M2 - Gross Income: Part 1

Question 1

Gross income means:

Answer 1

Generally all income, unless specifically excluded:
- It includes:
- Employee achievement awards not in the form of tangible property
- Treasure troves

Question 2

Portion of life insurance premiums included/excluded from income:

Answer 2

Not income to the employees up to the cost on the first $50,000 of coverage

Question 3

Under a nonaccountable plan:

Answer 3

Any amounts received by an employee from the employer must be reported as part of wages (even if there was an overpayment that was reimbursed by the employee)

Question 4

Accruable expense

Answer 4

Services has been received/performed but have not been paid for by the end of the reporting period

Question 5

Taxable interest income includes:

Answer 5

• Interest from federal bonds (Treasury bonds)
• Interest from industrial development bonds
• Interest from corporate bonds
• *Interest paid by the federal or state gov for late payment of a tax refund
• *Gifts to open up a bank account

Question 6

Tax-EXEMPT interest income:

Answer 6

• State and local gov bonds/obligations
• Bonds of a US Possession (such as Guam or Puerto Rico)
• US Series EE Savings Bonds

Question 7

Exclusion of interest from US Series EE savings bonds is phased out when AGI reaches a certain level:

Answer 7

-Single/head of household: $85,800 - $100,800
-MFJ: $128,650-$158,650

Question 8

Employer contributions to a qualified defined contribution plan and its earnings are:

Answer 8

Not taxable until it is distributed to the employee

Question 9

Interest on a Series EE bond is not taxable if:

Answer 9

The interest is used to pay tuition and fees for the taxpayer, spose or dependent enrolled in higher education

Question 10

A state refund from the previous year is not taxable if:

Answer 10

The taxpayer claims the standard deduction

Question 11

Requirements for payments to be classified as alimony:

Answer 11

• cash or its equivalent
• cannot extend beyond death of the payee-spouse
• must be legally pursuant to a written divorce agreement
• cannot be made to members of the same household
• must not be designated as anything other than alimony
• spouses may not file a joint tax return

Question 12

Maximum net loss deductible for capital loss

Answer 12

$3,000

Question 13

In a divorce settlement, payments must first be allocated to:

Answer 13

• child support, then alimony

Question 14

A Gain or loss on a sale of stock arises on the:

Answer 14

• trade date

Question 15

For withdrawals of a traditional IRA, is the taxpayer subject to effective or marginal tax rate?

Answer 15

• marginal

Question 16

If a person withdraws from an IRA before 59 1/2,

Answer 16

• they are subject to a 10% penalty tax
  Amount withdrawn x marginal tax % x 10% penalty

Question 17

Exceptions to the 10% IRA penalty tax (HIM DEAD)

Answer 17

• Home buyer (first time) $10,000 max (purchase must be made within 120 days of withdrawal)
• Insurance (medical) (if unemplyed 12 consecutive weeks or self-employed)
• Medical expenses in excess of AGI floor
• Disability
• Education
• Adoption or birth of a child
• Death

Question 18

Generally, the FMV of prizes and awards is taxable. Exclusions to this include:

Answer 18

• winner is selected for the award without entering into a contest
• winner assigns the award directly to a gov unit or charity

Question 19

What is the maximum % of Social Security benefits included in gross income?

Answer 19

85%

Question 20

Can you deduct the loss on the sale of a personal residence?

Answer 20

NO

Question 21

Maximum amount not taxed for employee reimbursed educational expenses:

Answer 21

$5,250

Question 22

Exclusion amount for single taxpayer on proceeds on sale of home:

Answer 22

$250,000

Question 23

Interest on Series EE savings bonds is tax-exempt when:

Answer 23

• Interest is used to pay for higher education of taxpayer, spouse, or dependents
• eligible higher education expenses are reduced by tax-free scholarships
• the taxpayer is over 24 when bonds are issued
• bonds are acquired after 1989
• interest exclusion is subject to a phase-out

Question 24

Is a stock split a taxable event?

Answer 24

NO

Question 25

What does a stock spit do?

Answer 25

Increases shares and decreases FMV of the shares

Question 26

Punitive damages are taxable/non-taxable?

Answer 26

Taxable