Question 1

A decrease in a taxpayer's AGI could increase the amount of medical expenses that can be deducted.

Accepted Answer

A) True 
 B)False  True

Question 2

Match the statements that relate to each other. Note: Some choices may be used more than once.
-Basic standard deduction

Accepted Answer

A) Not available to 65-year old taxpayer who itemizes. 
B) Exception for U.S. citizenship or residency test (for dependency exemption purposes). 
C) Largest basic standard deduction available to a dependent who has no earned income in 2019. 
D) Considered for dependency purposes. 
E) Qualifies for head of household filing status.
F)A child (age 15) who is a dependent and has only earned income.
G)Considered in applying gross income test (for dependency exemption purposes).
H)Not considered in applying the gross income test (for dependency exemption purposes).
I)Unmarried taxpayer who can use the same tax rates as married persons filing jointly.
J)Exception to the support test (for dependency exemption purposes).
K)A child (age 16) who is a dependent and has only unearned income of $4,500.
L)No correct match provided. 
A) Not available to 65-year old taxpayer who itemizes. 
B) Exception for U.S. citizenship or residency test (for dependency exemption purposes). 
C) Largest basic standard deduction available to a dependent who has no earned income in 2019. 
D) Considered for dependency purposes. 
E) Qualifies for head of household filing status.
F)A child (age 15) who is a dependent and has only earned income.
G)Considered in applying gross income test (for dependency exemption purposes).
H)Not considered in applying the gross income test (for dependency exemption purposes).
I)Unmarried taxpayer who can use the same tax rates as married persons filing jointly.
J)Exception to the support test (for dependency exemption purposes).
K)A child (age 16) who is a dependent and has only unearned income of $4,500.
L)No correct match provided. A

Question 3

Roy and Linda divorced in 2018. The divorce decree awards custody of their children (all under age 17) to Linda but is silent as to who is entitled to treat them as dependents for purposes of claiming the child tax credit. If Roy furnished more than half of their support, he can claim the child tax credit for them in 2019.

Accepted Answer

A) True 
 B)False  False

Question 4

During 2019, Lisa (age 66) furnished more than 50% of the support of the following persons: ∙ Her current husband who has no income and is not claimed by anyone else as a dependent.
∙ Her stepson (age 19) who lives with her and earns $6,000 as a dance instructor. He dropped out of school a year ago.
∙ Her ex-husband who does not live with her. The divorce occurred two years ago.
∙ Her former brother-in-law who does not live with her.
Presuming that all other dependency tests are met, on a separate return how many dependents may Lisa claim?

Accepted Answer

A)  Two 
B)  Three 
C)  Four 
D)  Five 
E)  None of these 
A)  Two 
B)  Three 
C)  Four 
D)  Five 
E)  None of these

Question 5

Which of the following statements relating to the standard deduction, if any, is correct?

Accepted Answer

A)  If a taxpayer dies during the year, his or her standard deduction must be prorated. 
B)  If a taxpayer is claimed as a dependent of another, his or her additional standard deduction is allowed in full (i.e., no adjustment is necessary). 
C)  If spouses file separate returns, both must claim the standard deduction (rather than itemize their deductions from AGI). 
D)  If a taxpayer is claimed as a dependent of another, no basic standard deduction is allowed. 
E)  None of these. 
A)  If a taxpayer dies during the year, his or her standard deduction must be prorated. 
B)  If a taxpayer is claimed as a dependent of another, his or her additional standard deduction is allowed in full (i.e., no adjustment is necessary). 
C)  If spouses file separate returns, both must claim the standard deduction (rather than itemize their deductions from AGI). 
D)  If a taxpayer is claimed as a dependent of another, no basic standard deduction is allowed. 
E)  None of these.

Question 6

Match the statements that relate to each other. Note: Some choices may be used more than once.
-Surviving spouse

Accepted Answer

A) Not available to 65-year old taxpayer who itemizes. 
B) Exception for U.S. citizenship or residency test (for dependency exemption purposes). 
C) Largest basic standard deduction available to a dependent who has no earned income in 2019. 
D) Considered for dependency purposes. 
E) Qualifies for head of household filing status.
F)A child (age 15) who is a dependent and has only earned income.
G)Considered in applying gross income test (for dependency exemption purposes).
H)Not considered in applying the gross income test (for dependency exemption purposes).
I)Unmarried taxpayer who can use the same tax rates as married persons filing jointly.
J)Exception to the support test (for dependency exemption purposes).
K)A child (age 16) who is a dependent and has only unearned income of $4,500.
L)No correct match provided. 
A) Not available to 65-year old taxpayer who itemizes. 
B) Exception for U.S. citizenship or residency test (for dependency exemption purposes). 
C) Largest basic standard deduction available to a dependent who has no earned income in 2019. 
D) Considered for dependency purposes. 
E) Qualifies for head of household filing status.
F)A child (age 15) who is a dependent and has only earned income.
G)Considered in applying gross income test (for dependency exemption purposes).
H)Not considered in applying the gross income test (for dependency exemption purposes).
I)Unmarried taxpayer who can use the same tax rates as married persons filing jointly.
J)Exception to the support test (for dependency exemption purposes).
K)A child (age 16) who is a dependent and has only unearned income of $4,500.
L)No correct match provided.

Question 7

Adjusted gross income (AGI) appears on page 2 of Form 1040.

Accepted Answer

A) True 
 B)False

Question 8

During the year, Kim sold the following assets: business auto for a $1,000 loss, stock investment for a $1,000 loss, and pleasure yacht for a $1,000 loss. Presuming adequate income, how much of these losses may Kim claim?

Accepted Answer

A)  $0. 
B)  $1,000. 
C)  $2,000. 
D)  $3,000. 
E)  None of these. 
A)  $0. 
B)  $1,000. 
C)  $2,000. 
D)  $3,000. 
E)  None of these.

Question 9

For 2019, Tom has taxable income of $48,005. When he uses the Tax Tables, Tom finds that his tax liability is higher than under the Tax Rate Schedules.

a. Why is there a difference?
b. Can Tom use the Tax Rate Schedules?

Accepted Answer

b. No. Unless taxable income i

Question 10

After paying down the mortgage on their personal residence, the Hills have found that their itemized deductions for each year are always slightly less than the standard deduction option.
a. Explain what has happened.
b. What remedy do you suggest?

Accepted Answer

b. The Hills should begin concentrating

Question 11

Once a child reaches age 19, the kiddie tax no longer applies.

Accepted Answer

A) True 
 B)False

Question 12

After Ellie moves out of the apartment she had rented as her personal residence, she recovers her damage deposit of $1,000. The $1,000 is not income to Ellie.

Accepted Answer

A) True 
 B)False

Question 13

Ayla, age 17, is claimed by her parents as a dependent. During 2019, she had interest income from a bank savings account of $2,000 and income from a part-time job of $4,200. Ayla's taxable income is:

Accepted Answer

A)  $4,200 - $4,550 = $0. 
B)  $6,200 - $5,700 = $500. 
C)  $6,200 - $4,550 = $1,650. 
D)  $6,200 - $1,000 = $5,200. 
E)  None of these. 
A)  $4,200 - $4,550 = $0. 
B)  $6,200 - $5,700 = $500. 
C)  $6,200 - $4,550 = $1,650. 
D)  $6,200 - $1,000 = $5,200. 
E)  None of these.

Question 14

In any given year, that year's Tax Tables are released by the IRS before the Tax Rate Schedules for that year.

Accepted Answer

A) True 
 B)False

Question 15

The Deweys are expecting to save on their taxes for 2019. Not only have both incurred large medical expenses, but both reached age 65. During the year, they also recognized a $30,000 loss on some land they sold which was purchased as an investment several years ago. Are the Deweys under a mistaken understanding regarding their tax position? Explain.

Accepted Answer

The Deweys are expecting to qualify for

Question 16

Once they reach age 65, many taxpayers will switch from itemizing their deductions from AGI and start claiming the standard deduction.

Accepted Answer

A) True 
 B)False

Question 17

When separate income tax returns are filed by married taxpayers, one spouse cannot claim the other spouse as a dependent.

Accepted Answer

A) True 
 B)False

Question 18

Which of the statements regarding the standard deduction, if any, is correct?

Accepted Answer

A)  Some taxpayers may qualify for two types of standard deductions. 
B)  The standard deduction is not available to taxpayers who are dependents. 
C)  The standard deduction may be taken as a for AGI deduction. 
D)  The basic standard deduction is indexed for inflation but the additional standard deduction is not. 
E)  None of these. 
A)  Some taxpayers may qualify for two types of standard deductions. 
B)  The standard deduction is not available to taxpayers who are dependents. 
C)  The standard deduction may be taken as a for AGI deduction. 
D)  The basic standard deduction is indexed for inflation but the additional standard deduction is not. 
E)  None of these.

Question 19

During 2019, Enrique had the following transactions: $\begin{array}{lr}
\text { Salary } & \$ 70,000 \
\text { Interest income on Xerox bonds } & 2,000 \
\text { Inheritance from uncle } & 40,000 \
\text { Contribution to traditional IRA } & 5,500 \
\text { Capital losses } & 2,500
\end{array}$ Enrique's AGI is:

Accepted Answer

A)  $62,000. 
B)  $64,000. 
C)  $67,000. 
D)  $102,000. 
E)  $104,000. 
A)  $62,000. 
B)  $64,000. 
C)  $67,000. 
D)  $102,000. 
E)  $104,000.

Question 20

When the kiddie tax applies, the child need not file an income tax return because his or her income will be reported on the parents' return.

Accepted Answer

A) True 
 B)False

Exam 3: Computing the Tax

A decrease in a taxpayer's AGI could increase the amount of medical expenses that can be deducted.

Match the statements that relate to each other. Note: Some choices may be used more than once. -Basic standard deduction

Which of the following statements relating to the standard deduction, if any, is correct?

Match the statements that relate to each other. Note: Some choices may be used more than once. -Surviving spouse

Adjusted gross income (AGI) appears on page 2 of Form 1040.

During the year, Kim sold the following assets: business auto for a $1,000 loss, stock investment for a $1,000 loss, and pleasure yacht for a $1,000 loss. Presuming adequate income, how much of these losses may Kim claim?

For 2019, Tom has taxable income of $48,005. When he uses the Tax Tables, Tom finds that his tax liability is higher than under the Tax Rate Schedules. a. Why is there a difference? b. Can Tom use the Tax Rate Schedules?

After paying down the mortgage on their personal residence, the Hills have found that their itemized deductions for each year are always slightly less than the standard deduction option. a. Explain what has happened. b. What remedy do you suggest?

Once a child reaches age 19, the kiddie tax no longer applies.

After Ellie moves out of the apartment she had rented as her personal residence, she recovers her damage deposit of $1,000. The $1,000 is not income to Ellie.

Ayla, age 17, is claimed by her parents as a dependent. During 2019, she had interest income from a bank savings account of $2,000 and income from a part-time job of $4,200. Ayla's taxable income is:

In any given year, that year's Tax Tables are released by the IRS before the Tax Rate Schedules for that year.

Once they reach age 65, many taxpayers will switch from itemizing their deductions from AGI and start claiming the standard deduction.

When separate income tax returns are filed by married taxpayers, one spouse cannot claim the other spouse as a dependent.

Which of the statements regarding the standard deduction, if any, is correct?

During 2019, Enrique had the following transactions: Salary \ 70,000 Interest income on Xerox bonds 2,000 Inheritance from uncle 40,000 Contribution to traditional IRA 5,500 Capital losses 2,500 Enrique's AGI is:

When the kiddie tax applies, the child need not file an income tax return because his or her income will be reported on the parents' return.

Understanding and Working With the Federal Tax Law

Working With the Tax Law

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges

Property Transactions: Capital Gains and Losses, Section 1231, and Recapture Provisions

Taxing Business Income

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

S Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

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