Taxation in the United States and Gross Income
552. CHAPTER 5GROSS INCOME: EXCLUSIONS Question MC #1 The taxpayer’s marginal tax bracket is 25%. Which would the taxpayer prefer?
a. $1.00 taxable income rather than $1.00 tax-exempt income.
*b. $.80 tax-exempt income rather than $1.00 taxable income.
c. $1.25 taxable income rather than $1.00 tax-exempt income.
d. $1.30 taxable income rather than $1.00 tax-exempt income. e. None of the above.
553. CHAPTER 5GROSS INCOME: EXCLUSIONS Question MC #2 Cash received by an individual:
a. Is not included in gross income if it was not earned. b. Is not taxable unless the payor is legally obligated to make the payment.
c. Must always be included in gross income.
*d. May be included in gross income although the payor is not legally obligated to make the payment.
e. None of the above.
554. CHAPTER 5GROSS INCOME: EXCLUSIONS Question MC #3 Sharon’s automobile slid into a ditch. A stranger pulled her out. Sharon offered to pay $25, but the stranger refused. Sharon slipped the $25 in the stranger’s truck when he was not looking.
a. The $25 is a nontaxable gift received by the stranger because Sharon was not legally required to pay him. b. The $25 is a nontaxable gift because the stranger did not ask to receive it. *c. The $25 is taxable compensation for services rendered.
d. The $25 is a nontaxable service award. e. None of the above.
555. CHAPTER 5GROSS INCOME: EXCLUSIONS Question MC #4 Carin, a widow, elected to receive the proceeds of a $150,000 life insurance policy on the life of her deceased husband in 10 installments of $17,500 each. Her husband had paid premiums of $60,000 on the policy. In the first year, Carin collected $17,500 from the insurance company. She must include in gross income:
a. $0. *b. $2,500. c. $10,000. d. $25,000. e. None of the above.
556. CHAPTER 5GROSS INCOME: EXCLUSIONS Question MC #5 Iris collected $100,000 on her deceased husband’s life insurance policy. The policy was purchased by the husband’s employer under a
a. $1.00 taxable income rather than $1.00 tax-exempt income.
*b. $.80 tax-exempt income rather than $1.00 taxable income.
c. $1.25 taxable income rather than $1.00 tax-exempt income.
d. $1.30 taxable income rather than $1.00 tax-exempt income. e. None of the above.
553. CHAPTER 5GROSS INCOME: EXCLUSIONS Question MC #2 Cash received by an individual:
a. Is not included in gross income if it was not earned. b. Is not taxable unless the payor is legally obligated to make the payment.
c. Must always be included in gross income.
*d. May be included in gross income although the payor is not legally obligated to make the payment.
e. None of the above.
554. CHAPTER 5GROSS INCOME: EXCLUSIONS Question MC #3 Sharon’s automobile slid into a ditch. A stranger pulled her out. Sharon offered to pay $25, but the stranger refused. Sharon slipped the $25 in the stranger’s truck when he was not looking.
a. The $25 is a nontaxable gift received by the stranger because Sharon was not legally required to pay him. b. The $25 is a nontaxable gift because the stranger did not ask to receive it. *c. The $25 is taxable compensation for services rendered.
d. The $25 is a nontaxable service award. e. None of the above.
555. CHAPTER 5GROSS INCOME: EXCLUSIONS Question MC #4 Carin, a widow, elected to receive the proceeds of a $150,000 life insurance policy on the life of her deceased husband in 10 installments of $17,500 each. Her husband had paid premiums of $60,000 on the policy. In the first year, Carin collected $17,500 from the insurance company. She must include in gross income:
a. $0. *b. $2,500. c. $10,000. d. $25,000. e. None of the above.
556. CHAPTER 5GROSS INCOME: EXCLUSIONS Question MC #5 Iris collected $100,000 on her deceased husband’s life insurance policy. The policy was purchased by the husband’s employer under a