Question 1

Under the Federal income tax formula for individuals, the determination of adjusted gross income (AGI) precedes that of taxable income (TI).

Accepted Answer

A) True 
 B)False

Question 2

Benjamin, age 16, is claimed as a dependent by his parents. During 2018, he earned $850 at a car wash. Benjamin's standard deduction is $1,400 ($1,050 + $350).

Accepted Answer

A) True 
 B)False

Question 3

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 4

In applying the gross income test in the case of dependents that are married, could the application of community property laws have any effect? Explain.

Accepted Answer

Most often, the application of community

Question 5

Match the statements that relate to each other. Note: Choice l. may be used more than once.
a. Available to a 70-year-old father claimed as a dependent by his son.
b. Equal to tax liability divided by taxable income.
c. The highest income tax rate applicable to a taxpayer.
d. Not eligible for the standard deduction.
e. No one qualified taxpayer meets the support test. 
f. Taxpayer's ex-husband does not qualify.
g. A dependent child (age 18) who has only unearned income.
h. Highest applicable rate is 37%.
i. Applicable rate could be as low as 0%. 
j. Maximum rate is 28%.
k. No correct match provided.
-Multiple support agreement

Accepted Answer

The answer of Match the statements that relate to each...

Question 6

In terms of the tax formula applicable to individual taxpayers, which, if any, of the following statements is correct?

Accepted Answer

A)  In arriving at AGI, a taxpayer must elect between claiming deductions for AGI and deductions from AGI. 
B)  In arriving at taxable income, a taxpayer must elect between claiming deductions for AGI and deductions ???? ???. 
C)  If a taxpayer has deductions for AGI, the standard deduction is not available. 
D)  In arriving at taxable income, a taxpayer must elect between deductions for AGI and the standard deduction. 
E)  None of these. 
A)  In arriving at AGI, a taxpayer must elect between claiming deductions for AGI and deductions from AGI. 
B)  In arriving at taxable income, a taxpayer must elect between claiming deductions for AGI and deductions ???? ???. 
C)  If a taxpayer has deductions for AGI, the standard deduction is not available. 
D)  In arriving at taxable income, a taxpayer must elect between deductions for AGI and the standard deduction. 
E)  None of these.

Question 7

Butch and Minerva are divorced in December of 2018. Since they were married for more than one-half of the year, they are considered as married for 2018.

Accepted Answer

A) True 
 B)False

Question 8

Match the statements that relate to each other. Note: Choice l. may be used more than once.
a. Available to a 70-year-old father claimed as a dependent by his son.
b. Equal to tax liability divided by taxable income.
c. The highest income tax rate applicable to a taxpayer.
d. Not eligible for the standard deduction.
e. No one qualified taxpayer meets the support test. 
f. Taxpayer's ex-husband does not qualify.
g. A dependent child (age 18) who has only unearned income.
h. Highest applicable rate is 37%.
i. Applicable rate could be as low as 0%. 
j. Maximum rate is 28%.
k. No correct match provided.
-Gain on collectibles (held more than one year)

Accepted Answer

The answer of Match the statements that relate to each...

Question 9

The additional standard deduction for age and blindness is greater for married taxpayers than for single taxpayers.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

The answer of Match the statements that relate to each...

Question 11

Regarding classification as a dependent, classify each statement in one of the four categories:
a. Could be a qualifying child.
b. Could be a qualifying relative.
c. Could be either a qualifying child or a qualifying relative.
d. Could be neither a qualifying child nor a qualifying relative.
-A cousin who does not live with taxpayer.

Accepted Answer

The answer of Regarding classification as a dependent, classify each...

Question 12

An individual taxpayer uses a fiscal year of March 1 to February 28. The due date of this taxpayer's Federal income tax return is May 15 of each tax year.

Accepted Answer

A) True 
 B)False

Question 13

Under the income tax formula, a taxpayer must choose between deductions for AGI and the standard deduction.

Accepted Answer

A) True 
 B)False

Question 14

The Dargers have itemized deductions that exceed the standard deduction. However, when they file their joint return, they choose the standard deduction option.
a. Is this proper procedure?
b. Aside from a possible misunderstanding as to the tax law, what might be the reason for the Darger's choice?

Accepted Answer

a. Yes. The choice between itemizing and

Question 15

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

a. Paying down the mortgage reduced the

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Kirby is in the 12% tax bracket and had the following capital asset transactions during 2018:  
Kirby's tax consequences from these gains are as follows:

Accepted Answer

A)  (5% × $10,000) + (12% × $13,000). 
B)  (12% × $13,000) + (28% × $11,000). 
C)  (0% × $10,000) + (12% × $13,000). 
D)  (12% × $23,000). 
E)  None of these. 
A)  (5% × $10,000) + (12% × $13,000). 
B)  (12% × $13,000) + (28% × $11,000). 
C)  (0% × $10,000) + (12% × $13,000). 
D)  (12% × $23,000). 
E)  None of these.

Question 18

During 2018, Madison had salary income of $80,000 and the following capital transactions:
   
How are these transactions handled for income tax purposes?

Accepted Answer

Combining the long-term transactions yie

Question 19

When married persons file a joint return, joint and several liability results. What does this mean?

Accepted Answer

Joint and several liability me

Question 20

Which of the following items, if any, is deductible?

Accepted Answer

A)  Parking expenses incurred in connection with jury duty-taxpayer is a dentist. 
B)  Substantiated gambling losses (not in excess of gambling winnings) from state lottery. 
C)  Contributions to mayor's reelection campaign. 
D)  Speeding ticket incurred while on business. 
E)  Premiums paid on personal life insurance policy. 
A)  Parking expenses incurred in connection with jury duty-taxpayer is a dentist. 
B)  Substantiated gambling losses (not in excess of gambling winnings) from state lottery. 
C)  Contributions to mayor's reelection campaign. 
D)  Speeding ticket incurred while on business. 
E)  Premiums paid on personal life insurance policy.

Exam 3: Computing the Tax

Under the Federal income tax formula for individuals, the determination of adjusted gross income (AGI) precedes that of taxable income (TI).

Benjamin, age 16, is claimed as a dependent by his parents. During 2018, he earned $850 at a car wash. Benjamin's standard deduction is $1,400 ($1,050 + $350).

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

In applying the gross income test in the case of dependents that are married, could the application of community property laws have any effect? Explain.

In terms of the tax formula applicable to individual taxpayers, which, if any, of the following statements is correct?

Butch and Minerva are divorced in December of 2018. Since they were married for more than one-half of the year, they are considered as married for 2018.

The additional standard deduction for age and blindness is greater for married taxpayers than for single taxpayers.

An individual taxpayer uses a fiscal year of March 1 to February 28. The due date of this taxpayer's Federal income tax return is May 15 of each tax year.

Under the income tax formula, a taxpayer must choose between deductions for AGI and the standard deduction.

The Dargers have itemized deductions that exceed the standard deduction. However, when they file their joint return, they choose the standard deduction option. a. Is this proper procedure? b. Aside from a possible misunderstanding as to the tax law, what might be the reason for the Darger's choice?

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?

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

Kirby is in the 12% tax bracket and had the following capital asset transactions during 2018: Kirby's tax consequences from these gains are as follows:

During 2018, Madison had salary income of $80,000 and the following capital transactions: How are these transactions handled for income tax purposes?

When married persons file a joint return, joint and several liability results. What does this mean?

Which of the following items, if any, is deductible?

An Introduction to Taxation and Understanding 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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