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To qualify for the moving expense deduction, an employee must change job sites, move a required distance,
and change employers.
 
False
   
Professional development expenses related to the curriculum are eligible for the Educator Expenses deduction.
 
True
   
For 2017, the maximum amount of deductible student loan interest is $2,500.
 
True
   
In 2013 through 2016, Shirin borrowed a total of $30,000 for higher education expenses on qualified education loans.
In 2017, while still living at home and being claimed by her parents as a dependent, she began making payments on
the loan. The first year interest on the loan was reported as $1,750. The amount that Shirin can claim on her tax return is:
 
$0.
   
The payment of alimony has tax ramifications. These tax ramifications only affect the payor of the alimony.
 
False
 
   
Due to a company consolidation, Tran transfers from Boston to San Diego. Under a new job description, he
is reclassified from department manager to a staff member. His moving expenses, which are not reimbursed, are as follows:
                                 
Transportation                   $             1,200
Meals                                                                    300
Lodging                                                                400
Cost of moving household goods               4,000
Pre-move house hunting costs    2,500
 
Renaldo's deductible moving expense is:
 
$5,600.
   
Shanika is a self-employed hair stylist and had net earnings from self-employment of $4,100. She paid $375
per month for health insurance over the last year. Shanika is entitled to a for AGI deduction for health insurance premiums of:
 
$4,100.
   
If a taxpayer incurs an early withdrawal of savings penalty, the taxpayer is entitled to report the penalty as a
for AGI deduction on Form 1040.
 
True
   
There is an employment test, a distance test, and a time test that must be met in order to deduct qualifying moving expenses.
 
True
   
Deductions taken from gross income in determining AGI, adjusted gross income. Gross income minus for AGI
(above the line) deductions equals AGI. Are listed on Schedule 1. FOR AGI deductions
 
Above the line deductions
   
Deductions from adjusted gross income. Also known as itemized deductions. AGI minus below the line deductions
equals taxable income. Are listed on Schedule A. FROM AGI deduction
 
Below the line deductions
   
Where is Student Loan Interest recorded and reported?
 
Schedule 1 of Form 1040, Line 33, Form 1098-E
   
A loan taken out by the taxpayer solely to pay qualified education expenses.
 
Qualified Student Loan
   
Tuition and fees; room and board; books, supplies, and equipment; other necessary expenses.
 
Qualified Education Expenses
   
Where are moving expenses for members of the armed forces deducted on Form 1040?
 
Schedule 1, Line 25 and form 3903
   
Where is the deduction for 1/2 of self-employment tax recorded?
 
Form 1040, Schedule 1, Line 27
   
Where is the Self Employed health insurance deduction recorded?
 
Form 1040, Schedule 1, line 29
   
Where is the penalty on early withdrawal of savings deduction recorded & reported?
 
Form 1040, Schedule 1, Line 30. Reported in box 2 of 1099-INT
   
Where is the alimony paid deduction recorded?
 
Form 1040, Schedule 1, Line 31A
   
On a particular Saturday, Tom had planned to paint a room in his house, but his employer gave him the
opportunity to work that day. If Tom works, he must hire a painter for $120.
For Tom to have a positive cash flow from working and hiring the painter:


Tom must earn more than $160 if he is in the 25% marginal tax bracket.
   
The tax concept and economic concept of income are in agreement on which of the following:


Rent income for 2016 collected in 2015 is income for 2015.
   
The Blue Utilities Company paid Sue $2,000 for the right to lay an underground electric cable across her property anytime in the future.


Sue is not required to recognize gross income from the receipt of the funds, but she must reduce her cost basis in the land by $2,000.
   
For purposes of determining gross income, which of the following is true?


A taxpayer who finds a wallet full of money is required to recognize income even though someone
may eventually ask for the return of the money.
   
Detroit Corporation sued Chicago Corporation for intentional damage to Detroit's goodwill. Detroit had created
its goodwill through providing high-quality services to its customers. Thus, no basis for the goodwill appeared
on Detroit's balance sheet. The suit was settled and Detroit received $1,500,000 for the damages to its goodwill.


The $1,500,000 is taxable because Detroit has no basis in the goodwill.
   
The annual increase in the cash surrender value of a life insurance policy:


Is not included in gross income each year because of the substantial restrictions on gaining access to the policy's value.
   
Turner, a successful executive, is negotiating a compensation plan with his potential employer.
The employer has offered to pay Turner a $600,000 annual salary, payable at the rate of $50,000 per month.
Turner counteroffers to receive a monthly salary of $40,000 ($480,000 annually) and a $180,000 bonus
in 5 years when Turner will be age 65.


If the employer accepts Turner's counteroffer, Turner will recognize $40,000 income each month for the year and $180,000 in year 5.
   
Maroon Corporation expects the employees' income tax rates to increase next year.
The employees use the cash method. The company presently pays on the last day of each month.
The company is considering changing its policy so that the December salaries will be paid on the
first day of the following year. What would be the effect on an employee of the proposed change
in company policy for paying its salaries beginning for December 2015?


The employee will not be required to recognize the income until it is received, in 2016.
   
The annual increase in the cash surrender value of a life insurance policy:


Is not included in gross income because the policy must be surrendered to receive the cash surrender value.
   
Under the original issue discount (OID) rules as applied to a three-year certificate of deposit:


The interest income will be greater in the third year than in the first year.
   
Freddy purchased a certificate of deposit for $20,000 on July 1, 2015.
The certificate's maturity value in two years (June 30, 2017) is $21,218, yielding 3% before-tax interest.


Freddy must recognize $300 (.03 × $20,000 × .5) gross income in 2015.
   
Jerry purchased a U.S. Series EE savings bond for $744. The bond has a maturity value in 10 years
of $1,000 and yields 3% interest. This is the first Series EE bond that Jerry has ever owned.


Jerry can defer the interest income until the bond matures in 10 years.
   
Office Palace, Inc., leased an all-in-one printer to a new customer, Ashley, on December 27, 2015.
The printer was to rent for $600 per month for a period of 36 months beginning January 1, 2016.
Ashley was required to pay the first and last month's rent at the time the lease was signed. Ashley was
also required to pay a $1,500 damage deposit. Office Palace must recognize as income for the lease:


$1,200 in 2015, if Office Palace is an accrual basis taxpayer.
   
The Maroon & Orange Gym, Inc., uses the accrual method of accounting. The corporation sells memberships
that entitle the member to use the facilities at any time. A one-year membership costs $480 ($480/12 = $40
per month); a two-year membership costs $720 ($720/24 = $30 per month). Cash payment is required at the
beginning of the membership period. On July 1, 2015, the company sold a one-year membership and a two-year
membership. The company should report as gross income from the two contracts:


$780 in 2016.
   
Orange Cable TV Company, an accrual basis taxpayer, allows its customers to pay by the year in advance
($500 per year), or two years in advance ($950). In September 2015, the company collected the following
amounts applicable to future services:

October 2015-September 2017 services (two-year contracts) $144,000
October 2015-September 2016 services (one-year contracts) 128,000
Total $272,000


As a result of the above, Orange Cable should report as gross income:


$222,000 in 2016.
   
With respect to the prepaid income from services, which of the following is true?


An accrual basis taxpayer can spread the income over the period services are to be provided if all of the
services will be completed by the end of the tax year following the year of receipt.
   
With respect to income from services, which of the following is true?


If an accrual basis taxpayer sells a 36month service contract on July 1, 2015 for $3,600, the taxpayer's
2014 gross income from the contract is $600.
   
The Green Company, an accrual basis taxpayer, provides business-consulting services. Clients generally pay a
retainer at the beginning of a 12-month period. This entitles the client to no more than 40 hours of services.
Once the client has received 40 hours of services, Green charges $500 per hour. Green Company allocates the
retainer to income based on the number of hours worked on the contract. At the end of the tax year, the
company had $50,000 of unearned revenues from these contracts. The company also had $10,000 in
unearned rent income received from excess office space leased to other companies. Based on the above,
Green must include in gross income for the current year:


$10,000.
   
Teal company is an accrual basis taxpayer. On December 1, 2015, a customer paid for an item that was
on hand, but the customer wanted the item delivered in early January 2016. Teal delivered the item on
January 4, 2016. Teal included the sale in its 2015 income for financial accounting purposes.


Teal must recognize the income in 2015.
   
On January 5, 2015, Tim purchased a bond paying interest at 6% for $30,000. On March 31, 2014,
he gave the bond to Jane. The bond pays $1,800 interest on December 31. Tim and Jane are cash
basis taxpayers. When Jane collects the interest in December 2015:


Jane reports $1,350 of interest income in 2015, and Tim reports $450 of interest income in 2015.
   
Mike contracted with Kram Company, Mike's controlled corporation. Mike was a medical doctor and
the contract provided that he would work exclusively for the corporation. No other doctor worked for
the corporation. The corporation contracted to perform an operation for Rosa for $8,000.
The corporation paid Mike $6,500 to perform the operation under the terms of his employment contract.


Mike's gross income is $6,500.
   
As a general rule:


I. Income from property is taxed to the person who owns the property.
II. Income from services is taxed to the person who earns the income.
III. The assignee of income from property must pay tax on the income.
IV. The person who receives the benefit of the income must pay the tax on the income.


Only I and II are true.
   
On November 1, 2015, Bob, a cash basis taxpayer, gave Dave common stock. On October 30, 2015, the
corporation had declared the dividend payable to shareholders of record as of November 22, 2015.
The dividend was paid on December 15, 2015. The corporation has paid the $1,200 dividend once each year
for the past ten years, during which Bob owned the stock. When Dave collected the dividend on December 15, 2015:


Bob must include all of the dividend in his gross income.
   
Daniel purchased a bond on July 1, 2015, at par of $10,000 plus accrued interest of $300.
On December 31, 2015, Daniel collected the $600 interest for the year. On January 1, 2016,
Daniel sold the bond for $10,200.


Daniel must recognize $300 interest income for 2015 and a $200 gain on the sale of the bond in 2016.
   
Theresa, a cash basis taxpayer, purchased a bond on July 1, 2011, for $10,000, plus $400 of accrued interest.
The bond paid $800 of interest each December 31. On March 31, 2015, she sold the bond for $9,800,
which included $200 of accrued interest.


Theresa has $200 interest income and a $400 loss from the bond in 2015.
   
Darryl, a cash basis taxpayer, gave 1,000 shares of Copper Company common stock to his daughter on
September 29, 2015. Copper Company is a publicly held company that has declared a $2.00 per share
dividend on September 30th every year for the last 20 years. Just as Darryl had expected, Copper
Company declared a $2.00 per share dividend on September 30th, payable on October 15th, to stockholders
of record as of October 10th. The daughter received the $2,000 dividend on October 18, 2015.


The daughter must recognize the income because she owned the stock when the dividend was declared, and she received the $2,000.
   
Wayne owns a 30% interest in the capital and profits of Emerald Company (a calendar year partnership).
For tax year 2014, the partnership earned revenue of $900,000 and had operating expenses of $660,000.
During the year, Wayne withdrew from the partnership a total of $90,000. He also invested an additional
$30,000 in the partnership. For 2014, Wayne's gross income from the partnership is:


$72,000.