Question 1: (Please explain your answer) (Please note all questions are for USA Federal Income Taxation)

SMG Corp., an accrual basis taxpayer, provides accounting services for start-ups. Generally, clients pay a retaining fee at the beginning of a 12-month period and they are entitled to no more than 50 hours of services. After the client has received 50 hours of services, SMG Corp. charges $600 per hour. SMG Corp. allocates the retainer to income based on the number of hours worked on the contract. At the end of 2021, the company reported $40,000 of unearned revenues from these contracts as a liability in its financial statements. The company also reported $15,000 in unearned rent income received in 2021 from excess office space leased to other companies. Considering only this information, how much gross income must SMG report in 2022 for tax purposes?

Question 2: (Please explain your answer) (Please note all questions are for USA Federal Income Taxation)

Daniel is a police officer. His employer requires that he live in the county where he is employed. Because housing is very costly, the county agreed to pay him $5,500 per year to cover the higher cost of housing. Daniel must include the housing supplement in his gross income.

True or False

Question 3: (Please explain your answer) (Please note all questions are for USA Federal Income Taxation)

In December 2021, Joanne collected a $3,000 rent payment for December 2021 and another $3,000 for January 2022 from her tenant, Hank. Joanne is an accrual-basis taxpayer. She must include the $6,000 in her gross income for 2021.

True or False

Question 4: (Please explain your answer) (Please note all questions are for USA Federal Income Taxation)

Under the alimony rules:

A. A person who receives a property division has experienced an increase in wealth and thus should be subject to tax.

B. A person who earns $100,000 and pays $20,000 in alimony per a divorce agreement entered into 2019 is allowed to deduct the $20,000

C. Alimony paid per a 2021 divorce agreement is not included in gross income of the recipient of payments.

D. To determine whether a cash payment is alimony, one must consult the state laws that define alimony.

E. None of these is true.