Tax actual Exam 2 latest
2025-2026 Review Guide
with questions and
correct verified answers
graded A+ GUARANTEED
100% PASS
This year Barney purchased 500 shares of Bell common stock for $20 per share. At
year-end the Bell shares were only worth $2 per share. What amount can Barney
deduct as a loss this year?
A) $10,000
B) $9,000
C) $1,000
D) Barney can deduct $10,000 only if he includes $1,000 in his taxable income.
E) None of the choices are correct—Barney is not entitled to a loss deduction. -
ANSWERS-e) none of the choices are correct
,Hillary is a cash-basis calendar-year taxpayer. During the last week of December, she
received a letter containing a $5,000 check for services. Which of the following is a true
statement?
A) Hillary is taxed on the $5,000 of service income in the year she cashes the check.
B) Hillary is taxed on the $5,000 of service income in the year the check was mailed.
C) Hillary is taxed on the $5,000 of service income in the year she receives the check.
D) Hillary is taxed on the $5,000 of service income in the year she provides the
services.
E) None of the choices are correct. - ANSWERS-C) Hillary is taxed on the $5,000 of
service income in the year she receives the check.
Identify the rule dictating that on a sale of an asset a taxpayer need only include the
incremental gain in gross income rather than the entire proceeds from the sale:
A) Tax benefit rule
B) Constructive receipt
C) Return of capital principle
D) Wherewithal to pay
E) None of the choices are true - ANSWERS-C) Return of capital principle
Identify the rule that states that income has been realized when a taxpayer receives the
income and there are no restrictions on the taxpayer's use of the income (e.g., no
obligation to repay the amount):
A) Claim of right
B) Constructive receipt
C) Return of capital principle
D) Wherewithal to pay
E) None of the choices are correct. - ANSWERS-A) Claim of right
Dave is a plumber who uses the cash method of accounting. This year Dave requested
that his clients make their checks payable to his son, Steve. This year Steve received
checks in the amount of $62,000 for Dave's plumbing services. Which of the following is
a true statement?
A) Dave is taxed on $62,000 of plumbing income this year.
B) Steve is taxed on $62,000 of plumbing income this year.
C) Steve is taxed on $62,000 of income from gifts received this year.
D) Dave may deduct the $62,000 received by Steve.
E) All of these choices are correct. - ANSWERS-A) Dave is taxed on $62,000 of
plumbing income this year.
Jack and Jill are married. This year Jack earned $72,000 and Jill earned $80,000 and
they received $4,000 of interest income from a joint savings account. How much gross
income would Jack report if he files married filing separately from Jill?
A) $72,000 if they reside in a common-law state.
B) $76,000 if they reside in a community property state.
C) $84,000 if they reside in a common-law state.
D) $78,000 if they reside in a community property state.
, E) All of these choices are correct. - ANSWERS-D) $78,000 if they reside in a
community property state.
Community property:
(72K + 80K + 4k)/2
Common law:
(4k/2)+ 72k
Identify which of the items below helps determine which taxpayer must recognize
earned income:
A) Residence in a community property state.
B) Assignment of income.
C) Residence in a common law-state.
D) All of these choices are correct.
E) Both residence in a community property state and residence in a common-law state -
ANSWERS-D) All of these choices are correct.
Emily is a cash-basis taxpayer, and she was an especially productive salesperson last
year. In December of last year her supervisor told Emily she had earned a $5,000
bonus. However, Emily received the bonus check after year-end. Identify the principle
that will determine when Emily is taxed on the bonus:
A) Assignment of income.
B) Constructive receipt.
C) Return of capital principle.
D) Wherewithal to pay.
E) All of these choices are correct - ANSWERS-B) Constructive receipt.
Kevin provided services to several clients this year who paid with different types of
property. Which of the following payments is not included in Kevin's gross income?
A) Cash.
B) Shares of stock listed on the New York Stock Exchange.
C) A used car.
D) Gold coins.
E) All of these are included in gross income. - ANSWERS-E) All of these are included in
gross income.
Ophra is a cash-basis taxpayer who is employed in the publishing industry. This year
her employer informed her that because of her outstanding performance she is entitled
to a free world cruise. Ophra asked her employer to issue the cruise tickets to her
parents, and he complied with this request. Identify the principle that will determine
whether Ophra or her parents are taxed on the value of the cruise tickets:
A) Assignment of income.
B) Constructive receipt.
C) Return of capital principle.
D) Wherewithal to pay.
2025-2026 Review Guide
with questions and
correct verified answers
graded A+ GUARANTEED
100% PASS
This year Barney purchased 500 shares of Bell common stock for $20 per share. At
year-end the Bell shares were only worth $2 per share. What amount can Barney
deduct as a loss this year?
A) $10,000
B) $9,000
C) $1,000
D) Barney can deduct $10,000 only if he includes $1,000 in his taxable income.
E) None of the choices are correct—Barney is not entitled to a loss deduction. -
ANSWERS-e) none of the choices are correct
,Hillary is a cash-basis calendar-year taxpayer. During the last week of December, she
received a letter containing a $5,000 check for services. Which of the following is a true
statement?
A) Hillary is taxed on the $5,000 of service income in the year she cashes the check.
B) Hillary is taxed on the $5,000 of service income in the year the check was mailed.
C) Hillary is taxed on the $5,000 of service income in the year she receives the check.
D) Hillary is taxed on the $5,000 of service income in the year she provides the
services.
E) None of the choices are correct. - ANSWERS-C) Hillary is taxed on the $5,000 of
service income in the year she receives the check.
Identify the rule dictating that on a sale of an asset a taxpayer need only include the
incremental gain in gross income rather than the entire proceeds from the sale:
A) Tax benefit rule
B) Constructive receipt
C) Return of capital principle
D) Wherewithal to pay
E) None of the choices are true - ANSWERS-C) Return of capital principle
Identify the rule that states that income has been realized when a taxpayer receives the
income and there are no restrictions on the taxpayer's use of the income (e.g., no
obligation to repay the amount):
A) Claim of right
B) Constructive receipt
C) Return of capital principle
D) Wherewithal to pay
E) None of the choices are correct. - ANSWERS-A) Claim of right
Dave is a plumber who uses the cash method of accounting. This year Dave requested
that his clients make their checks payable to his son, Steve. This year Steve received
checks in the amount of $62,000 for Dave's plumbing services. Which of the following is
a true statement?
A) Dave is taxed on $62,000 of plumbing income this year.
B) Steve is taxed on $62,000 of plumbing income this year.
C) Steve is taxed on $62,000 of income from gifts received this year.
D) Dave may deduct the $62,000 received by Steve.
E) All of these choices are correct. - ANSWERS-A) Dave is taxed on $62,000 of
plumbing income this year.
Jack and Jill are married. This year Jack earned $72,000 and Jill earned $80,000 and
they received $4,000 of interest income from a joint savings account. How much gross
income would Jack report if he files married filing separately from Jill?
A) $72,000 if they reside in a common-law state.
B) $76,000 if they reside in a community property state.
C) $84,000 if they reside in a common-law state.
D) $78,000 if they reside in a community property state.
, E) All of these choices are correct. - ANSWERS-D) $78,000 if they reside in a
community property state.
Community property:
(72K + 80K + 4k)/2
Common law:
(4k/2)+ 72k
Identify which of the items below helps determine which taxpayer must recognize
earned income:
A) Residence in a community property state.
B) Assignment of income.
C) Residence in a common law-state.
D) All of these choices are correct.
E) Both residence in a community property state and residence in a common-law state -
ANSWERS-D) All of these choices are correct.
Emily is a cash-basis taxpayer, and she was an especially productive salesperson last
year. In December of last year her supervisor told Emily she had earned a $5,000
bonus. However, Emily received the bonus check after year-end. Identify the principle
that will determine when Emily is taxed on the bonus:
A) Assignment of income.
B) Constructive receipt.
C) Return of capital principle.
D) Wherewithal to pay.
E) All of these choices are correct - ANSWERS-B) Constructive receipt.
Kevin provided services to several clients this year who paid with different types of
property. Which of the following payments is not included in Kevin's gross income?
A) Cash.
B) Shares of stock listed on the New York Stock Exchange.
C) A used car.
D) Gold coins.
E) All of these are included in gross income. - ANSWERS-E) All of these are included in
gross income.
Ophra is a cash-basis taxpayer who is employed in the publishing industry. This year
her employer informed her that because of her outstanding performance she is entitled
to a free world cruise. Ophra asked her employer to issue the cruise tickets to her
parents, and he complied with this request. Identify the principle that will determine
whether Ophra or her parents are taxed on the value of the cruise tickets:
A) Assignment of income.
B) Constructive receipt.
C) Return of capital principle.
D) Wherewithal to pay.
