Reference no: EM132885212

Questions -

Q1. Mr. Sandwich borrowed $4,000 from Mr. Hand. In return for only $1,000, Mr. Hand cancels Mr. Sandwich's debt of $4,000. The cancellation is not a gift and Mr. Sandwich is neither insolvent nor bankrupt. Which of the following statements is correct?

a. Mr. Hand has $1,000 taxable income.

b. Mr. Sandwich has $3,000 of taxable income.

c. Mr. Sandwich has $4,000 of taxable income.

d. Neither Mr. Hand nor Mr. Sandwich has any taxable income from this transaction.

Q2. Roger Burrows, age 19, is a full-time student at Marshall College and a candidate for a bachelor's degree. During 2020, he received the following payments:

Academic scholarship for tuition $3,600

Loan from college financial aid office $1,500

Cash support from parents $3,000

Cash dividends on investments $700

Cash prize award in contest $500

What is Burrows' gross income for 2020?

a. $2,700

b. $1,200

c. $4,800

d. $9,300

Q3. Harry purchased one share of common stock in a computer company for $90. Shortly after he purchased it, the corporation distributed two new shares of common stock to each common stock shareholder for each share held. What is his basis for each of the three shares of common stock?

a. $90

b. $180

c. $30

d. $270

Q4. In 2020, Norm, a carpenter, received a beach boat from the Newport Marina in exchange for carpentry work on a new dock. The beach boat cost the marina $1,600. The fair market value of the boat is $2,000. What amount, if any, is includible in Norm's 2020 gross income as a result of this transaction?

a. $2,000

b. $3,600

c. $1,600

d. $400

e. $0