Exam 3: Preparing Your Taxes

Maria and Ed just sold their home of 20 years so that they could purchase a smaller home.They realized a $400,000 capital gain on the home.How much of this gain will Maria and Ed have to pay taxes on?

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement. -Your tax filing status [would | would not] be a factor in determining the amount of standard deduction you could take.

From the information given below,determine Marcie's gross income for tax purposes:

Molly and Justin are considering contributing $5,000 to their favorite,tax deductible charity.This contribution will bring their total itemized deductions to $20,000.Assuming they are in the 28% marginal tax bracket,how much will they save in taxes by contributing this $5,000 to charity?

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement. -A child must file a joint return with his/her parents until age 14.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement. -Christy lives by herself with her dog,Tex.She [can | cannot] use the Head of Household filing status.

If your AGI is less than $100,000 and you do not itemize deductions,the IRS will compute your taxes for you.

The standard deduction in 2008 for a single filer is $5,450 and for married persons filing jointly is $10,900.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement. -Your marital status [will | will not] have an effect on the amount of social security tax you pay.

You have up to three years after mailing your tax return to file an amended tax return (1040X).

A married couple filing a joint return has Ms.Cindy Cook,a CPA,complete their return.The IRS will hold only Ms.Cook responsible for any errors on the return.

An investment must be owned over two years in order to qualify for long-term capital gains treatment.

Sales taxes are

Anyone can legally prepare tax returns and charge a fee for that service.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement. -Federal income taxation is [progressive | regressive].

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement. -Alimony received is included in gross income for the receiver and a tax deduction for the payer.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement. -If you ask the IRS a tax question and are given an incorrect answer,[you will still have to pay any additional tax owed | the IRS will forgive any additional taxes].

In order to curtail bracket creep,the tax Reform Act of 1986

To get favorable tax treatment,the taxpayer must own and occupy the residence as a principle residence for at least 2 of the 5 years prior to the sale.

One's home must typically be owned at least three years to receive the most favorable capital gains treatment.