Question 1

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

Accepted Answer

What is described are deductions for AGI.Itemized deductions are also known as deductions from AGI and appear on page 2 of Form 1040.

Question 2

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

Accepted Answer

The choice is between deductions from AGI and the standard deduction.

Question 3

Adjusted gross income (AGI)appears at the bottom of page 1 and at the top of page 2 of Form 1040.

Accepted Answer

This statement is true. AGI is reported on line 11 of page 1 and line 8b of page 2 of Form 1040.

Question 4

Once they reach age 65,many taxpayers will switch from itemizing their deductions from AGI and start claiming the standard deduction.

Accepted Answer

Not only is the additional standard deduction now available but also the mortgage interest deduction on the personal residence has declined (or disappeared).

Question 5

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

Accepted Answer

The filing status is relevant in determining the amount of the standard deduction available.

Question 6

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

Accepted Answer

The inflation adjustment is made annually to both the basic standard deduction and the additional standard deduction.

Question 7

In 2014,Ed is 66 and single.If he has itemized deductions of $7,400,he should not claim the standard deduction alternative.

Accepted Answer

The standard deduction yields $7,750 ($6,200 + $1,550).

Question 8

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

Accepted Answer

Even though a taxpayer chooses to itemize,deductions for AGI can be claimed.

Question 9

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.

Accepted Answer

The $1,000 is a nontaxable return of capital.

Question 10

Howard,age 82,dies on January 2,2014.On Howard's final income tax return,the full amount of the basic and additional standard deductions will be allowed even though Howard lived for only 2 days during the year.

Accepted Answer

The full amount of basic and additional standard deductions are allowed on the final income tax return regardless of how many days the individual lived during the year.

Question 11

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

Accepted Answer

An increase in AGI increases the allowable charitable contribution that can be claimed due to the 50% ceiling imposed.

Question 12

All exclusions from gross income are reported on Form 1040.

Accepted Answer

Gifts and inheritances are two major exclusions not reported on Form 1040.

Question 13

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

Accepted Answer

The determination of AGI precedes (not follows)the determination of taxable income (TI).

Question 14

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

Accepted Answer

A decrease in AGI may increase the medical expense deduction due to the 10% (or 7.5%)floor imposed.

Question 15

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

Accepted Answer

Just the opposite is the case.The deduction for property taxes and mortgage interest expense usually makes itemizing preferable to the standard deduction.

Question 16

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

Accepted Answer

For 2014,compare $1,550 (single)with $1,200 (married).

Question 17

Claude's deductions from AGI exceed the standard deduction allowed for 2014.Under these circumstances,Claude cannot claim the standard deduction.

Accepted Answer

The choice is elective.Claude may wish to avoid the time and trouble of completing Schedule A.

Question 18

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

Accepted Answer

Under the global system of taxation followed by the U.S. ,foreign-sourced income is subject to tax.Although Lee is not a citizen,he is a resident of the U.S.

Question 19

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

Accepted Answer

Approximately two-thirds do so.

Question 20

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

Accepted Answer

"Above the line" deductions, also known as adjustments to income, are deductions taken from your gross income (before any taxes are withheld) to arrive at your adjusted gross income (AGI).

Quiz 3: Tax Formula and Tax Determination;an Overview of Property Transactions