1. The sales tax is the perfect example of a (or an):
a. direct tax
b. income tax
c. head tax
d. progressive tax
e. none of the above
2. In the McDonell case, the first determination the Tax Court made was:
a. it excluded the benefit of the trip from taxpayer's gross income.
b. that the trip was not a prize or award under Section 74.
c. it included the benefit of the trip in the taxpayer's gross income.
d. that the trip was a prize or award under Section 74.
e. none of the above.
3. Congress's purpose in enacting Section 117 was:
a. to provide a clear-cut method for distinguishing between taxable and non-taxable educational grants.
b. to include in gross income amounts received as grants by degree candidates.
c. to clearly define the term scholarships.
d. to clearly define educational expenses for purposes of educational grants.
e. none of the above.
4. If an employee receives an amount from his or her employer for educational assistance, he or she may exclude a certain amount. The code Section which permits this is Section:
a. 74
b. 102
c. 132
d. 274
e. none of the above.
5. Which of the following statements is false?
a. In all situations, the basis of property in the hands of a done is the same basis the property had in the hands of the donor.
b. A major revision of the 1954 Internal Revenue Code occurred in 1969.
c. "Gestalt," in the context of learning the Internal Revenue Code "Code" refers to the phase of a person's understanding when one begins to understand the structure or pattern of the Code.
d. Gross income does not include the amount of any damage received on account of personal injuries.
e. all of the above are true.
6. Kent Knobe gave Larry Lawson a gift having a fair market value of $133,000 on February 14, 2012. Kent had purchased the gift property in 2004 for $93,000, the taxable gift was $120,000, and paid a gift tax of $15,000. What is Larry's basis in the property?
a. $93,000
b. $120,000
c. $98,000
d. $108,000
e. $133,000
7. Starting in 2012, Mr. West must pay his former spouse $20,000 annually under a divorce decree in the following amounts:
$1,000 a month for mortgage payments (including principal and interest) on a jointly owned home until she dies
$200 a month for tuition fees paid to a private school until their son attains the age of 18 or leaves the school prior to age 18
$5,000 a year cash payment to former Mrs. West until she dies
In addition to the above amounts, the former Mrs. West also received in 2012 a lump-sum amount of $150,000 from the sale of their other marital assets.
Assume the parties did not file a joint return and were not members of the same household. Also, assume that there were no written statements between the parties as to how the amounts should be treated. What is the amount of Mr. West's 2012 alimony deductions?
a. $20,000
b. $155,000
c. $17,600
d. $11,000
8. Holly and Harp Oaks were divorced in 2010. The divorce decree was silent regarding the exemption for their 12-year-old daughter, June. Holly has legal custody of her daughter and did not sign a statement releasing the exemption. Holly earned $8,000 and Frank earned $80,000. June had a paper route and earned $3,000. June lived with Harp 4 months of the year and with Holly 8 months. Who may claim the exemption for June in 2012?
a. June may, since she had gross income over $3,000 and files her own return.
b. Since June lived with both Holly and Harp during the year, they both may claim her as an exemption.
c. Holly may, since she has legal custody and physical custody for more than half the year.
d. Harp may, since he earned more than Holly and, therefore, is presumed to have provided more than 50% of June's support.
9. Based on the following 2012 events, how much should Rachel include in income on her federal income tax return?
Jury awarded punitive damages
$10,000
Kickbacks on sale of goods (not treated as a reduction elsewhere)
5,000
Money borrowed from a bank
8,000
Increase in the value of an asset
1,000
a. $10,000
b. $15,000
c. $16,000
d. $24,000
10. Insurance policy dividends used to purchase additional life insurance are not taxable to the policyowner.
a. True
b. False