Question 1

Generally, in the case of a divorced couple, the parent who has physical custody of a child for the greater part of the year is entitled to the dependency exemption.

Accepted Answer

The parent who has physical custody of a child for the greater part of the year is considered the custodial parent and is entitled to the dependency exemption unless they waive it to the noncustodial parent. However, this can be negotiated and adjusted in the divorce agreement.

Question 2

Nonresident aliens are allowed a full standard deduction.

Accepted Answer

False

Question 3

Generally, itemized deductions are personal expenses specifically allowed by the tax law.

Accepted Answer

Itemized deductions are personal expenses that are allowed by the tax law, such as medical and dental expenses, state and local income taxes, mortgage interest, charitable contributions, and more. These deductions can help taxpayers reduce their taxable income and potentially lower their tax bill.

Question 4

Refundable tax credits are allowed to reduce or totally eliminate a taxpayer's tax liability but any credits in excess of the tax liability are lost.

Accepted Answer

Refundable tax credits can not only reduce or eliminate a taxpayer's tax liability but also result in a refund if the credits exceed the tax liability. Therefore, any excess credits are not lost.

Question 5

Although exclusions are usually not reported on an individual's income tax return, interest income on state and local government bonds must be reported on the tax return.

Accepted Answer

Even though interest income on state and local government bonds may be excluded from federal income tax, it must still be reported on the tax return.

Question 6

The person claiming a dependency exemption under a multiple support declaration must provide more than 25% of the dependent's support.

Accepted Answer

The person claiming the exemption under a multiple support declaration must provide at least 10% of the dependent's support, not more than 25%.

Question 7

Taxpayers have the choice of claiming either the personal and dependency exemption or the standard deduction.

Accepted Answer

Taxpayers claim the greater of itemized deductions or the standard deduction.In addition,taxpayers will reduce taxable income by personal and dependency exemptions.

Question 8

For purposes of the dependency exemption, a qualifying child may not provide more than one-half of his or her own support during the year.

Accepted Answer

According to IRS rules, a qualifying child must not provide more than one-half of his or her own support during the year to be eligible for the dependency exemption.

Question 9

A child credit is a partially refundable credit.

Accepted Answer

A child credit is partially refundable, meaning that if the credit exceeds the amount of tax owed, the taxpayer may receive a refund for a portion of the credit.

Question 10

An individual who is claimed as a dependent by another person is not entitled to a personal exemption on his or her own return.

Accepted Answer

If someone claims a person as a dependent, that person cannot also claim a personal exemption on their own tax return.

Question 11

An individual may not qualify for the dependency exemption as a qualifying child but may still qualify as a dependent.

Accepted Answer

An individual may not qualify for the dependency exemption as a qualifying child (due to age, relationship, residency, support, etc.) but may still qualify as a dependent if they meet the criteria for a qualifying relative (such as providing more than half of their support).

Question 12

Gross income is income from whatever source derived less exclusions.

Accepted Answer

This is the definition of gross income according to the Internal Revenue Service (IRS).

Question 13

Nonrefundable tax credits are allowed to reduce or totally eliminate a taxpayer's tax liability but any credits in excess of the tax liability are lost.

Accepted Answer

This statement is true. Nonrefundable tax credits cannot be refunded or carried over to future years if they exceed a taxpayer's tax liability. Any excess amount is lost.

Question 14

A qualifying child of the taxpayer must meet the gross income test.

Accepted Answer

A qualifying child is not required to meet the gross income test. However, if the child has earned income that exceeds a certain amount ($4,300 in 2020), they may still need to file a tax return.

Question 15

One requirement for claiming a dependent other than a qualifying child is that the taxpayer provides more than 50 percent of the dependent's support (assuming it is not a multiple support agreement situation).

Accepted Answer

One requirement for claiming a dependent other than a qualifying child is that the taxpayer provides more than 50 percent of the dependent's support. This is specified in the IRS rules for claiming dependents.

Question 16

Generally, deductions for (not from)adjusted gross income are personal expenses specifically allowed by tax law.

Accepted Answer

The answer of Generally, deductions for (not from)adjusted gross income...

Question 17

For purposes of the dependency exemption, a qualifying child must be under age 19, a full-time student under age 24, or a permanently and totally disabled child.

Accepted Answer

The statement is true. These are the three criteria for a child to be considered a qualifying child for the dependency exemption.

Question 18

When two or more people qualify to claim the same person as a dependent, a taxpayer who is entitled to the exemption through the qualified child rules has priority over a taxpayer who meets the requirements for other relatives.

Accepted Answer

This is because the qualified child rules take precedence over the rules for claiming other relatives as dependents.

Question 19

The standard deduction may not be claimed by one married taxpayer filing a separate return if the other spouse itemizes deductions.

Accepted Answer

This is correct according to IRS regulations. If one spouse itemizes deductions on their separate tax return, the other spouse must also itemize deductions rather than claim the standard deduction.

Question 20

The standard deduction is the maximum amount of itemized deductions which may be claimed by a taxpayer, and is based on an individual's filing status, age, and vision.

Accepted Answer

The standard deduction is based on an individual's filing status, age, and whether or not they are blind, but not on their vision.

Quiz 2: Determination of Tax