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30) Barney and Betty got divorced in 2018. In the divorce decree Betty agreed to transfer 100 shares of common stock worth $50,000 and pay Barney $24,000 per year for five years (or until Barney’s death or remarriage). What amount (if any) is included in Barney’s gross income this year? A) $24,000
31) Hal Gore won a $1 million prize for special contributions to environmental research. This prize is awarded for public achievement, and Hal directed the awarding organization to transfer $400,000 of the award to the Environmental Protection Agency. How much of the prize should Hal include in his gross income? B) $600,000
32) This year Ed celebrated his 25th year as an employee of Designer Jeans Company. In recognition of his long and loyal service, the company awarded Ed a gold watch worth $250 and a $2,000 cash bonus. What amount must Ed include in his gross income? B) $2,000.
33) Bart, a single taxpayer, has recently retired. This year, he received $24,000 in pension payments and $5,000 of social security payments. What amount must Bart include in his gross income for the social security payments? D) $750
34) Janine’s employer loaned her $5,000 this year (interest-free) to buy a used car. If the federal interest rate was 4%, which of the following is correct? E) None of the choices are correct.
35) This year, Fred and Wilma, married filing joint, sold their home (sales price $750,000; cost $200,000). All closing costs were paid by the buyer. Fred and Wilma owned and lived in their home for 20 years. How much of the gain is included in gross income? D) $50,000
36) Hank is a U.S. citizen and is doing a three to six-year assignment as a sales executive in Paris for a French company, which began this year. Hank earned $109,500 working for the French company this year but only lived in France for 180 days (out of 365 days). He will live full-time in France next year. What amount of Hank’s $109,500 salary this year will he be allowed to exclude from gross income in the U.S. (rounded to the nearest one-hundred dollars)? C) $51,200
37) Pam recently was sickened by eating spoiled peanut butter. She successfully sued the manufacturer for her medical bills ($3,700), her emotional distress ($6,000 – she now fears peanut butter), and punitive damages ($44,000). What amount must Pam include in her gross income? A) $44,000
38) Congress allows self-employed taxpayers to deduct the cost of health insurance above the line (for AGI) because: C) this deduction provides a measure of equity between employees and the self-employed.
39) Which of the following is a true statement? E) All of the choices are correct.
40) Which of the following is a true statement? A) The deduction for interest on educational loans is subject to a phase-out limitation.
41) This year, Jong paid $3,000 of interest on a qualified education loan. Jong files married filing joint and reports modified AGI of $147,000. What is Jong’s deduction for interest expense on an educational loan? C) $1,500.
42) Max, a single taxpayer, has a $270,000 loss from his sole proprietorship. How much of this loss is deductible after considering the excess business loss rules?B) $250,000.
43) Han is a self-employed carpenter and his wife, Christine, works full-time as a grade school teacher. Han paid $525 for carpentry tools and supplies, and Christine paid $3,600 as her share of health insurance premiums (not with pre-tax dollars) for Han and herself in a qualified plan provided by the school district (not through an exchange). Which of the following is a true statement? A) The tools and supplies are deductible for AGI while the health insurance is an itemized deduction.
44) This fall Millie finally repaid her student loan. She originally borrowed the money to pay tuition several years ago when she attended at State University (a qualified educational institution). This year Millie paid a total of $2,400 of interest on the loan. If Millie files single and reports $70,000 of income and no other items of income or expense how much of the interest can she deduct? B) Millie can deduct $1,600 for AGI.
45) This year Norma, a single taxpayer, paid $11,200 of real estate taxes on her personal residence and 9,500 of state income taxes. Which of the following is a true? C) Norma can deduct $10,000 of taxes as an itemized deduction.
46) Madeoff donated stock (capital gain property) to a public charity. He purchased the stock 3 years ago for $100,000, and on the date of the gift, it had a fair market value of $200,000. What is his maximum charitable contribution deduction for the year related to this stock if his AGI is $500,000 (before considering the itemized deduction phaseout)? C) $150,000.