TAX EXAM 2 ACTUAL 2025/2026 QUESTIONS AND 100% CORRECT ANSWERS

TAX EXAM 2 ACTUAL 2025/2026 QUESTIONS AND 100% CORRECT ANSWERS Jack and Jill are married. This year Jack earned $81,000 and Jill earned $89,000 and they received $5800 of interest income from a joint savings account. How much gross income would Jack report if he files married filing separately from Jill? - Answer -$87,900 if they reside in a community property state In a community property state Jack is taxed on half of his separate income ($40,500) plus half of Jill's separate income ($44,500) plus half of joint income ($2,900). In a common-law state, Jack is taxed on his separate income ($81,000) plus half of joint income ($2,900). Opal deducted $2,420 of state income taxes on her tax return last year. This year she received a state income tax refund of $190. What amount of the refund, if any, should Opal include in her gross income if last year her total itemized deductions exceeded the standard deduction by $360? - Answer -$190 Refund amounts are included in gross income only to the extent that the original deduction provided a tax benefit. The $2,420 of deductionproduced a tax benefit of $360, so the entire $190 is included in income. Maren received 10 NQOs (each option gives her the right to purchase 10 shares of stock for $8 per share) at the time she started working, when the stock price was $7 per share. When the share price was $14 per share, she exercised all of her options. Eighteen months later she sold all of the shares for $20 per share. What is the amount of Maren's bargain element? - Answer -$600 10 options × 10 shares × ($14 market price at exercise − $8 exercise price). Fran purchased an annuity that provides $13,400 quarterly payments for the next 12 years. The annuity was purchased at a cost of $393,600. How much of the first quarterly payment will Fran include in her gross income? - Answer -$5,200 The annuity exclusion ratio is [$393,600/(4 × 12)] = $8,200 return of capital per payment. Hence, $5,200 of each $13,400 payment is included in gross income. Rhett made his annual gambling trip to Uwin Casino. On this trip Rhett won $440 at the slots and $1,390 at poker. Also this year, Rhett made several trips to the racetrack, but he lost $795 on his various wagers. What amount must Rhett include in his gross income? - Answer -$1830Taxpayers must include the gross amount of their gambling winnings for the year in gross income. Bernie is a former executive who is retired. This year Bernie received $264,000 in pension payments and $24,000 of Social Security payments. What amount must Bernie include in his gross income? - Answer -$284,400