Question 1

Which of the following statements regarding credits is correct?

Accepted Answer

A)  Business expenses are generally refundable credits. 
B)  Business credits that are generated in one year but are not utilized in that year expire. 
C)  Business credits that are generated in one year but are not utilized in that year may be carried forward to future years but not back to a prior year. 
D)  Business credits that are generated in one year but are not utilized in that year may be carried back to the previous year and then forward to future years. 
A)  Business expenses are generally refundable credits. 
B)  Business credits that are generated in one year but are not utilized in that year expire. 
C)  Business credits that are generated in one year but are not utilized in that year may be carried forward to future years but not back to a prior year. 
D)  Business credits that are generated in one year but are not utilized in that year may be carried back to the previous year and then forward to future years.

Question 2

Self-employed taxpayers are allowed to deduct the full amount of the self-employment taxes they pay.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following statements regarding the AMT exemption amounts is not True?

Accepted Answer

A)  The amount of the exemption depends on the taxpayer's filing status. 
B)  The exemption amount is completely phased-out for high income taxpayers. 
C)  Taxpayers must choose whether they will claim the exemption or itemize deductions. 
D)  None of the above statements is False (all of the above statements are True). 
A)  The amount of the exemption depends on the taxpayer's filing status. 
B)  The exemption amount is completely phased-out for high income taxpayers. 
C)  Taxpayers must choose whether they will claim the exemption or itemize deductions. 
D)  None of the above statements is False (all of the above statements are True).

Question 4

Hester (age 17) is claimed as a dependent by his parents, Charlton and Abigail. In 2018, Hester received $10,000 of qualified dividends and he received $11,800 from a part time job. What is his taxable income for 2018?

Accepted Answer

A)  $21,800 
B)  $20,750 
C)  $9,800 
D)  $9,650 
A)  $21,800 
B)  $20,750 
C)  $9,800 
D)  $9,650

Question 5

Tax credits reduce a taxpayer's taxable income dollar for dollar.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is not a barrier to income shifting among family members?

Accepted Answer

A)  The assignment of income doctrine. 
B)  Net unearned income for children 18 and younger taxed at parents' marginal tax rates. 
C)  Elimination of preferential tax rates (on dividends and long-term capital gains) for dependents. 
D)  "The assignment of income doctrine" and "Net unearned income for children 18 and younger taxed at parents' marginal tax rates". 
A)  The assignment of income doctrine. 
B)  Net unearned income for children 18 and younger taxed at parents' marginal tax rates. 
C)  Elimination of preferential tax rates (on dividends and long-term capital gains) for dependents. 
D)  "The assignment of income doctrine" and "Net unearned income for children 18 and younger taxed at parents' marginal tax rates".

Question 7

Candace is claimed as a dependent on her parent's tax return. In 2018, Candace received $5,000 of interest income from corporate bonds she obtained several years ago. This is her only source of income. She is 15 years old at year-end. What is her gross tax liability?

Accepted Answer

$444.
Answ

Question 8

Alton reported net income from his sole proprietorship of $90,000. To determine his self-employment tax, he would multiply $90,000 by the self-employment tax rate.

Accepted Answer

A) True 
 B)False

Question 9

Cassy reports a gross tax liability of $1,000. She also claims $400 of nonrefundable personal credits, $700 of refundable personal credits, and $200 of business credits. What is Cassy's tax refund or tax liability due after applying the credits?

Accepted Answer

A)  $1,000 taxes payable. 
B)  $0 refund or taxes payable. 
C)  $700 refund. 
D)  $300 refund. 
A)  $1,000 taxes payable. 
B)  $0 refund or taxes payable. 
C)  $700 refund. 
D)  $300 refund.

Question 10

Which of the following statements concerning tax credits is True?

Accepted Answer

A)  The tax benefit a taxpayer receives from a credit depends on the taxpayer's marginal tax rate. 
B)  Refundable tax credits are limited to a taxpayer's gross tax liability. 
C)  Tax credits are generally more beneficial than tax deductions. 
D)  None of the these is a True statement. 
A)  The tax benefit a taxpayer receives from a credit depends on the taxpayer's marginal tax rate. 
B)  Refundable tax credits are limited to a taxpayer's gross tax liability. 
C)  Tax credits are generally more beneficial than tax deductions. 
D)  None of the these is a True statement.

Question 11

Sam is 30 years old. In 2018, he reported an AGI of $12,000, all from his job as a server at the local café. He is single and has no dependents. What amount of earned income credit may he claim in 2018? Use Exhibit 8-10

Accepted Answer

$250
Answe

Question 12

Parents may claim a $2,000 child tax credit for a dependent child who is 22 years of age at the end of the year if the child is a full-time student.

Accepted Answer

A) True 
 B)False

Question 13

Assume Georgianne underpaid her estimated tax liability by $150 in the first quarter, $500 in the second quarter, $400 in the third quarter, and $200 in the fourth quarter. Calculate her underpayment penalty for the year, assuming the federal short-term interest rate is five percent.

Accepted Answer

$25 ($3 + $10 + $8 +

Question 14

Why would a taxpayer file a tax return if not required to do so?

Accepted Answer

A)  To remain in favor with the IRS. 
B)  To claim a refund of taxes paid. 
C)  All taxpayers are required to file returns. 
D)  In order to claim the standard deduction. 
A)  To remain in favor with the IRS. 
B)  To claim a refund of taxes paid. 
C)  All taxpayers are required to file returns. 
D)  In order to claim the standard deduction.

Question 15

Harmony reports a regular tax liability of $15,000 and tentative minimum tax of $17,000. Given just this information, what is her alternative minimum tax liability for the year?

Accepted Answer

A)  $0 
B)  $2,000 
C)  $15,000 
D)  $17,000 
A)  $0 
B)  $2,000 
C)  $15,000 
D)  $17,000

Question 16

Carolyn has an AGI of $38,000 (all from earned income), two qualifying children, and is filing as a head of household. What amount of earned income credit is she entitled to? (Exhibit 8-10)

Accepted Answer

A)  $0 
B)  $1,643 
C)  $3,461 
D)  $4,073 
E)  $5,716 
A)  $0 
B)  $1,643 
C)  $3,461 
D)  $4,073 
E)  $5,716

Question 17

An individual could pay 100% of her tax liability by the due date of her tax return and still be subject to underpayment tax penalties.

Accepted Answer

A) True 
 B)False

Question 18

Happy, Sleepy, Grumpy, and Doc all did not make adequate estimated payments. Which of them will not owe underpayment penalties for 2018 given the following information?

Accepted Answer

A)  Happy. 
B)  Sleepy. 
C)  Grumpy. 
D)  Doc. 
E)  "Happy" and "Doc". F) None of the choices are correct. 
A)  Happy. 
B)  Sleepy. 
C)  Grumpy. 
D)  Doc. 
E)  "Happy" and "Doc". F) None of the choices are correct.

Question 19

The lifetime learning credit can be used toward the cost of any course of instruction to acquire or improve a taxpayer's job skills, no matter the age of the taxpayer.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following represents the correct order in which credits are applied to gross tax liability (from first to last)?

Accepted Answer

A)  Nonrefundable personal, business, refundable. 
B)  Business, nonrefundable personal, refundable. 
C)  Refundable, nonrefundable personal, business. 
D)  Refundable, business, nonrefundable personal. 
A)  Nonrefundable personal, business, refundable. 
B)  Business, nonrefundable personal, refundable. 
C)  Refundable, nonrefundable personal, business. 
D)  Refundable, business, nonrefundable personal.

Which of the following statements regarding credits is correct?

Self-employed taxpayers are allowed to deduct the full amount of the self-employment taxes they pay.

Which of the following statements regarding the AMT exemption amounts is not True?

Hester (age 17) is claimed as a dependent by his parents, Charlton and Abigail. In 2018, Hester received $10,000 of qualified dividends and he received $11,800 from a part time job. What is his taxable income for 2018?

Tax credits reduce a taxpayer's taxable income dollar for dollar.

Which of the following is not a barrier to income shifting among family members?

Candace is claimed as a dependent on her parent's tax return. In 2018, Candace received $5,000 of interest income from corporate bonds she obtained several years ago. This is her only source of income. She is 15 years old at year-end. What is her gross tax liability?

Alton reported net income from his sole proprietorship of $90,000. To determine his self-employment tax, he would multiply $90,000 by the self-employment tax rate.

Cassy reports a gross tax liability of $1,000. She also claims $400 of nonrefundable personal credits, $700 of refundable personal credits, and $200 of business credits. What is Cassy's tax refund or tax liability due after applying the credits?

Which of the following statements concerning tax credits is True?

Sam is 30 years old. In 2018, he reported an AGI of $12,000, all from his job as a server at the local café. He is single and has no dependents. What amount of earned income credit may he claim in 2018? Use Exhibit 8-10

Parents may claim a $2,000 child tax credit for a dependent child who is 22 years of age at the end of the year if the child is a full-time student.

Assume Georgianne underpaid her estimated tax liability by $150 in the first quarter, $500 in the second quarter, $400 in the third quarter, and $200 in the fourth quarter. Calculate her underpayment penalty for the year, assuming the federal short-term interest rate is five percent.

Why would a taxpayer file a tax return if not required to do so?

Harmony reports a regular tax liability of $15,000 and tentative minimum tax of $17,000. Given just this information, what is her alternative minimum tax liability for the year?

Carolyn has an AGI of $38,000 (all from earned income), two qualifying children, and is filing as a head of household. What amount of earned income credit is she entitled to? (Exhibit 8-10)

An individual could pay 100% of her tax liability by the due date of her tax return and still be subject to underpayment tax penalties.

Happy, Sleepy, Grumpy, and Doc all did not make adequate estimated payments. Which of them will not owe underpayment penalties for 2018 given the following information?

The lifetime learning credit can be used toward the cost of any course of instruction to acquire or improve a taxpayer's job skills, no matter the age of the taxpayer.

Which of the following represents the correct order in which credits are applied to gross tax liability (from first to last)?

An Introduction to Tax

Tax Compliance, the IRS, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Dependents, and Filing Status

Gross Income and Exclusions

Individual Deductions

Investments

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Filters

Exam 8: Individual Income Tax Computation and Tax Credits

Which of the following statements regarding credits is correct?

Self-employed taxpayers are allowed to deduct the full amount of the self-employment taxes they pay.

Which of the following statements regarding the AMT exemption amounts is not True?

Hester (age 17) is claimed as a dependent by his parents, Charlton and Abigail. In 2018, Hester received $10,000 of qualified dividends and he received $11,800 from a part time job. What is his taxable income for 2018?

Tax credits reduce a taxpayer's taxable income dollar for dollar.

Which of the following is not a barrier to income shifting among family members?

Candace is claimed as a dependent on her parent's tax return. In 2018, Candace received $5,000 of interest income from corporate bonds she obtained several years ago. This is her only source of income. She is 15 years old at year-end. What is her gross tax liability?

Alton reported net income from his sole proprietorship of $90,000. To determine his self-employment tax, he would multiply $90,000 by the self-employment tax rate.

Cassy reports a gross tax liability of $1,000. She also claims $400 of nonrefundable personal credits, $700 of refundable personal credits, and $200 of business credits. What is Cassy's tax refund or tax liability due after applying the credits?

Which of the following statements concerning tax credits is True?

Sam is 30 years old. In 2018, he reported an AGI of $12,000, all from his job as a server at the local café. He is single and has no dependents. What amount of earned income credit may he claim in 2018? Use Exhibit 8-10

Parents may claim a $2,000 child tax credit for a dependent child who is 22 years of age at the end of the year if the child is a full-time student.

Assume Georgianne underpaid her estimated tax liability by $150 in the first quarter, $500 in the second quarter, $400 in the third quarter, and $200 in the fourth quarter. Calculate her underpayment penalty for the year, assuming the federal short-term interest rate is five percent.

Why would a taxpayer file a tax return if not required to do so?

Harmony reports a regular tax liability of $15,000 and tentative minimum tax of $17,000. Given just this information, what is her alternative minimum tax liability for the year?

Carolyn has an AGI of $38,000 (all from earned income), two qualifying children, and is filing as a head of household. What amount of earned income credit is she entitled to? (Exhibit 8-10)

An individual could pay 100% of her tax liability by the due date of her tax return and still be subject to underpayment tax penalties.

Happy, Sleepy, Grumpy, and Doc all did not make adequate estimated payments. Which of them will not owe underpayment penalties for 2018 given the following information?

The lifetime learning credit can be used toward the cost of any course of instruction to acquire or improve a taxpayer's job skills, no matter the age of the taxpayer.

Which of the following represents the correct order in which credits are applied to gross tax liability (from first to last)?

An Introduction to Tax

Tax Compliance, the IRS, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Dependents, and Filing Status

Gross Income and Exclusions

Individual Deductions

Investments

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Filters