1. An individual has a business income of \$120,000 and investment

income of \$30,000 for the tax year. If the standard deduction for the year

is \$12,000, what is the individual's taxable income?

 A) \$138,000

 B) \$150,000

 C) \$128,000

 D) \$142,000

 Answer: C) \$128,000

 Rationale: The individual's taxable income is the sum of business and

investment income minus the standard deduction (\$120,000 + \$30,000 -

\$12,000).

2. Which of the following is considered a deductible business expense?

 A) Personal vacation expenses

 B) Political contribution

 C) Office rent

 D) Gym membership for personal use

 Answer: C) Office rent

 Rationale: Office rent is a legitimate business expense that can be

deducted to lower taxable income.

3. Jane sold a property for \$200,000 that she purchased 5 years ago for

\$150,000. What is her capital gain from the transaction?

 A) \$50,000

 B) \$200,000

 C) \$150,000

 D) Cannot be determined with the given information

 Answer: A) \$50,000

 Rationale: Capital gain is calculated as the selling price minus the

purchase price (\$200,000 - \$150,000).

4. Which of the following employee benefits is taxable?

 A) Health insurance

 B) Life insurance coverage up to \$50,000

 C) Employer-provided cell phone for business use

 D) Personal use of a company car

 Answer: D) Personal use of a company car

 Rationale: Personal use of a company car is considered a fringe benefit