TRU OL ACCT 3221 Income Taxation 1
FINAL EXAM TEST BANK VERSION
2026 UPDATE
1 of 309
75. The Perfection Tax Service gives employees $12.50 as "supper
money" when they are required to work overtime, approximately 25
days each year. The supper money received:
a. Must be included in the employee's gross income.
b. Must be included in the employee's gross income if the employee
does not spend it for supper.
c. May be excluded from the employee's gross income as a
"noadditional-cost" fringe benefit.
d. May be excluded from the employee's gross income as a de
minimis fringe benefit.
e. None of these.
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a d
, c b
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2 of 309
Term
79. A company has a medical reimbursement plan for officers that
covers all costs that the insurer will not pay. However, for all
employees who are not officers, the medical reimbursement plan
applies only after the employee has paid $1,000 from his or her own
funds. An officer incurred $1,500 in medical expenses and was
reimbursed for that amount. An hourly worker also incurred $1,500 in
medical expense and was reimbursed $500.
a. Both employees must include all benefits received in gross
income.
b. The officer must include $500 in gross income.
c. The officer must include $1,500 in gross income.
d. The hourly employee must include $1,000 in gross income.
e. None of these.
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c b
e a
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, 3 of 309
Term
69. On January 5, 2014, 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 2014:
a. Tim must include all of the interest in his gross income.
b. Jane must report $1,800 gross income for 2014.
c. Jane reports $1,350 of interest income in 2014, and Tim reports
$450 of interest income in 2014.
d. Jane reports $450 of interest income in 2014, and Tim reports
$1,350 of interest income in 2014.
e. None of these is correct.
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c a
d b
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4 of 309
Term
70. In 2014, Mary had the following items:
Salary $30,000
Personal use casualty gain 10,000
, Personal use casualty loss (after $100 floor) 17,000
Other itemized deductions 4,000
Assuming that Mary files as head of household (has one dependent
child), determine her taxable income for 2014.
a. $13,000
b. $14,100
c. $14,300
d. $22,000
e. None of these
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a e
b d
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5 of 309
Term
81. Louise works in a foreign branch of her employer's business. She
earned $5,000 per month throughout the relevant period.
a. If Louise worked in the foreign branch from May 1, 2013 until
October 31, 2014, she may exclude $40,000 from gross income in
2013 and exclude $50,000 in 2014.
b. If Louise worked in the foreign branch from May 1, 2013 until
October 31, 2014, she cannot exclude anything from gross income
because she was not present in the country for 330 days in either
FINAL EXAM TEST BANK VERSION
2026 UPDATE
1 of 309
75. The Perfection Tax Service gives employees $12.50 as "supper
money" when they are required to work overtime, approximately 25
days each year. The supper money received:
a. Must be included in the employee's gross income.
b. Must be included in the employee's gross income if the employee
does not spend it for supper.
c. May be excluded from the employee's gross income as a
"noadditional-cost" fringe benefit.
d. May be excluded from the employee's gross income as a de
minimis fringe benefit.
e. None of these.
Give this one a try later!
a d
, c b
Don't know?
2 of 309
Term
79. A company has a medical reimbursement plan for officers that
covers all costs that the insurer will not pay. However, for all
employees who are not officers, the medical reimbursement plan
applies only after the employee has paid $1,000 from his or her own
funds. An officer incurred $1,500 in medical expenses and was
reimbursed for that amount. An hourly worker also incurred $1,500 in
medical expense and was reimbursed $500.
a. Both employees must include all benefits received in gross
income.
b. The officer must include $500 in gross income.
c. The officer must include $1,500 in gross income.
d. The hourly employee must include $1,000 in gross income.
e. None of these.
Give this one a try later!
c b
e a
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, 3 of 309
Term
69. On January 5, 2014, 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 2014:
a. Tim must include all of the interest in his gross income.
b. Jane must report $1,800 gross income for 2014.
c. Jane reports $1,350 of interest income in 2014, and Tim reports
$450 of interest income in 2014.
d. Jane reports $450 of interest income in 2014, and Tim reports
$1,350 of interest income in 2014.
e. None of these is correct.
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c a
d b
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4 of 309
Term
70. In 2014, Mary had the following items:
Salary $30,000
Personal use casualty gain 10,000
, Personal use casualty loss (after $100 floor) 17,000
Other itemized deductions 4,000
Assuming that Mary files as head of household (has one dependent
child), determine her taxable income for 2014.
a. $13,000
b. $14,100
c. $14,300
d. $22,000
e. None of these
Give this one a try later!
a e
b d
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5 of 309
Term
81. Louise works in a foreign branch of her employer's business. She
earned $5,000 per month throughout the relevant period.
a. If Louise worked in the foreign branch from May 1, 2013 until
October 31, 2014, she may exclude $40,000 from gross income in
2013 and exclude $50,000 in 2014.
b. If Louise worked in the foreign branch from May 1, 2013 until
October 31, 2014, she cannot exclude anything from gross income
because she was not present in the country for 330 days in either
