CPA REG Individual Gross Income Practice Questions
Individual Gross Income makes up 5 of every 50 questions on a Tigertest CPA REG practice test. Here are 10 of the 20 questions on it, each with the answer and the reason.
Updated by the Tigertest team. Based on the AICPA's 2026 REG blueprint. Original multiple-choice questions; 50 per test, weighted like the real section's five areas, 75% target. Not affiliated with the AICPA or NASBA.
1. Which item is excluded from an individual's gross income?
- A.Prize money from a contest
- B.Life insurance paid at death
- C.Punitive damages awarded
- D.Unemployment compensation
Answer: B. Life insurance proceeds paid because of the insured's death are excluded. Punitive damages, unemployment benefits and prizes are taxable.
2. Interest on which investment is generally excluded from federal gross income?
- A.A corporate bond
- B.A bank certificate of deposit
- C.A U.S. Treasury bond
- D.A city's general obligation bond
Answer: D. Interest on state and local bonds is generally exempt from federal tax. Treasury interest is federally taxable, though exempt from state tax.
3. An employer provides $150,000 of group-term life insurance to an employee. The employee is taxed on the cost of the coverage above:
- A.$50,000
- B.$150,000
- C.$100,000
- D.$25,000
Answer: A. The cost of the first $50,000 of employer-provided group-term life coverage is excluded. The cost of coverage over $50,000 is taxable wages.
4. A degree candidate receives a scholarship covering $12,000 of tuition, $1,000 of required books and $6,000 of room and board. Her gross income from it is:
- A.$7,000
- B.$19,000
- C.$6,000
- D.$0
Answer: C. A qualified scholarship excludes tuition and required fees, books and supplies. Room and board is taxable, so $6,000 is included.
5. Jo receives $80,000 in a lawsuit for a physical injury: $50,000 compensatory and $30,000 punitive damages. Her gross income includes:
- A.$50,000
- B.$80,000
- C.$30,000
- D.$0
Answer: C. Compensatory damages for physical injury are excluded. Punitive damages are taxable even when the injury was physical.
6. Last year Ali itemized, deducted state income tax and got the full tax benefit. This year he receives a $700 refund of that state tax. He includes:
- A.$700
- B.$350
- C.Only interest on it
- D.$0
Answer: A. Under the tax benefit rule a recovery of an amount deducted with a tax benefit is income in the year received. The full benefit means all $700 is included.
7. Which receipt is excluded from the recipient's gross income?
- A.A prize from a radio contest
- B.A bonus from an employer
- C.Interest on a savings account
- D.A cash gift from a parent
Answer: D. Gifts are excluded from the recipient's income. Any gift tax is the donor's concern.
8. A general partner receives a $60,000 guaranteed payment and a $20,000 share of the partnership's ordinary income. Her self-employment income from it is:
- A.$0
- B.$80,000
- C.$60,000
- D.$20,000
Answer: B. A general partner's share of ordinary business income and guaranteed payments for services are both self-employment income: $60,000 + $20,000.
9. A freelancer is paid in virtual currency worth $9,000 at the time for services. She includes in gross income:
- A.$4,500 of ordinary income
- B.$9,000 of ordinary income
- C.$9,000 of capital gain
- D.Nothing until she sells
Answer: B. Virtual currency received for services is ordinary income at its fair market value when received, and that value becomes her basis.
10. Bo bought virtual currency for $4,000 and 8 months later used it to buy a laptop priced at $6,500. Bo has:
- A.No gain until year end
- B.$6,500 of ordinary income
- C.A $2,500 long-term gain
- D.A $2,500 short-term gain
Answer: D. Virtual currency is property, so spending it is a sale. The $2,500 gain is short-term because it was held a year or less.
Practice all 20 individual gross income questions, and the rest of the 200-question bank, in the free CPA REG training sets. Questions you miss come back until you have mastered them.
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