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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
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