Deck 3: Computing the Tax

Question 1

Lee, a citizen of Korea, is a resident of the U.S. Any rent income Lee receives from land he owns in Korea is not subject to the U.S. income tax.

Answer 1

False

Question 2

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

Answer 2

False

Question 3

As opposed to itemizing deductions from AGI, the majority of individual taxpayers choose the standard deduction.

Answer 3

True

Question 4

The filing status of a taxpayer (e.g., single, head of household) must be identified before the applicable standard deduction is determined.

Question 5

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

Question 6

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.

Question 7

Because they appear on page 1 of Form 1040, itemized deductions are also referred to as "page 1 deductions."

Question 8

In 2018, Ed is 66 and single. If he has itemized deductions of $12,700, he should not claim the standard deduction alternative.

Question 9

An "above the line" deduction refers to a deduction for AGI.

Question 10

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

Question 11

An increase in a taxpayer's AGI could decrease the amount of charitable contribution that can be claimed.

Question 12

Many taxpayers who previously itemized will start claiming the standard deduction when they purchase a home.

Question 13

The basic and additional standard deductions both are subject to an annual adjustment for inflation.

Question 14

All exclusions from gross income are reported on Form 1040.

Question 15

Howard, age 82, dies on January 2, 2018. On Howard's final income tax return, the full amount of the basic and additional standard deductions will be allowed even though Howard lived for only 2 days during the year.

Question 16

Under the Federal income tax formula for individuals, a choice must be made between claiming deductions for AGI and itemized deductions.

Question 17

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

Question 18

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

Question 19

Adjusted gross income (AGI) appears at the bottom of page 1 and at the top of page 2 of Form 1040.

Question 20

Claude's deductions from AGI exceed the standard deduction allowed for the current year. Under these circumstances, Claude cannot claim the standard deduction.

Question 21

Derek, age 46, is a surviving spouse. If he has itemized deductions of $26,250 for 2018, Derek should not claim the standard deduction.

Question 22

Dan and Donna are husband and wife and file separate returns for the year. If Dan itemizes his deductions from AGI, Donna cannot claim the standard deduction.

Question 23

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).

Question 24

Monique is a resident of the U.S. and a citizen of France. If she files a U.S. income tax return, Monique cannot claim the standard deduction.

Question 25

Jason and Peg are married and file a joint return. Both are over 65 years of age and Jason is blind. Their standard deduction for 2018 is $27,900 ($24,000 + $1,300 + $1,300 + $1,300).

Question 26

For the year a spouse dies, the surviving spouse is considered married for the entire year for income tax purposes.

Question 27

Buddy and Hazel are ages 72 and 71 and file a joint return. If they have itemized deductions of $25,100 for 2018, they should not claim the standard deduction.

Question 28

Using borrowed funds from a mortgage on her home, Leah provides 52% of her own support, while her sons furnished the rest. Leah can be claimed as a dependent under a multiple support agreement.

Question 29

In determining whether the gross income test is met for determining dependency status, only the taxable portion of a scholarship is considered.

Question 30

Debby, age 18, is claimed as a dependent by her mother. During 2018, she earned $1,100 in interest income on a savings account. Debby's standard deduction is $1,450 ($1,100 + $350).

Question 31

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.

Question 32

Roy and Linda were divorced in 2017. The divorce decree awards custody of their children (under age 17) to Linda but is silent as to who is entitled to treat them as dependents for purposes of claiming the child credit. If Roy furnished more than half of their support, he can claim the child tax credit for them in 2018.

Question 33

In 2018, Hal furnishes more than half of the support of his ex-wife and her father, both of whom live with him. The divorce occurred in 2017. Hal may claim the father-in-law and the ex-wife as dependents.

Question 34

The deduction for personal and dependency exemptions has been suspended from 2018 through 2025.

Question 35

Clara, age 68, claims head of household filing status. If she has itemized deductions of $18,900 for 2018, she should claim the standard deduction.

Question 36

If an individual does not spend funds that have been received from another source (e.g., interest on municipal bonds), the unexpended amounts are not considered for purposes of the support test.

Question 37

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

Question 38

Albert buys his mother a TV. For purposes of meeting the support test, Albert cannot include the cost of the TV.

Question 39

After her divorce, Hope continues to support her ex-husband's sister, Cindy, who does not live with her. Hope can claim Cindy as a dependent.

Question 40

Katrina, age 16, is claimed as a dependent by her parents. During 2018, she earned $5,600 as a checker at a grocery store. Her standard deduction is $5,950 ($5,600 earned income + $350).

Question 41

A taxpayer who itemizes must use Form 1040, and cannot use Form 1040EZ or Form 1040A.

Question 42

In determining the filing requirement based on gross income received, both additional standard deductions (i.e., age and blindness) are taken into account.

Question 43

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.

Question 44

Since an abandoned spouse is treated as not married and has one or more dependent children, he or she qualifies for the standard deduction available to head of household.

Question 45

In January 2018, Jake's wife dies and he does not remarry. For tax year 2018, Jake may not be able to use the filing status available to married persons filing joint returns.

Question 46

For tax purposes, married persons filing separate returns are treated the same as single taxpayers.

Question 47

Darren, age 20 and not disabled, earns $4,300 during 2018. Darren's parents cannot claim him as a dependent unless he is a full-time student.

Question 48

Surviving spouse filing status begins in the year in which the deceased spouse died.

Question 49

Currently, the top income tax rate in effect is not the highest it has ever been.

Question 50

Ed is divorced and maintains a home in which he and a dependent friend live. Ed does not qualify for head of household filing status.

Question 51

For dependents who have income, special filing requirements apply.

Question 52

Kim, a resident of Oregon, supports his parents who are residents of Canada but citizens of Korea. Kim can claim a dependent tax credit for his parents.

Question 53

In terms of timing as to any one year, the Tax Tables are available before the Tax Rate Schedules.

Question 54

Married taxpayers who file a joint return cannot later (i.e., after the filing due date) switch to separate returns for that year.

Question 55

The kiddie tax does not apply to a child whose earned income is more than one-half of his or her support.

Question 56

Married taxpayers who file separately cannot later (i.e., after the due date for filing) change to a joint return.

Question 57

Katelyn is divorced and maintains a household in which she and her daughter, Crissa, live. Crissa, age 22, earns $11,000 during 2018 as a model. Katelyn does not qualify for head of household filing status.

Question 58

Lucas, age 17 and single, earns $6,000 during 2018. Lucas's parents cannot claim him as a dependent if he does not live with them.

Question 59

Sarah furnishes more than 50% of the support of her son and daughter-in-law who live with her. If the son and daughter-in-law file a joint return, Sarah cannot claim them as dependents.

Question 60

In terms of income tax consequences, abandoned spouses are treated the same way as married persons filing separate returns.

Question 61

Frank sold his personal use automobile for a loss of $9,000. He also sold a personal coin collection for a gain of $10,000. As a result of these sales, $10,000 is subject to income tax.

Question 62

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

Question 63

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

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 64

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

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 spouses 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 65

A child who is married cannot be subject to the kiddie tax.

Question 66

Ayla, age 17, is claimed by her parents as a dependent. During 2018, 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:

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 67

Stuart has a short-term capital loss, a collectible long-term capital gain, and a long-term capital gain from land held as investment. The short-term loss is first applied to the collectible capital gain.

Question 68

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

Question 69

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

A) In arriving at taxable income, a taxpayer must choose between the standard deduction and itemized deductions.
B) In arriving at AGI, personal and dependency exemptions are subtracted from gross income.
C) In arriving at taxable income, a taxpayer must choose between the standard deduction and the deduction for qualified business income.
D) The tax formula does not apply if a taxpayer elects to claim the standard deduction.
E) None of these.

Question 70

During 2018, Enrique had the following transactions:
Enrique's AGI is:

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

Question 71

During 2018, Marvin had the following transactions:
Marvin's AGI is:

A) $32,000.
B) $38,000.
C) $44,000.
D) $56,000.
E) $64,000.

Question 72

Which, if any, of the following is a deduction for AGI?

A) Contributions to a traditional Individual Retirement Account.
B) Child support payments.
C) Funeral expenses.
D) Loss on the sale of a personal residence.
E) Medical expenses.

Question 73

In 2018, Nai-Yu had the following transactions:
Nai-Yu's AGI is:

A) $114,000.
B) $103,000.
C) $98,000.
D) $94,000.
E) $83,000.

Question 74

Which, if any, of the following is a deduction for AGI?

A) State and local sales taxes.
B) Interest on home mortgage.
C) Charitable contributions.
D) Unreimbursed moving expenses of an employee (not in the military).
E) None of these.

Question 75

During 2018, Sandeep had the following transactions:
Sandeep's AGI is:

A) $185,000.
B) $187,000.
C) $285,000.
D) $287,000.
E) $387,000.

Question 76

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

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 77

In 2018, a child who has unearned income of $2,100 or less cannot be subject to the kiddie tax.

Question 78

Gain on the sale of collectibles held for more than 12 months always is subject to a tax rate of 28%.

Question 79

Regarding the tax formula and its relationship to Form 1040, which, if any, of the following statements is correct?

A) Most exclusions from gross income are reported on page 2 of Form 1040.
B) An "above the line deduction" refers to a deduction from AGI.
C) A "page 1 deduction" refers to a deduction for AGI.
D) The taxable income (TI) amount appears both at the bottom of page 1 and at the top of page 2 of Form 1040.
E) None of these.

Question 80

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

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.