Deck 3: Tax Determination: Personal and Dependency Exemptions: an Overview of Property Transactions

Question 1

The basic and additional standard deductions are not subject to an annual adjustment for inflation.

Answer 1

False

Question 2

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

Answer 2

False

Question 3

A taxpayer who itemizes his deductions from AGI can claim the property taxes on his personal residence as a deduction.

Answer 3

True

Question 4

Claude's deductions from AGI slightly exceed the standard deduction allowed for 2011.Under these circumstances,Claude cannot claim the standard deduction.

Question 5

As used in the income tax formula,gross income would not include the receipt of a loan the taxpayer obtained from a bank.

Question 6

The filing status of a taxpayer (e.g.,single,head of household)must be identified before taxable income is determined.

Question 7

Tad claims his 70-year-old mother as a dependent.The mother may not claim an additional standard deduction for her age.

Question 8

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

Question 9

Once TI (taxable income)is determined,the taxpayer must make a choice between itemizing or claiming the standard deduction.

Question 10

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

Question 11

Al owns an investment in Vireo Corporation stock which during the year increased in value by $10,000.The $10,000 appreciation must be included in Al's gross income for the year.

Question 12

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

Question 13

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

Question 14

All exclusions from gross income are reported on Form 1040.

Question 15

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

Question 16

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 2011 is $15,050 ($11,600 + $1,150 + $1,150 + $1,150).

Question 17

An increase in the amount of a taxpayer's AGI will not affect the amount of medical expenses allowed as a deduction.

Question 18

The additional standard deduction for age and blindness is the same amount for single as for married taxpayers.

Question 19

It is possible for an individual taxpayer to claim more than one type of standard deduction.

Question 20

In 2011,Ed is 66 and single.If he has itemized deductions of $7,200,he should claim the standard deduction alternative.

Question 21

Monique is a citizen of the U.S.and a resident of France.If she files a U.S.income tax return,Monique can claim the standard deduction.

Question 22

A dependent cannot claim a personal exemption on his or her own return.

Question 23

Buddy and Hazel are ages 72 and 71 and file a joint return.If they have itemized deductions of $13,500 for 2011,they should not claim the standard deduction.

Question 24

Derek,age 46,is a surviving spouse.If he has itemized deductions of $11,700 for 2011,Derek should not claim the standard deduction.

Question 25

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 26

In 2011,Hal furnishes more than half of the support of his ex-wife and her father,neither of whom lives with him.The divorce occurred in 2010.Hal may claim the father-in-law and the ex-wife as dependents.

Question 27

Using borrowed funds from a mortgage on her home,Leah provides 52% of her own support,while her sons furnished the rest.Leah cannot be claimed as a dependent under a multiple support agreement.

Question 28

Benjamin,age 16,is claimed as a dependent by his parents.During 2011,he earned $700 at a car wash.Benjamin's standard deduction is $1,250 ($950 + $300).

Question 29

Albert buys his mother a TV.For purposes of meeting the support test,Albert can include the cost of the TV.

Question 30

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 31

Butch and Minerva are divorced in December of 2011.Since they were married for more than one-half of the year,they are considered asmarried for 2011.

Question 32

Roy and Linda were divorced in 2010.The divorce decree awards custody of their children to Linda but is silent as to who is entitled to claim them as dependents.If Roy furnished more than half of their support,he can claim them as dependents in 2011.

Question 33

Clara,age 68,claims head of household filing status.If she has itemized deductions of $9,500 for 2011,she should not claim the standard deduction.

Question 34

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

Question 35

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

Question 36

Debby,age 18,is claimed as a dependent by her mother.During 2011,she earned $1,100 in interest income on a savings account.Debby's standard deduction is $1,400 ($1,100 + $300).

Question 37

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

Question 38

In determining whether the support test is met for dependency exemption purposes,only the taxable portion of a scholarship is considered.

Question 39

Katrina,age 16,is claimed as a dependent by her parents.During 2011,she earned $5,600 as a checker at a grocery store.Her standard deduction is $5,900 ($5,600 earned income + $300).

Question 40

Logan,an 80-year-old widower,dies on January 2,2011.Even though he lived for only two days,on his final income tax return for 2011,the full basic and additional standard deductions can be claimed.

Question 41

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

Question 42

Currently,the top income tax rate in effect is the highest it has ever been.

Question 43

Katelyn is divorced and maintains a household in which she and her daughter,Crissa,live.Crissa,age 22,earns $11,000 during 2011 as a model.Katelyn does qualify for head of household filing status.

Question 44

An individual taxpayer uses a fiscal year February 1-January 31.The due date of this taxpayer's Federal income tax return is May 15 of each tax year.

Question 45

Kim,a resident of Oregon,supports his parents who are residents of Canada but citizens of Korea.Kim can claim his parents as dependents.

Question 46

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 47

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

Question 48

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 49

Darren,age 20 and not disabled,earns $3,500 during 2011.Darren's parents cannot claim him as a dependent unless he is a full-time student.

Question 50

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

Question 51

In January 2011,Jake's wife dies and he does not remarry.For tax year 2011,Jake may not be able to use the filing status available to married persons filing joint returns.

Question 52

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

Question 53

A child who has unearned income of $1,900 or less cannot be subject to the kiddie tax.

Question 54

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

Question 55

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

Question 56

Since an abandoned spouse is treated as single and has one or more dependent children,he or she qualifies for the standard deduction available to head of household.

Question 57

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

Question 58

When the kiddie tax applies and the parents are divorced,the applicable parent (for determining the parental tax)is the one with the greater taxable income.

Question 59

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 60

Keith,age 17 and single,earns $3,000 during 2011.Keith's parents can claim him as a dependent even if he does not live with them.

Question 61

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

A) Some taxpayers may qualify for two types of standard deductions.
B) Not available to taxpayers who choose to deduct their personal and dependency exemptions.
C) Not available to taxpayers who choose to claim their deduction for AGI.
D) The basic standard deduction is indexed for inflation but the additional standard deduction is not.
E) None of the above.

Question 62

For 2011,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

Merle is a widow,age 80 and blind,who is claimed as a dependent by her son.During 2011,she received $4,800 in Social Security benefits,$2,200 in bank interest,and $1,800 in cash dividends from stocks.Merle's taxable income is:

A) $4,000 - $950 - $2,900 = $150.
B) $4,000 - $2,900 = $1,100.
C) $4,000 - $950 - $1,450 = $1,600.
D) $8,800 - $950 - $2,900 = $4,950.
E) None of the above.

Question 64

Evan and Eileen Carter are husband and wife and file a joint return for 2011.Both are under 65 years of age.They provide more than half of the support of their daughter,Pamela (age 25),who is a full-time medical student.Pamela receives a $5,000 scholarship covering her tuition at college.They furnish all of the support of Belinda (Evan's grandmother),who is age 80 and lives in a nursing home.They also support Peggy (age 66),who is a friend of the family and lives with them.How many personal and dependency exemptions may the Carters claim?

A) Two.
B) Three.
C) Four.
D) Five.
E) None of the above.

Question 65

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

A) Alimony payments.
B) Child support payments.
C) Funeral expenses.
D) Loss on the sale of a personal residence.
E) Interest on home mortgage.

Question 66

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

A) State and local sales taxes.
B) Interest on home mortgage.
C) Unreimbursed employee expenses.
D) Charitable contributions.
E) None of the above.

Question 67

Gain on the sale of collectibles held for more than 12 months is subject to tax at a rate no higher than 28%.

Question 68

During 2011,Anna had the following transactions: Anna's AGI is:

A) $185,000.
B) $187,000.
C) $285,000.
D) $287,000.
E) $385,000.

Question 69

During 2011,Esther had the following transactions: Esther's AGI is:

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

Question 70

In 2011,Warren 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,$1,000 is subject to income tax.

Question 71

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 spouses file separate returns, both spouses must claim the standard deduction (rather than itemize their deductions from AGI).
C) 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).
D) If a taxpayer is claimed as a dependent of another, no basic standard deduction is allowed.
E) None of the above.

Question 72

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 for AGI.
C) A "page 1 deduction" refers to a deduction from 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 the above.

Question 73

In 2011,Justin had the following transactions: Justin's AGI is:

A) $73,000.
B) $76,000.
C) $78,000.
D) $81,000.
E) $89,000.

Question 74

Wilma,age 70 and single,is claimed as a dependent on her daughter's tax return.During 2011,she had interest income of $2,400 and $800 of earned income from baby sitting.Wilma's taxable income is:

A) $700.
B) $850.
C) $1,800.
D) $2,250.
E) None of the above.

Question 75

Sylvia,age 17,is claimed by her parents as a dependent.During 2011,she had interest income from a bank savings account of $2,000 and income from a part-time job of $4,200.Sylvia's taxable income is:

A) $4,200 - $4,500 = $0.
B) $6,200 - $5,700 = $500.
C) $6,200 - $4,500 = $1,700.
D) $6,200 - $950 = $5,250.
E) None of the above.

Question 76

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

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

Question 77

During 2011,Marvin had the following transactions: Marvin's AGI is:

A) $62,000.
B) $65,000.
C) $67,000.
D) $102,000.
E) $104,000.

Question 78

Tony,age 15,is claimed as a dependent by his grandmother.During 2011,Tony had interest income from Boeing Corporation bonds of $1,000 and earnings from a part-time job of $700.Tony's taxable income is:

A) $0.
B) $1,700 - $700 - $950 = $50.
C) $1,700 - $1,000 = $700.
D) $1,700 - $950 = $750.
E) None of the above.

Question 79

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

A) Parking expenses incurred in connection with jury duty-taxpayer is a dentist.
B) Contributions to mayor's reelection campaign.
C) Substantiated gambling losses (not in excess of gambling winnings) incurred on a vacation to Reno.
D) Speeding ticket incurred while on business.
E) Premiums paid on personal life insurance policy.

Question 80

Kyle and Liza are married and under 65 years of age.During 2011,they furnish more than half of the support of their 18-year old daughter,May,who lives with them.May earns $15,000 from a part-time job,most of which she sets aside for future college expenses.Kyle and Liza also provide more than half of the support of Kyle's cousin who lives with them.Liza's father,who died on January 3,2011,at age 90,has for many years qualified as their dependent.How many personal and dependency exemptions should Kyle and Liza claim?

A) Two.
B) Three.
C) Four.
D) Five.
E) None of the above.