ACC 570

CQ3b

NAME___________________________

____1. Tyler Pace received the following compensation and fringe benefits from his employer during the
current year:
Salary
$100,000
Year-end bonus
10,000
Premium on $20,000 of nondiscriminatory group-term life insurance
of which Tylers wife was the sole beneficiary
250
Sick pay due to illness paid directly by employer
750
Rental allowance for car used in commuting to work
4,000
What amount of these payments should be included in Tylers current-year gross income?
A. $115,000
B. $114,750
C. $114,000
D. $110,000
_____2. Craig Mello is a general partner in the Bottle Down Partnership, which manufactures glass
bottles. During the current year, Mello reported ordinary income from his partnership interest of $80,000.
For additional income, Mello authored a book. For this, he received royalties in the current year of
$15,000. Also during the current year, $10,000 worth of improvements were left by a lessee on rental
property held by Mello. What amount should Mello include as self-employment income on his current-year
return (before any deduction for self-employment taxes)?
A. $25,000
B. $95,000
C. $105,000
D. $90,000
_____3. From the items listed below, determine the amount of income to be included in Valeries tax
return for the current year.
Nondiscriminatory medical insurance premium paid by employer under a plan
$1,600
Nondiscriminatory group permanent life insurance premiums paid by employer
250
The excess of fair market value over the purchase price paid for
property acquired from employer (not a qualified discount)
810
Amount of travel expense allowance received from employer in excess of actual
200
expenses
A.
B.
C.
D.

$200
$1,260
$1,010
$2,860

_____4. Ernest Sosa files a joint return with his wife. Sosas employer pays 100% of the cost of all
employees group term life insurance under a qualified plan. What is the maximum amount of coverage
that may be provided tax-free by his employer under this plan?
A. $100,000
B. $50,000
C. $10,000
D. $5,000
_____5. Doug invested in a limited partnership in 1985. In the current year, the partnership purchased an
apartment building for rent. The at-risk rules do not apply to Dougs share of any losses from operation of
the apartment building.
A. True.
B. False.

_____6. Which of the following is passive income?

A. Gain on sale of property held for investment.
B. Income from an interest in a limited partnership owned by a limited partner.
C. Fees earned for managing a passive activity.
D. Interest earned on accounts receivable that arose in the ordinary course of a business
selling equipment.
_____7. Taxpayer W rented the apartment in the basement of his personal residence to an unrelated
married couple for the entire year of 2008. The apartment consists of 1,000 square feet, which represents
25% of the total space in the residence. Ws total expenses in 2008 are as follows:
Interest
$2,500
Taxes
900
Utilities (all paid by W)
1,200
Repairs (to apartment plumbing)
150
Insurance (covers period January 1,
2008 through December 31, 2010)
600
Fair market value of Mr. Ws time applied to maintenance
200
Depreciation of 1,000 sq. ft. of residence
1,000
What is the amount of rental expenses that may be deducted on Mr. Ws Schedule E (assuming no
passive loss limitations)?
A. $1,600
B. $2,350
C. $1,700
D. $1,800
_____8. The support test is one of the tests that must be met for a person to qualify as ones dependent.
Which of the following expenses paid on behalf of a dependent is not considered a support item in
determining the dependents total support?
A. Medical insurance premiums.
B. Social security benefits added to the persons savings account.
C. Tax-exempt income used to support the person.
D. Education expenses.
_____9. A and B are the divorced parents of one child and they furnish all his support. The divorce decree
entered into eight years ago gives the exemption for the child to B who has custody of the child. B
provided $1,000 support for the child and A provided $1,100. A is entitled to the exemption for the child.
A. True.
B. False.
_____10. Assuming none of the following taxpayers had AGI in excess of $150,000 in year 1, which of
them should have made estimated tax payments for year 2?
A. Dennis has a year 2 tax liability of $31,000, had a year 1 tax liability of $40,000, and has
year 2 tax withholding of $28,000.
B. Karen has a year 2 tax liability of $10,000, had a year 1 tax liability of $11,000, and has
year 2 tax withholding of $8,000.
C. Roger has a year 2 tax liability of $5,000, had a year 1 tax liability of $7,000, and has
year 2 tax withholding of $5,500.
D. Gene has a year 2 tax liability of $45,000, had a year 1 tax liability of $17,000, and has
year 2 tax withholding of $23,000.