Exam 4: Using Tax Concepts for Planning

A branch of the U.S.Treasury Department,called the ________,administers the federal tax system.

If a stock was purchased for $5,000 in January 2010 and is sold in December 2010 for $3,000,a ________ of $2,000 results.

Interest expense paid on home loans and car loans is deductible from your income tax.

All of the following are types of nontaxable income except

Gross income and adjusted gross income can be the same if you do not have any special adjustments.Which of the following is not one of these special adjustments?

If a stock was purchased in January 2009 for $1,000 and sold in December 2010 for $3,000,a ________ of $2,000 results.

Melanie,a homeowner,has mortgage interest of $3,000,real estate taxes of $1,500,and charitable contributions of $500.According to her filing status,a standard deduction of $5,000 is allowed.How much should Melanie deduct on her tax return? (a)$4,700 (b)$5,000 (c)$6,700 (d)$7,700

Itemized deductions can include mortgage interest expense,state income tax expense,charitable contributions,and other employee expenses.

Which of the following items is not impacted by the taxpayer's income level?

Employee contributions to qualified Individual Retirement Accounts (IRAs)and interest paid on student loans are adjusted from gross income to calculate a taxpayer's adjusted gross income.

An expense that could be included in the itemized deductions of a taxpayer is

Jerry is divorced and has two children that live with him.In addition he baby-sits three other children in the evenings and has a cat and two dogs.How many exemptions can he claim on his tax return?

Jake invested $800 in an IRA.If he has a 15 percent marginal tax rate and the contribution is tax deductible,Jake will

The Tax Relief Act of 2001

If you own stock that has increased in price,it would be best to sell it after you have owned it for at least

In 2001,the tax laws were changed to allow substantial tax benefits for parents who wish to set aside money for their children's future college expenses.

Which of the following is not an acceptable method of reducing your tax bill?

The ________ is a fixed amount deducted from adjusted gross income to determine taxable income.

Self-employed individuals pay FICA taxes at a rate of

Enrico and his wife have combined salaries of $85,000.They have interest and dividends on their investments of $1,000 and annually contribute $3,000 to a traditional IRA.The interest on their home mortgage is $2,500,they contributed $1,000 to their church,and incurred medical expenses not covered by insurance of $1,800.Assuming they can claim two personal exemptions of $3,200 each and file joint tax returns,compute their tax liability for the year. (a)$11,606 (b)$10,056 (c)$11,131 (d)$9,981