13. The fact that the accounting method the taxpayer uses to measure income is consistent with
GAAP does not assure that the method will be acceptable for tax purposes.
14. The financial accounting principle of conservatism is not well-suited to the task of measuring
taxable income.
15. When stock is sold after the date of declaration but before the record date, the buyer must
recognize as income the dividend declared.
16. The tax concept and economic concept of income are in agreement on which of the following:
a. The fair rental value of an owner-occupied home should be included in income.
b. Increase in value of assets held for the entire year should be included in income for the year.
c. Rent income for 2019 collected in 2018 is income for 2018.
d. All of these.
17. The annual increase in the cash surrender value of a life insurance policy:
a. Is taxed when the individual dies and the heirs collect the insurance proceeds.
b. Must be included in gross income each year under the original issue discount rules.
c. Reduces the deduction for life insurance expense.
d. Is not included in gross income each year because of the substantial restrictions on gaining
access to the policy's value.
e. None of these.
18. The annual increase in the cash surrender value of a life insurance policy:
a. Is taxed according to the original issue discount rules.
b. Is not included in gross income because the policy must be surrendered to receive the cash
surrender value.
c. Reduces the deduction for life insurance expense.
d. Is exempt because it is life insurance proceeds.
e. None of these.
19. For a person who is in the 35\% marginal tax bracket, $1,000 of tax-exempt income is
equivalent to $1,350 of income that is subject to tax.
20. If a scholarship does not satisfy the requirements for a gift, the scholarship must be included in
gross income.
21. Betty received a graduate teaching assistantship that was awarded on the basis of academic
achievement. The payments must be included in her gross income.
22. Workers' compensation benefits are included in gross income if the employer also pays the
employee while the employee is recovering from his or her injury.
