Federal tax refund

Answer 20

Not Taxable

Question 21

Taxable Dividend Income

Answer 21

From Earnings and Profits

Dividends that arise in below market loans from corporation to shareholder

Dividends used to buy more stock in lieu of receiving cash

If Dividend reinvestment plan allows you to buy more stock below FMV, you are still taxed on FMV

Service charges that were subtracted before dividend distribution are added back for dividend income

Foreign source dividends unless exempted by U.S. Law
o True whether reside inside or outside of US
o True whether receive a 1099 from payer

Patronage Dividends from a Corp.

Question 22

Non Taxable Dividend Income

Answer 22

[Stock Dividends and Stock Rights (stock options)
o Taxable at FMV if:
1. Opt to receive cash or property
2. Cash/prop. is given to other shldrs
3. Distributions is conv. P/S
4. Distribution is on P/S
5. Distribution gives P/S to C/S shldrs

• Stock Splits
• S-Corps Dividends
• Life Insurance Policy dividends (return of premium)
• Dividends received from Mutual Fund that invested in tax exempt bonds
• VA dividends
• Liquidating Dividends (not from E&P)
• Investments from tax exempt bonds/exempt interest div

Question 23

Dividend income greater than $600

Answer 23

Must be itemized on Sch. B

Question 24

In order for a Dividend to be taxable it must be

Answer 24

out of Earnings and Profits

Question 25

Assume any dividend from C/S or P/S are ordinary unless

Answer 25

told otherwise

Question 26

Qualified dividends Special Rates (similar to LTCG rates)

Answer 26

o 0%  10-15% tax bracket
o 15%  15% - 38% tax bracket
o 20%  39.6% - up tax bracket

Question 27

Non-Qualified Dividends:

Answer 27

o	Capital Gain distributions
o	Dividends paid on deposits
o	Dividends paid from tax exempt organizations
o	Dividends paid by Corporation for ESOP
o	Dividends from Foreign corporation

Question 28

Rent

Answer 28

Taxable including:
nonrefundable deposits
improvements made in lieu of rent
prepaid rent
lease cancellation payments

Question 29

ISO’s

Answer 29

Not Taxable

Question 30

Deductible Traditional IRA withdrawals “deferred interest”

1) Original contributions that were initially excluded or deducted from income:

Answer 30

o Taxable to extent of contributions made

o Accumulated earnings taxable

Question 31

Non-deductible Traditional IRA withdrawals “deferred interest”
1) Original contributions were non-excludible or non-deductible:

Answer 31

o Nontaxable to extent of contributions made

o Accumulated earnings taxable

Question 32

Pension Plan withdrawals whose original contributions were excluded or deducted from income

Answer 32

Taxable

Question 33

Pension Plan withdrawals whose original contributions were not excluded or deducted from income

Answer 33

Non Taxable

Question 34

LUMP SUM distributions (Stock Bonus, Pension, Keogh, Profit sharing) are subject to special tax treatment.

Answer 34

Not Taxable

DOES NOT INCLUDE IRA’s!!!

Question 35

Non-Physical Injury Awards for:

1) Non-Physical Injuries (SRRN)
2) Lost Business Profits
3) Punitive Damages
4) Mental or emotional injury

Answer 35

Taxable

Question 36

Physical Injury Awards for:

1) Physical Injury -bodily injury, pain and suffering, blood
2) Lost Wages
3) Workers Compensation
4) Disability payments
5) Medical expense reimbursements

Answer 36

Not Taxable

Question 37

Social Security benefits if TP earns $60,000 or more

Answer 37

85% of Social Security is taxable

15% is Not Taxable

Question 38

Alimony

Answer 38

Taxable (CANNOT)

Question 39

Child Support and Property Settlements

Answer 39

Not Taxable

Question 40

Alimony Recapture Rule

Answer 40

Prevents property settlements from being treated as alimony

Question 41

Partial combination of child support and alimony

Answer 41

Child support is paid first
If payments are to be reduced due to child based contingency, even though labeled alimony, it is considered child support

Question 42

Gifts

Answer 42

Generally Not Taxable to Donee

Income from Gift taxable however

Question 43

Inheritances

Answer 43

Generally Not Taxable

Income from Inheritance taxable however

Question 44

Death Benefits

Answer 44

Generally Not Taxable

Question 45

Gain on Sale of Personal Residence

Answer 45

Not Taxable if once every 5 years