1. A business bad debt is deductible for tax purposes as a(n):
2. Which of the following items is not subject to federal income tax?
3. Sam owes Bob $8,000. Bob cancels (forgives) the debt. The cancellation is not a gift and Sam is neither insolvent nor bankrupt. Which of the following statements is correct concerning the impact of this transaction?
Neither Bob nor Sam has any taxable income from this transaction.
4. Jane purchased an annuity contract that pays her $800 per month. The annuity cost her $50,000 and it has an expected return of $100,000. How much of each monthly annuity payment is includible in Jane’s gross income?
5. Which of the following is not considered “constructive receipt” of income?
Mr.W received a check on December 30, 2009 for services rendered, but was unable to make a deposit until January 3, 2010.
6. Stan and Anne were divorced in January 2009. The provisions of the divorce decree and Anne’s obligations follow: (1.) Transfer the title in their resort condo to Stan. At the time of the transfer, the condo had a basis to Anne of $75,000, a fair market value of $95,000; it was subject to a mortgage of $65,000. (2.) Anne is to make the mortgage payments for 17 years regardless of how long Stan lives. Anne paid $8,000 in 2009. (3.) Anne is to pay Stan $1,000 per month, beginning in February, for 10 years or until Stan dies. Of this amount, $300 is designated as child support. Anne made five payments of $900 each in 2009 (February-June). What is the amount of alimony from his settlement that is includible in Stan’s gross income for 2009?
7. To be deductible for tax purposes, a trade or business expenditure must be:
8. Mr. Wilson is 66 years old and single. His income for 2009 consisted of the following: Taxable pension $10,000 Taxable interest 9,000 Taxable dividends 5,000 Social security payments 5,000 He did not have any adjustments to income. What amount of W’s social security benefits is taxable?
9. Explain the Assignment of Income Doctrine (AID) and the “fruit-of-the-tree” doctrine.
10. Explain the Constructive Receipt Doctrine.
11. Explain the Economic Benefit Doctrine.
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