Question 1

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

Accepted Answer

An example of two additional standard deductions would be a taxpayer who is age 65 (or older)and blind (choice a. ).Both the basic and the additional standard deductions are subject to indexation (choice d. ).Personal and dependency exemptions are deductible in any event (choice b. ).The standard deductions are in lieu of deductions from AGI-not for AGI
(choice c. ).

Question 2

A child who has unearned income of $2,000 or less cannot be subject to the kiddie tax.

Accepted Answer

According to the IRS, if a child has unearned income of $2,000 or less in 2021, they are not subject to the kiddie tax.

Question 3

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.

Accepted Answer

The child need not file only if the parental election (if available)is made and the parent picks up all of the child's income.

Question 4

Regarding the tax formula and its relationship to Form 1040,which,if any,of the following statements is correct?

Accepted Answer

Most exclusions are not reported on Form 1040,but those that are appear on page 1-not on page 2 (choice a. ).A "page 1 deduction" as well as an "above the line deduction" are deductions for AGI (choices b.and c. ).AGI,not TI,is at the bottom of page 1 and the top of page 2 of Form 1040 (choice d. ).

Question 5

For 2014,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.

Accepted Answer

According to IRS rules, short-term capital losses are always applied first to any collectible long-term capital gains before being applied to any other long-term capital gains. Therefore, Stuart's short-term capital loss would be applied to the collectible long-term capital gain before being applied to the long-term capital gain from land held as investment.

Question 6

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

Accepted Answer

AGI is computed by claiming deductions for and no election is required (choice a. ).In arriving at taxable income,deductions for AGI are allowed (choice b. )and the election is between deductions from AGI and the standard deduction (choices c.and d. ).

Question 7

Which,if any,of the following statements relating to the standard deduction is correct?

Accepted Answer

In the case of death,no apportionment is required and the full standard deduction is allowed (choice a. ).If married taxpayers file separate returns and one spouse itemizes,the other spouse must also itemize.
However,there is no requirement that they each claim the standard deduction-although they may do so (choice c. ).A basic standard deduction is allowed for dependents although its determination is subject to special rules (choice d. ).

Question 8

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

Accepted Answer

IRA contributions (choice a. )are deductions for AGI.Child support payments (choice b. ),funeral expenses (choice c. ),and personal capital losses (choice d. )are nondeductible items.Medical expenses are deductions from AGI.

Question 9

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

Accepted Answer

All other choices are not deductible-either as dfor or dfrom AGI.

Question 10

During 2014,Sarah had the following transactions:

Accepted Answer

The answer of During 2014,Sarah had the following transactions: 
...

Question 11

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

Accepted Answer

This is correct according to the IRS guidelines for the kiddie tax. If a child's earned income is more than one-half of their support, they are not subject to the kiddie tax rules.

Question 12

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

Accepted Answer

If the regular income tax rates are lower,such rates apply.

Question 13

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

Accepted Answer

The kiddie tax does apply if the child is a full-time student under age 24.

Question 14

During 2014,Marvin had the following transactions: 
$\begin{array} { l  }
 \text { Salary}&\$50,000\
 \text {Bank loan (proceeds used to buy personal auto) }&10,000\
 \text {Alimony paid }&12,000\
 \text {Child support paid }&6,000\
 \text {Gift from aunt }&20,00\\
\text { Marvin's AGI is: }&\
\end{array}$

Accepted Answer

The answer of During 2014,Marvin had the following transactions: 
\(\begin{array}...

Question 15

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

Accepted Answer

The standard deduction is not an alternative;it is a component of the tax formula (choice d. ).Personal and dependency exemptions are subtracted after AGI is determined (choice b. ).The choice is between the standard deduction and deductions from AGI (choice a. ).

Question 16

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.

Accepted Answer

The applicable parent is the one who has custody.

Question 17

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

Accepted Answer

All other items (choices a. ,b. ,and c. )are deductions from AGI.

Question 18

In 2014,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.

Accepted Answer

Frank must recognize a collectible gain of $10,000 on the sale of the coin collection.The $9,000 loss on the sale of the personal use automobile is nondeductible.

Question 19

During 2014,Esther had the following transactions: 
$\begin{array}{lr}
\text { Salary } & \$ 70,000 \
\text { Interest income on Xerox bonds } & 2,000 \
\text { Inheritance from uncle } & 40,000 \
\text { Contribution to traditional IRA } & 5,500 \
\text { Capital losses } & 2,500\\text { Esther's } A G I \text { is: }
\end{array}$

Accepted Answer

The answer of During 2014,Esther had the following transactions: 
\(\begin{array}{lr}
\text...

Question 20

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

Accepted Answer

If he or she does not file a joint return,such child is not exempt from the kiddie tax.

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

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

A child who has unearned income of $2,000 or less cannot be subject to the kiddie tax.

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.

Regarding the tax formula and its relationship to Form 1040,which,if any,of the following statements is correct?

For 2014,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.

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

Which,if any,of the following statements relating to the standard deduction is correct?

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

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

During 2014,Sarah had the following transactions: $During 2014,Sarah had the following transactions: A) \$185,000 B) \$ 187,000 C) \$ 285,000 D) \$ 287,000 . E) \text { \$87,000. }$

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

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

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

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

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.

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

In 2014,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.

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