[Anonymous]

Question from Wiley 2011 Test bank:

Wages

$18,000

Interest income from investments in municipal bonds

400

Unemployment compensation

1,500

What is the total amount that must be included in gross in­come on Adler’s 2010 income tax return?

A. $18,000

B. $18,400

C. $19,500

D. $19,900

Correct answer is: $18,000 (Solution: The unemployment compensation replaces wages which would have been included in gross income).

Shouldn’t it be $19,500? How does one know unemployment is already included in wages? I have seen various questions such as this in Becker, and the answer is usually $19,500.

[Anonymous]

Also, is there a such thing as alimony recapture anymore? I have never seen that in Becker, but was asked a question about it in Wiley test bank.

[Anonymous]

Must be a typo. It should be 19,500.

[Anonymous]

That's what I was hoping as well!! Thanks for confirming my answer!!

[Anonymous]

The answer is $19,500. Unemployment Compensation is taxable.

[Anonymous]

I could be wrong, but I think unemployment compensation is excluded up to $2,500 (If I remember correctly) from gross income. Which is why the answer would be 18,000. If I am wrong please help me understand this.

[Anonymous]

Per Wiley book (2011) page 387

Unemployment compensation must generally be included in gross income. However, for tax year beginning in 2009, up to $2,400 of unemployment compensation can be excluded from gross income.

[jokami]

And is it still going through 2011 and 2012… Becker 2011 does not have that. Neither in R1 or R5.

B - 62, 70, 72, 79!!!
A - 68, 81
R - 70, 82
F - 84

"The limit to your abilities is where you place them" - Fortune Cookies

[nolifecpa]

i think the $2,400 exclusion was for 2009 only

Under the American Recovery and Reinvestment Act, enacted last month, every person who receives unemployment benefits during 2009 is eligible to exclude the first $2,400 of these benefits when they file their tax return next year. For a married couple, the exclusion applies to each spouse, separately. Thus, if both spouses receive unemployment benefits during 2009, each may exclude from income the first $2,400 of benefits they receive.

REG-65,71,74,73,70,74,79
BEC-60's,60's,69,71,76*,78
FAR-67,66,65,79
AUD-54,60's,65,83*,69,80
*expired

DONE

[Anonymous]

Wow! Wiley is not very clear on this. It seems though that the question above is applying this concept to the gross income calculation.

[Anonymous]

Yes, I saw that in my Wiley 2011 book and I can confirm that this is incorrect. Nolife is right. It was only excludable in 2009. It's back to being includable and the exam will test you on the new rule…

This is exactly why I do not recommend Wiley for REG. It's great for AUD and BEC, but not for REG. It has a hard time keeping up with the changes.

[Anonymous]

Glad this came up. I would have missed that one for sure on the exam. I ordered Gleim's Test Prep and book last night… hopefully it will be better than Wiley.

[Anonymous]

If you compare the 2009 to the 2010 & 2011 1040 returns, you will see that in 2009, it tells you to only include Unemployment Compensation in excess of $2,400. The 2010 and 2011 returns tell you to include everything. This question above is specifically asking for 2010, so you include everything. If it stated, “Adler’s 2009 income tax return” then I can see the answer being $18,000. The CPA exam normally doesn't give you years, so you need to just apply the new rule, i.e. include all of Unemployment Compensation in GI. I doubt they will test you on a 2009 rule.

[Anonymous]

@CPAMan, Thank you for clearing that up. Do you know if there is there anything else that Wiley has in their book that is incorrect or poorly worded? I will definitely be doing cross referencing with Gleim's book.

Thanks

[jeff]

85 – you're studying a book that was printed Summer 2010…

[Anonymous]

I know this, but if this was only applicable to 2009 shouldn't it have been stated differently in the 2011 text? From the way it is worded it sounds like it took effect beginning in 09 and continued.

[Author]

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