Bernice decides to take the 50000 in a lump sum

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she will earn only five-percent interest per year, receiving $10,500 per year for five years. Bernice decides to take the $50,000 in a lump-sum payment and invest the funds herself. Of the $50,000 received: ** a. All $50,000 is tax-free. b. All $50,000 is taxable income. c. $500 is interest income for each year. d. The first $25,000 is taxable. Question 13 (5 points) Kendrick is injured in an accident while working at his job. He received $1,500 in worker's compensation benefits for 5 weeks of lost work. How much should Kendrick report as gross income from the receipt of these benefits? ** a. $ - 0 - b. $ 300 c. $ 750 d. $ 900 e. $1,500 Question 14 (5 points) Ward and June are in the 28% tax bracket. Included in their assets is a Dell Computer Corporation bond with a face value of $10,000. The bond pays $1,000 a year in interest. Ward and June gift the bond to their son, Wally (age 18), on January 1, 2006. Wally is in the 15% tax bracket. The 2006 net tax savings for the family unit of Ward, June and Wally related to the transfer of the bond is a. $ -0- ** b. $130 c. $150 d. $280 Question 15 (5 points) Bart's spouse, Carla, dies during the current year. Carla's life insurance policy names Bart the sole beneficiary of the $2 million proceeds. Bart invests the $2 million in a bank certificate of deposit (CD). For the current year, Bart earns $98,000 interest from the CD. What are the tax effects of these events for Bart? I-The $2 million is excluded from gross income. II-Bart has no taxable income from these transactions. ** a. Only I is correct. b. Only II is correct. c. Both are correct. d. Neither is correct. Question 16 (5 points)
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Hilda is on a "full ride" tennis scholarship at Western University. Her $12,500 scholarship covers tuition and books ($7,000) and room and board ($5,500). Hilda's gross income is ** Question 17 (5 points) Ally served as chairperson of the local school board. Upon completion of her term in office, the organization awards her a silver-serving tray in recognition of her outstanding service to the organization. The value of the tray is $200. What are the tax effects of the award? I-This is not an employer/employee relationship; exceptions for awards do not apply. II-The value of the tray is included in gross income because of services rendered. III-The tray is a gift because it is from a detached and disinterested generosity. ** Question 18 (5 points) Natalie is in the 33% marginal tax bracket. Because of her high tax rate, Natalie would like to reinvest a $10,000, 6%, certificate of deposit in a tax-exempt bond. What is the minimum rate of interest Natalie would have to receive to make the tax exempt-bond a more profitable investment? ** a. 4.0% b. 6.0% c. 8.0% d. 9.0% Question 19 (5 points) Ally served as chairperson of the local school board. Upon completion of her term in office, the employees in the school district offices take up a collection and purchase her a silver sterling tray in recognition of her outstanding service to the organization. The value of the tray is $200. What are the tax effects of the award?
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Christopher Reinemann
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