Question 1

Which of the following statements about tax subsidies for higher education is false?

Accepted Answer

A) Individuals can deduct a limited amount of qualified tuition expenses as an above-the-line deduction. 
B) Individuals can deduct a limited amount of interest paid on qualified education loans as an above-the-line deduction. 
C) Individuals can claim an American Opportunity Credit for a limited amount of college tuition,fees,and course materials. 
D) None of the above is false. 
A) Individuals can deduct a limited amount of qualified tuition expenses as an above-the-line deduction. 
B) Individuals can deduct a limited amount of interest paid on qualified education loans as an above-the-line deduction. 
C) Individuals can claim an American Opportunity Credit for a limited amount of college tuition,fees,and course materials. 
D) None of the above is false.

Question 2

Mr.and Mrs.Shohler received $25,200 Social Security benefits this year.Their only other source of income was Mrs.Shohler's $10,479 taxable pension from her former employer.How much of their Social Security is included in gross income?

Accepted Answer

A) $0 
B) $12,600 
C) $21,420 
D) $25,200 
A) $0 
B) $12,600 
C) $21,420 
D) $25,200

Question 3

A flood destroyed an antique Persian rug owned by Mr.and Mrs.McConnell.The couple purchased the rug for $13,000 fifteen years ago,but its appraised FMV before the flood was $42,500.Unfortunately,their homeowners' insurance policy does not cover flood damage.Compute the McConnells' casualty loss resulting from the flood,subject to an aggregate 10% AGI floor.

Accepted Answer

A) $41,900 
B) $42,000 
C) $13,000 
D) $12,900 
A) $41,900 
B) $42,000 
C) $13,000 
D) $12,900

Question 4

This year,David paid his physician $6,200 for routine examinations and received a $3,000 reimbursement from his medical insurance company.David is allowed a $3,200 medical expense as an above-the-line deduction.

Accepted Answer

A) True 
 B)False

Question 5

A child of divorced parents is considered a dependent of the parent with custody unless that parent agrees to allow the noncustodial parent to claim the dependency exemption.

Accepted Answer

A) True 
 B)False

Question 6

A taxpayer must purchase a new personal residence in order to exclude any gain from the sale of the old residence.

Accepted Answer

A) True 
 B)False

Question 7

Chad won a car valued at $25,000 from a game show.Because he immediately donated the car to the Red Cross,Chad can exclude $25,000 from gross income.

Accepted Answer

A) True 
 B)False

Question 8

On February 1,Alan,a single individual,purchased his first personal residence for $400,000.On July 1,Alan sold this residence for $460,000 because he accepted a new job in another state.Consequently,Alan occupied the home for only 150 days.How much gain must Alan recognize?

Accepted Answer

A) $0 
B) $8,630 
C) $30,000 
D) $51,370 
A) $0 
B) $8,630 
C) $30,000 
D) $51,370

Question 9

For federal income tax purposes,a taxpayer may elect to deduct state and local sales taxes as an itemized deduction.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is not a tax incentive for individuals to purchase a home instead of renting?

Accepted Answer

A) Real property taxes on the home are deductible. 
B) Premiums paid on homeowner's insurance are deductible. 
C) Interest paid on a home mortgage is deductible. 
D) All of the above are tax incentives. 
A) Real property taxes on the home are deductible. 
B) Premiums paid on homeowner's insurance are deductible. 
C) Interest paid on a home mortgage is deductible. 
D) All of the above are tax incentives.

Question 11

The federal income tax system provides incentives for individual taxpayers to meet their housing needs by purchasing instead of renting a home.

Accepted Answer

A) True 
 B)False

Question 12

Losses realized on the sale of personal use assets are deductible.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following items is not included in the recipient's gross income?

Accepted Answer

A) Scholarship for university room and board 
B) Unemployment compensation from a state government 
C) Gain on sale of an antique car 
D) Welfare payments from a state government 
A) Scholarship for university room and board 
B) Unemployment compensation from a state government 
C) Gain on sale of an antique car 
D) Welfare payments from a state government

Question 14

Congress provides an indirect subsidy to charities by allowing a deduction for charitable contributions.

Accepted Answer

A) True 
 B)False

Question 15

Mr.and Mrs.Frazier recognized a $723,000 gain on sale of a home that had been their principal residence for 29 years.They moved into a rented condominium in Naples,Florida.What are the tax consequences of the sale to the Fraziers?

Accepted Answer

A) $723,000 long-term capital gain 
B) $223,000 long-term capital gain 
C) $473,000 ordinary gain 
D) $473,000 long-term capital gain 
A) $723,000 long-term capital gain 
B) $223,000 long-term capital gain 
C) $473,000 ordinary gain 
D) $473,000 long-term capital gain

Question 16

Mr.and Mrs.Darwin sold their principal residence on September 12,2016,and purchased and moved into a new residence three weeks later.They properly excluded their $353,000 gain realized on this sale from gross income.On October 2,2017,the Darwins realized a gain on sale of the new residence.Which of the following statements about this gain is true?

Accepted Answer

A) If the Darwins sold the new residence because of a change in place of Mr.Darwin's employment,they may exclude up to $500,000 of the gain from gross income. 
B) The Darwins may not exclude any of the gain from gross income. 
C) The Darwins may exclude $147,000 of the gain from gross income. 
D) None of the above statements is true. 
A) If the Darwins sold the new residence because of a change in place of Mr.Darwin's employment,they may exclude up to $500,000 of the gain from gross income. 
B) The Darwins may not exclude any of the gain from gross income. 
C) The Darwins may exclude $147,000 of the gain from gross income. 
D) None of the above statements is true.

Question 17

A drunk driver seriously injured Leah.The court awarded her $200,000 for her physical injuries and $300,000 as punitive damages.Leah must include $300,000 in gross income.

Accepted Answer

A) True 
 B)False

Question 18

Recipients of the Nobel Peace Prize must include the prize in gross income.

Accepted Answer

A) True 
 B)False

Question 19

The cost of commuting to and from a place of employment is a nondeductible personal expense.

Accepted Answer

A) True 
 B)False

Question 20

Real estate taxes deducted for regular tax purposes must be added back in computing alternative minimum taxable income (AMTI).

Accepted Answer

A) True 
 B)False

Which of the following statements about tax subsidies for higher education is false?

Mr.and Mrs.Shohler received $25,200 Social Security benefits this year.Their only other source of income was Mrs.Shohler's $10,479 taxable pension from her former employer.How much of their Social Security is included in gross income?

This year,David paid his physician $6,200 for routine examinations and received a $3,000 reimbursement from his medical insurance company.David is allowed a $3,200 medical expense as an above-the-line deduction.

A child of divorced parents is considered a dependent of the parent with custody unless that parent agrees to allow the noncustodial parent to claim the dependency exemption.

A taxpayer must purchase a new personal residence in order to exclude any gain from the sale of the old residence.

Chad won a car valued at $25,000 from a game show.Because he immediately donated the car to the Red Cross,Chad can exclude $25,000 from gross income.

On February 1,Alan,a single individual,purchased his first personal residence for $400,000.On July 1,Alan sold this residence for $460,000 because he accepted a new job in another state.Consequently,Alan occupied the home for only 150 days.How much gain must Alan recognize?

For federal income tax purposes,a taxpayer may elect to deduct state and local sales taxes as an itemized deduction.

Which of the following is not a tax incentive for individuals to purchase a home instead of renting?

The federal income tax system provides incentives for individual taxpayers to meet their housing needs by purchasing instead of renting a home.

Losses realized on the sale of personal use assets are deductible.

Which of the following items is not included in the recipient's gross income?

Congress provides an indirect subsidy to charities by allowing a deduction for charitable contributions.

Mr.and Mrs.Frazier recognized a $723,000 gain on sale of a home that had been their principal residence for 29 years.They moved into a rented condominium in Naples,Florida.What are the tax consequences of the sale to the Fraziers?

A drunk driver seriously injured Leah.The court awarded her $200,000 for her physical injuries and $300,000 as punitive damages.Leah must include $300,000 in gross income.

Recipients of the Nobel Peace Prize must include the prize in gross income.

The cost of commuting to and from a place of employment is a nondeductible personal expense.

Real estate taxes deducted for regular tax purposes must be added back in computing alternative minimum taxable income (AMTI).

Taxes and Taxing Jurisdictions

Policy Standards for a Good Tax

Taxes As Transaction Costs

Maxims of Income Tax Planning

Tax Research

Taxable Income From Business Operations

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Nontaxable Exchanges

Sole Proprietorships, Partnerships, llcs, and S Corporations

The Corporate Taxpayer

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Compensation and Retirement Planning

Investment and Personal Financial Planning

The Tax Compliance Process

Filters

Exam 17: Tax Consequences of Personal Activities

Which of the following statements about tax subsidies for higher education is false?

Mr.and Mrs.Shohler received $25,200 Social Security benefits this year.Their only other source of income was Mrs.Shohler's $10,479 taxable pension from her former employer.How much of their Social Security is included in gross income?

This year,David paid his physician $6,200 for routine examinations and received a $3,000 reimbursement from his medical insurance company.David is allowed a $3,200 medical expense as an above-the-line deduction.

A child of divorced parents is considered a dependent of the parent with custody unless that parent agrees to allow the noncustodial parent to claim the dependency exemption.

A taxpayer must purchase a new personal residence in order to exclude any gain from the sale of the old residence.

Chad won a car valued at $25,000 from a game show.Because he immediately donated the car to the Red Cross,Chad can exclude $25,000 from gross income.

On February 1,Alan,a single individual,purchased his first personal residence for $400,000.On July 1,Alan sold this residence for $460,000 because he accepted a new job in another state.Consequently,Alan occupied the home for only 150 days.How much gain must Alan recognize?

For federal income tax purposes,a taxpayer may elect to deduct state and local sales taxes as an itemized deduction.

Which of the following is not a tax incentive for individuals to purchase a home instead of renting?

The federal income tax system provides incentives for individual taxpayers to meet their housing needs by purchasing instead of renting a home.

Losses realized on the sale of personal use assets are deductible.

Which of the following items is not included in the recipient's gross income?

Congress provides an indirect subsidy to charities by allowing a deduction for charitable contributions.

Mr.and Mrs.Frazier recognized a $723,000 gain on sale of a home that had been their principal residence for 29 years.They moved into a rented condominium in Naples,Florida.What are the tax consequences of the sale to the Fraziers?

A drunk driver seriously injured Leah.The court awarded her $200,000 for her physical injuries and $300,000 as punitive damages.Leah must include $300,000 in gross income.

Recipients of the Nobel Peace Prize must include the prize in gross income.

The cost of commuting to and from a place of employment is a nondeductible personal expense.

Real estate taxes deducted for regular tax purposes must be added back in computing alternative minimum taxable income (AMTI).

Taxes and Taxing Jurisdictions

Policy Standards for a Good Tax

Taxes As Transaction Costs

Maxims of Income Tax Planning

Tax Research

Taxable Income From Business Operations

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Nontaxable Exchanges

Sole Proprietorships, Partnerships, llcs, and S Corporations

The Corporate Taxpayer

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Compensation and Retirement Planning

Investment and Personal Financial Planning

The Tax Compliance Process

Filters