2009 CCH. All Rights Reserved.
TRUE-FALSE QUESTIONS—CHAPTER 4
Dr. Yomo, a cash basis taxpayer, received a check for $250 after banking hours on December 30, 2009, from a patient.
Since Dr. Yomo could not deposit the check in his business checking account until January 2, 2010, the fee of $250 is
not included in his income for 2009.
A scholarship received by a student that represents compensation for past, present, or future services is includible in
Compensation for damages to a person’s character or for personal injury or illness is taxable.
Paul Penn, a cash basis taxpayer, received a desk in exchange for bookkeeping services. He should report the fair
market value of the desk as income.
On December 31, 2009, George Gaines’ bank credited his savings account with interest earned from October 1, 2009
through December 31, 2009. The bank posted this interest to his passbook on January 15, 2010, when he made a
withdrawal. George, a calendar year cash method taxpayer, must report this interest on his 2009 income tax return.
If the tenant pays any expenses of the landlord, these payments are rental income to the landlord and must be included
in the landlord’s return.
An amount called a security deposit which is to be used as a
nal payment of rent should not be included in rental
income in the year received, but should be included in income in the year the lease expires.
Ms. Clara Crayola, a teacher, received a cash award of $5,000 from the Chamber of Commerce in recognition of
her past accomplishments in the
eld of education. She was chosen without action on her part and is not expected
to perform any future services. The $5,000 award is the same as any other prize and must be reported by Clara as
income in 2009.
Dr. Nelly Newman recently graduated from medical school and has begun her internship in a university hospital. Dr.
Newman receives a $1,200 per month stipend, the same as all other interns. The internship is a required part of Dr.
Newman’s training as it is of all other medical school graduates entering her
eld of speciality. The $1,200 per month
stipend represents a nontaxable grant.
Rick Rambler is divorced from his wife, who has custody of their child. The divorce decree provides that Rick must
pay his former wife $15 per week toward the child’s support, which he did throughout the calendar year. The decree
also provides that he may claim the child as his exemption. Rick’s former wife can prove that during the year she
contributed $7,500 toward the support of the child. Rick is entitled to claim the exemption for the child.
Dan Drew owned two shares of a corporation’s common stock. He paid $60 for one share and $30 for the other share.
The corporation declared a stock dividend which gave stockholders two new shares of common stock for each share