Deck 3: Computing the Tax

Question 1

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

Answer 1

False

Question 2

Most exclusions from gross income are not reported on Form 1040.

Answer 2

True

Question 3

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

Answer 3

False

Question 4

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 2010 is $14,700 ($11,400 + $1,100 + $1,100 + $1,100).

Question 5

Derek,age 46,is a surviving spouse.If he has itemized deductions of $11,600 for 2010,Derek should not claim the standard deduction.

Question 6

The filing status of a taxpayer (e.g. ,single,head of household)need not be identified until after taxable income is determined.

Question 7

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

Question 8

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

Question 9

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

Question 10

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

Question 11

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

Question 12

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

Question 13

Lee,a citizen of Korea,is a resident of the U.S.Any income Lee receives from land he owns in Korea is subject to the U.S.income tax.

Question 14

In 2010,Ed is 66 and single.If he has itemized deductions of $6,200,he should claim the standard deduction alternative.

Question 15

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

Question 16

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

Question 17

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

Question 18

Since an abandoned spouse is considered to be unmarried with dependents,the standard deduction for head of household can be used.

Question 19

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

Question 20

Buddy and Hazel are ages 72 and 71 and file a joint return.If they have itemized deductions of $13,500 for 2010,they should not claim the standard deduction.

Question 21

Darren,age 20 and not disabled,earns $4,500 during 2010.Darren's parents cannot claim him as a dependent unless he is a full-time student.

Question 22

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

Question 23

Keith,age 17 and single,earns $4,000 during 2010.Keith's parents can claim him as a dependent even if he does not live with them.

Question 24

In 2010,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 2009.Hal may claim the father-in-law but not the ex-wife as dependents.

Question 25

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 26

Benjamin,age 16,is claimed as a dependent by his parents.During 2010,he earned $700 at a car wash.Benjamin's standard deduction is $1,250 ($950 + $300).

Question 27

Katrina,age 16,is claimed as a dependent by her parents.During 2010,she earned $5,500 as a checker at a grocery store.Her standard deduction is $5,800 ($5,500 earned income + $300).

Question 28

Debby,age 18,is claimed as a dependent by her mother.During 2010,she earned $1,100 in interest income on a savings account.Debby's standard deduction is $1,400 ($1,100 + $300).

Question 29

Clara,age 68,claims head of household filing status.If she has itemized deductions of $9,500 for 2010,she should claim the standard deduction.

Question 30

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

Question 31

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

Question 32

Albert buys his mother a used car.For purposes of meeting the support test,Albert cannot count the cost of the used car.

Question 33

Logan,an 80-year-old widower,dies on January 2,2010.Even though he lived for only two days,on his final income tax return for 2010,the full basic and additional standard deductions can be claimed.

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

Roy and Linda were divorced in 2009.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 2010.

Question 36

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

Question 37

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

Question 38

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

Question 39

Dan and Donna are husband and wife and file separate returns for the year.Even if Dan itemizes his deductions from AGI,Donna can still claim the standard deduction.

Question 40

Butch and Minerva are divorced in December of 2010.Since they were not married at the end of the year,they are considered not married for 2010.

Question 41

A child who is married can be subject to the kiddie tax.

Question 42

The IRS facilitates the filing of income tax returns by persons in the U.S.illegally through the issuance of ITINs.

Question 43

Katelyn is divorced and maintains a household in which she and her daughter,Crissa,live.Crissa,age 22,earns $11,000 during 2010 as a model.Katelyn does not qualify for head of household filing status.

Question 44

Ed is divorced and maintains a home in which he and a dependent friend live.Ed qualifies for head of household filing status.

Question 45

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 46

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

Question 47

In terms of income tax consequences,abandoned spouses are not treated the same way as married persons filing separate returns.

Question 48

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 49

Kim,a resident of Oregon,supports his parents who are residents of Canada but citizens of Korea.Kim cannot claim his parents as dependents.

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 some cases,the tax on long-term capital gains can be as low as 0%.

Question 52

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

Question 53

Carolyn lives in New York and supports her niece who is a Canadian citizen that resides in Quebec,Canada.Carolyn may claim her niece as a dependent.

Question 54

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

Question 55

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

Question 56

In 2010,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 57

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

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

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

Question 60

In January 2010,Jake's wife dies and he does not remarry.For tax year 2010,Jake may not be able to use the filing status available to married persons filing joint returns.

Question 61

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

A)Alimony payments.
B)Interest on home mortgage.
C)Unreimbursed employee expenses.
D)Charitable contributions.
E)None of the above.

Question 62

Evan and Eileen Carter are husband and wife and file a joint return for 2010.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 room and board at college.They furnish all of the support of Belinda (Evan's grandmother),who is age 70 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 63

In 2010,Sylvia had the following transactions: Sylvia's AGI is:

A)$73,000.
B)$77,000.
C)$78,000.
D)$81,000.
E)$89,000.

Question 64

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 65

In which,if any,of the following situations may the individual not be claimed as a dependent of the taxpayer?

A)A former spouse who lives with the taxpayer (divorce took place last year).
B)A stepmother who does not live with the taxpayer.
C)A married daughter who lives with the taxpayer.
D)A half brother who does not live with the taxpayer and is a citizen and resident of Mexico.
E)A cousin who does not live with the taxpayer.

Question 66

For 2010,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 67

During 2010,Anna had the following transactions: Anna's AGI is:

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

Question 68

During 2010,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 69

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

A)The basic standard deduction is indexed for inflation but the additional standard deduction is not.
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)Some taxpayers may qualify for two additional standard deductions.
E)None of the above.

Question 70

Merle,age 17,is claimed by her parents as a dependent.During 2010,she had interest income from a bank savings account of $2,000 and income from a part-time job of $4,200.Merle'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 71

During 2010,Justin had the following transactions: Justin's AGI is:

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

Question 72

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 for AGI.
E)None of the above.

Question 73

Tony,age 15,is claimed as a dependent by his grandmother.During 2010,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 74

Kyle and Liza are married and under 65 years of age.During 2010,they furnish more than half of the support of their 19-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 3,2010,at age 80,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.

Question 75

Which,if any,of the following is a deduction from 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 76

During 2010,Jen (age 66)furnished more than 50% of the support of the following persons: Presuming all other dependency tests are met,on a separate return how many personal and dependency exemptions may Jen claim?

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

Question 77

Muriel,age 70 and single,is claimed as a dependent on her daughter's tax return.During 2010,she had interest income of $2,400 and $800 of earned income from baby sitting.Muriel's taxable income is:

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

Question 78

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 79

Wilma is a widow,age 80 and blind,who is claimed as a dependent by her son.During 2010,she received $4,800 in Social Security benefits,$2,200 in bank interest,and $1,800 in cash dividends from stocks.Wilma's taxable income is:

A)$4,000 - $950 - $2,800 = $250.
B)$4,000 - $2,800 = $1,200.
C)$4,000 - $950 - $1,400 = $1,650.
D)$8,800 - $950 - $2,800 = $5,050.
E)None of the above.

Question 80

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.