Question 1

Which of the following series of inequalities is generally most accurate?

Accepted Answer

Gross income is the total income before any deductions or adjustments. Adjusted gross income (AGI) is gross income minus specific deductions (but before standard or itemized deductions and personal exemptions). Taxable income is what remains after all deductions and exemptions are applied to the AGI, hence it's usually the smallest amount. Therefore, the series Gross income ≥ adjusted gross income ≥ taxable income is most accurate.

Question 2

Eric and Josephine were married in year 1.In year 2,Eric dies.The couple did not have any children.Assuming Josephine does not remarry,she may file as a qualifying widow in year 3.

Accepted Answer

The answer of Eric and Josephine were married in year...

Question 3

Taxpayers who file as qualifying widows/widowers are treated exactly the same for tax purposes in all respects as taxpayers who are married filing jointly for tax purposes.

Accepted Answer

Qualifying widows/widowers have similar tax rates and standard deductions as married filing jointly, but they must meet specific criteria and can only use this status for up to two years following the spouse's death.

Question 4

If no one qualifies as the dependent of an unmarried taxpayer,the unmarried taxpayer may still be able to qualify for the head of household filing status.

Accepted Answer

To qualify for the head of household filing status, an unmarried taxpayer must pay more than half the cost of keeping up a home for the year and must have a qualifying person (such as a dependent child or parent) live with them for more than half the year, or in the case of a parent, the taxpayer can qualify if they pay more than half the cost of keeping up a home that was the main home for the parent for the entire year. Without a qualifying person, the taxpayer cannot claim the head of household status.

Question 5

In certain circumstances,a married taxpayer who does not file a joint tax return with her spouse may qualify for the head of household filing status.

Accepted Answer

If the married taxpayer meets certain criteria, such as living apart from her spouse for the last six months of the year and providing more than half of the cost of maintaining a household for a dependent, she may qualify for the head of household filing status even if she does not file a joint tax return with her spouse.

Question 6

Jeremy and Annie are married.During the year Jeremy dies.When Annie files her tax return for the year in which her husband dies,she may file under the married filing jointly filing status even if she does not remarry.

Accepted Answer

According to the IRS, a surviving spouse can file a joint return for the year of the spouse's death as long as the surviving spouse did not remarry during that year.

Question 7

Lebron received $50,000 of compensation from his employer and he received $400 of interest from a municipal bond.What is the amount of Lebron's gross income from these items?

Accepted Answer

Municipal bond interest is generally exempt from federal income tax, so only the $50,000 of compensation is included in Lebron's gross income.

Question 8

It is generally more advantageous from a nontax perspective for a married couple to file separately than it is for them to file jointly.

Accepted Answer

The answer of It is generally more advantageous from a...

Question 9

If an unmarried taxpayer is able to claim a dependency exemption for another individual,the taxpayer is automatically eligible for the head of household filing status.

Accepted Answer

Claiming a dependency exemption for another individual does not automatically make a taxpayer eligible for the head of household filing status. The taxpayer must also meet certain criteria, such as paying more than half of the household expenses and having a qualifying dependent.

Question 10

The income tax base for an individual tax return is:

Accepted Answer

The income tax base for an individual tax return is calculated by taking the adjusted gross income (AGI) and subtracting any deductions that are allowed from AGI. This results in taxable income, which is used to determine the amount of income tax owed. Therefore, D is the correct choice as it represents the taxable income base for an individual tax return.

Question 11

It is generally more advantageous from a tax perspective for a married couple to file separately than it is for them to file jointly.

Accepted Answer

It is generally more advantageous for a married couple to file jointly, as it allows them to take advantage of certain tax credits and deductions that are not available to those who file separately. Additionally, filing jointly often results in a lower overall tax bill for the couple. However, every couple's tax situation is unique, and it is important to consult with a tax professional to determine the best filing status for their specific circumstances.

Question 12

Bonnie and Ernie file a joint return.Bonnie works and receives income during the year but Ernie does not.If the couple files a joint tax return,Ernie is responsible for paying any taxes due if Bonnie is unable to pay the taxes.

Accepted Answer

When filing a joint tax return, both spouses are jointly and severally liable for any taxes owed. This means that if one spouse is unable to pay their portion of the taxes due, the other spouse is responsible for paying the full amount.

Question 13

Jennifer and Stephan are married at year end and they file separate tax returns.If Jennifer itemizes deductions on her return,Stephan must also itemize deductions on his return even if his itemized deductions don't exceed his standard deduction.

Accepted Answer

This is true, as both spouses must either claim the standard deduction or itemize deductions, they cannot mix and match.

Question 14

Charles,who is single,pays all of the costs of maintaining a home for himself and Damarcus.Charles and Damarcus have no family relationship but Damarcus lives with Charles for the entire year.Damarcus qualifies as a qualifying relative for Charles (Charles claims a dependency exemption for Damarcus on his tax return).Charles qualifies for head of household filing status.

Accepted Answer

To qualify for head of household status, the qualifying person must be a relative, which Damarcus is not, as they have no family relationship.

Question 15

Sally received $50,000 of compensation from her employer and she received $400 of interest from a corporate bond.What is the amount of Sally's gross income from these items?

Accepted Answer

Gross income is the total income received before any deductions or taxes. Therefore, Sally's gross income is the sum of her compensation and the interest from the corporate bond, which is $50,000 + $400 = $50,400. Option D is the only choice that includes this amount.

Question 16

A taxpayer may qualify for the head of household filing status if she has no dependent children but pays more than half of the cost of maintaining a separate household for her dependent mother and/or father.

Accepted Answer

This statement is true. A taxpayer may qualify for head of household filing status if they do not have any dependent children but pay more than half of the cost of maintaining a separate household for their dependent parent(s).

Question 17

If an unmarried taxpayer provides more than half the support for a cousin who lives in the taxpayer's home for the entire year,the taxpayer will qualify for head of household filing status.

Accepted Answer

To qualify for head of household filing status, the taxpayer must provide more than half the support for a qualifying person, who can be a child, parent, or relative who lived with the taxpayer for more than half the year. However, a cousin does not meet the IRS definition of a qualifying relative for the head of household status unless they are a "qualifying child" or another specific exception applies.

Question 18

Which of the following statements regarding exclusions and/or deferrals is false?

Accepted Answer

This statement is false. In order for an income item to qualify as an exclusion item, it generally must be realized. Deferrals, on the other hand, are income items that have been realized but are taxed in a subsequent year.

Question 19

A taxpayer may qualify for the head of household filing status even if she does not have any dependent children.

Accepted Answer

A taxpayer may qualify for the head of household filing status if she meets certain requirements, such as paying more than half the cost of keeping up a home for herself and a qualifying individual, such as an elderly parent or disabled relative. Having dependent children is not the only way to qualify for this filing status.

Question 20

Which of the following statements regarding realized income is true?

Accepted Answer

Realized income refers to income that has been received through a transaction or exchange with a second party. This can include wages earned from an employer, interest earned on savings accounts, or dividends from stock holdings. Option A is not true because taxpayers must report all realized income unless a provision of the tax code specifically excludes it. Option C is not true because some types of realized income may be excluded from gross income, such as certain types of scholarships or qualified distributions from a Roth IRA. Option D is not true because option B is correct.

Quiz 4: Individual Income Tax Overview, Exemptions, and Filing Status