Deck 3: Computing the Tax

Question 1

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

Answer 1

False

Question 2

All exclusions from gross income are reported on Form 1040.

Answer 2

False

Question 3

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

Answer 3

True

Question 4

Howard, age 82, died on January 2, 2019. On his final income tax return, the full amount of the basic and additional standard deductions will be allowed even though Howard lived for only two days during the year.

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

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

Question 7

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

Question 8

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

Question 9

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

Question 10

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

Question 11

In 2019, Ed is 66 and single. If he has itemized deductions of $12,700, he should not claim the standard deduction alternative.

Question 12

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 13

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

Question 14

Adjusted gross income (AGI) appears on page 2 of Form 1040.

Question 15

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

Question 16

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

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

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

Question 19

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

Question 20

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

Question 21

Debby, age 18, is claimed as a dependent by her mother. During 2019, Debby earned $1,200 in interest income on a savings account. Her standard deduction is $1,550 ($1,200 + $350).

Question 22

Katrina, age 16, is claimed as a dependent by her parents. During 2019, she earned $5,600 as a checker at a grocery store. Her standard deduction is $5,950 ($5,600 earned income + $350).

Question 23

Roy and Linda divorced in 2018. The divorce decree awards custody of their children (all under age 17) to Linda but is silent as to who is entitled to treat them as dependents for purposes of claiming the child tax credit. If Roy furnished more than half of their support, he can claim the child tax credit for them in 2019.

Question 24

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 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 2019 is $28,300 ($24,400 + $1,300 + $1,300 + $1,300).

Question 26

Buddy and Hazel are ages 72 and 71, respectively, and file a joint return. If they have itemized deductions of $25,100 for 2019, they should not claim the standard deduction.

Question 27

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

Question 28

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

Question 29

Butch and Minerva divorced in December 2019. Since they were married for more than one-half of the year, they are considered as married for 2019.

Question 30

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

Question 31

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

Question 32

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

Question 33

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

Question 34

Benjamin, age 16, is claimed as a dependent by his parents. During 2019, he earned $850 at a car wash. Benjamin's standard deduction is $1,450 ($1,100 + $350).

Question 35

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 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 a dependent.

Question 38

Clara, age 68, claims head of household filing status. If she has itemized deductions of $18,900 for 2019, she should
claim the standard deduction.

Question 39

In 2019, 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 2018. Hal may claim the father-in-law and the ex-wife as dependents.

Question 40

Derek, age 46, is a surviving spouse. If he has itemized deductions of $26,250 for 2019, Derek should not claim the standard deduction.

Question 41

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 42

In any given year, that year's Tax Tables are released by the IRS before the Tax Rate Schedules for that year.

Question 43

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

Question 44

A taxpayer who itemizes uses Schedule A (Form 1040).

Question 45

In January 2019, Jake's wife dies and he does not remarry. For tax year 2019, Jake may not be able to use the filing status available to married persons filing joint returns.

Question 46

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 47

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 48

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

Question 49

Darren, age 20 and not disabled, earns $4,300 during 2019. Darren's parents cannot claim him as a dependent unless he is a full-time student.

Question 50

Lucas, age 17 and single, earns $6,000 during 2019. His parents cannot claim him as a dependent if he does not live with them.

Question 51

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 52

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

Question 53

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

Question 54

Katelyn is divorced and maintains a household in which she and her daughter, Crissa, live. Crissa, age 22, earns
$11,000 during 2019 as a model. Katelyn does not qualify for head of household filing status.

Question 55

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

Question 56

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 57

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

Question 58

For dependents who have income, special filing requirements apply.

Question 59

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

Question 60

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

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

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 63

During 2019, Sandeep had the following transactions: $\begin{array}{lr}\text { Salary } & \$ 80,000 \\\text { Interest income on City of Baltimore bonds } & 1,000 \\\text { Damages for personal injury (car accident) } & 100,000 \\\text { Punitive damages (same car accident) } & 200,000 \\\text { Cash dividends from Chevron Corporation stock } & 7,000\end{array}$ Sandeep's AGI is:

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

Question 64

Ayla, age 17, is claimed by her parents as a dependent. During 2019, 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 65

Which of the following, if any, 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 66

In terms of the tax formula applicable to individual taxpayers, which of the following statements, if any, 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 from AGI.
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 67

In terms of the tax formula applicable to individual taxpayers, which of the following statements, if any, 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 68

Which of the statements regarding the standard deduction, if any, 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 69

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

Question 70

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.

Question 71

In 2019, a child who has unearned income of $2,200 or less cannot be subject to the kiddie tax.

Question 72

Which of the following, if any, 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

During 2019, Enrique had the following transactions: $\begin{array}{lr}\text { Salary } & \$ 70,000 \\\text { Interest income on Xerox bonds } & 2,000 \\\text { Inheritance from uncle } & 40,000 \\\text { Contribution to traditional IRA } & 5,500 \\\text { Capital losses } & 2,500\end{array}$ Enrique's AGI is:

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

Question 74

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

Question 75

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

Question 76

Regarding the tax formula and its relationship to Form 1040, which of the following statements, if any, 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 "Schedule 1 deduction" refers to a deduction for AGI.
D) A taxpayer's AGI amount appears both at the bottom of page 1 and at the top of page 2 of Form 1040.
E) None of these.

Question 77

In 2019, Nai-Yu had the following transactions: $\begin{array}{lc}\text { Salary } & \$ 90,000 \\\text { Short-term capital gain from a stock investment } & 4,000 \\\text { Moving expense to change jobs } & (11,000) \text { Receipt of } \\\text { repayment of } \$ 20,000 \text { loan she made to her sister in } 2014 \text { (includes no interest) } & 20,000 \\\text { State income taxes } & (5,000)\end{array}$ Nai-Yu's AGI is:

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

Question 78

Which of the following statements relating to the standard deduction, if any, 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 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 79

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

Question 80

During 2019, Marvin had the following transactions: $\begin{array}{lr}\text { Salary } & \$ 50,000 \\\text { Bank loan (proceeds used to buy personal auto) } & 10,000 \\\text { Alimony paid (divorce was finalized in 2010). } & 12,000 \\\text { Child support paid } & 6,000 \\\text { Gitt from aunt } & 20,000\end{array}$ Marvin's AGI is:

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