Question 1

Which of the following shows the correct relationship among standard deduction amounts for the respective filing statuses?

Accepted Answer

The standard deduction amount for Married Filing Jointly is the highest, followed by Head of Household, and then Single. Therefore, the correct relationship is Married Filing Jointly > Head of Household > Single. Option A is incorrect because it places Single before Head of Household. Option B is incorrect because it places Married Filing Separately before Head of Household. Option D is incorrect because it places Head of Household before Married Filing Jointly.

Question 2

Which of the following statements regarding tax credits is true?

Accepted Answer

Tax credits directly reduce the amount of tax owed, not taxable income. Therefore, option A is incorrect. Tax credits provide the same amount of tax benefit regardless of the taxpayer's marginal tax rate, making option B incorrect. Option C is correct as tax credits reduce taxes payable dollar for dollar.

Question 3

Which of the following statements regarding for AGI tax deductions is true?

Accepted Answer

The answer of Which of the following statements regarding for...

Question 4

Charlotte is the Lucas family's 22-year-old daughter.She is a full-time student at an out-of-state university but plans to return home when the school year ends.During the year,Charlotte earned $4,000 of income working part-time.Her support totaled $30,000 for the year.Of this amount,Charlotte paid $7,000 with her own funds,her parents paid $14,000,and Charlotte's grandparents paid $9,000.Which of the following statements most accurately describes whether Charlotte's parents can claim Charlotte as a dependent?

Accepted Answer

Charlotte is under 24 and a full-time student, making her a qualifying child for her parents. She meets the support test as her support is less than $4,200 (the threshold for 2021). Even though her grandparents provided some support, her parents still provided more support than she did herself. Her gross income of $4,000 is less than the threshold of $4,300 for 2021, so she also passes the gross income test.

Question 5

Anna is a 21-year-old full-time college student (she plans on returning home at the end of the school year).Her total support for the year was $34,000 (including $8,000 of tuition).Anna covered $12,000 of her support costs out of her own pocket (from savings,she did not work)and she received an $8,000 scholarship that covered all of her tuition costs.Which of the following statements regarding who is allowed to claim Anna as an exemption is true?

Accepted Answer

The answer of Anna is a 21-year-old full-time college student...

Question 6

Which of the following statements is true?

Accepted Answer

Qualified dividend income is taxed at a lower rate than an equal amount of ordinary income. This is due to the fact that qualified dividend income is subject to a maximum tax rate of 20%, while ordinary income is subject to tax rates as high as 37%.

Question 7

Which of the following is not an itemized deduction?

Accepted Answer

Alimony paid is not an itemized deduction, but rather a deduction for adjusted gross income (AGI).

Question 8

Which of the following types of income are not considered ordinary income?

Accepted Answer

Net long-term capital gains and qualified dividend income are taxed at preferential rates and are not considered ordinary income, unlike compensation income which is taxed as ordinary income.

Question 9

Jamison's gross tax liability is $7,000.Jamison had $2,000 of available credits and he had $4,000 of taxes withheld by his employer.What is Jamison's taxes due (or taxes refunded)with his tax return?

Accepted Answer

Jamison's gross tax liability is $7,000. He has $2,000 in credits, reducing his liability to $5,000. With $4,000 withheld, he still owes $1,000.

Question 10

Which of the following statements regarding dependents is false?

Accepted Answer

To qualify as a dependent of another, an individual must either be a qualifying child or qualifying relative. While the qualifying child must meet certain residency and relationship requirements, there is no such residency requirement for a qualifying relative. The other statements are true: A taxpayer may claim someone as a dependent without a family relationship (if the person meets the eligibility criteria), an individual who is a dependent of another cannot claim dependents of their own, and there is an income limit for qualifying relatives.

Question 11

All of the following are for AGI deductions except:

Accepted Answer

Charitable contributions are deductions from taxable income, not from AGI.

Question 12

Which of the following relationships does NOT pass the relationship test for a qualifying child?

Accepted Answer

A cousin is not considered a qualifying child for tax purposes. To be a qualifying child, the individual must be a son, daughter, stepchild, foster child, brother, sister, half-brother, half-sister, stepbrother, stepsister, or descendant of any of them.

Question 13

Which of the following statements regarding dependents is true?

Accepted Answer

To qualify as a dependent of another, an individual must be either a qualifying child or a qualifying relative of the other person. The other options listed may be factors that contribute to dependency status, but they are not the essential criteria.

Question 14

Madison's gross tax liability is $9,000.Madison had $3,000 of tax credits available and she had $8,000 of taxes withheld by her employer.What is Madison's taxes due (or taxes refunded)with her tax return?

Accepted Answer

Madison's gross tax liability is $9,000 but she has $3,000 of tax credits available which reduces her tax liability to $6,000 ($9,000 - $3,000). She also had $8,000 of taxes withheld by her employer which means she has actually overpaid her taxes by $2,000 ($8,000 - $6,000). Therefore, Madison is entitled to a tax refund of $2,000.

Question 15

All of the following are tests for determining qualifying child status except the ________.

Accepted Answer

The gross income test is used to determine whether a dependent can be claimed as a qualifying relative, not a qualifying child. The other tests listed (age, support, and residence) are used to determine qualifying child status.

Question 16

All of the following represents a type or character of income except:

Accepted Answer

"Normal" is not a type or character of income, but rather a term used to refer to regular or expected income. A, B, and C are all valid types of income.

Question 17

Which of the following is NOT a from AGI deduction?

Accepted Answer

The answer of Which of the following is NOT a...

Question 18

In year 1,the Bennetts' 25-year-old daughter,Jane,is a full-time student at an out-of-state university but she plans to return home after the school year ends.In previous years,Jane has never worked and her parents have always been able to claim her as a dependent.In year 1,a kind neighbor offers to pay for all of Jane's educational and living expenses.Which of the following statements is most accurate regarding whether Jane's parents would be allowed to claim Jane as a dependent for year 1 assuming the neighbor pays for all of Jane's support?

Accepted Answer

The answer of In year 1,the Bennetts' 25-year-old daughter,Jane,is a...

Question 19

Joanna received $60,000 compensation from her employer,the value of her stock in ABC company appreciated by $5,000 during the year (but she did not sell any of the stock),she received $30,000 of life insurance proceeds from the death of her husband.What is the amount of Joanna's gross income from these items?

Accepted Answer

Joanna's gross income includes the $60,000 compensation from her employer. The appreciation in stock value is not included as income until the stock is sold, and life insurance proceeds are generally not taxable.

Question 20

Which of the following statements regarding tax deductions is false?

Accepted Answer

The statement in option C is incorrect. From AGI deductions tend to be associated with personal activities while for AGI deductions tend to be associated with business activities.

Quiz 4: Individual Income Tax Overview dependents and Filing Status