Question 1

The earned income credit is sometimes referred to as a negative income tax.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is not true of the lifetime learning credit?

Accepted Answer

A)  It is a nonrefundable credit. 
B)  The credit can be claimed by taxpayers who have graduated from college and are taking professional training courses to improve their job skills. 
C)  A taxpayer with multiple dependents can claim a credit for each dependent's qualifying expenses. 
D)  The credit is subject to phase out based on the taxpayer's AGI. 
A)  It is a nonrefundable credit. 
B)  The credit can be claimed by taxpayers who have graduated from college and are taking professional training courses to improve their job skills. 
C)  A taxpayer with multiple dependents can claim a credit for each dependent's qualifying expenses. 
D)  The credit is subject to phase out based on the taxpayer's AGI.

Question 3

All else equal, taxpayers are more likely to be classified as employees rather than independent contractors if they are allowed to determine their own working hours and work without frequent oversight.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements regarding the earned income credit is true?

Accepted Answer

A)  It is a nonrefundable credit 
B)  It is possible that a taxpayer with more earned income may receive more credit than a taxpayer with less earned income 
C)  A 70-year-old taxpayer with no dependents can qualify for the credit in certain circumstances 
D)  A taxpayer whose only source of income is interest from corporate bonds is eligible for the credit 
A)  It is a nonrefundable credit 
B)  It is possible that a taxpayer with more earned income may receive more credit than a taxpayer with less earned income 
C)  A 70-year-old taxpayer with no dependents can qualify for the credit in certain circumstances 
D)  A taxpayer whose only source of income is interest from corporate bonds is eligible for the credit

Question 5

The American opportunity credit is available only for those students who are in their first or second year of postsecondary education.

Accepted Answer

A) True 
 B)False

Question 6

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 7

The AMT exemption amount is phased-out for high income taxpayers.

Accepted Answer

A) True 
 B)False

Question 8

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 9

Miley, a single taxpayer, plans on reporting $27,900 of taxable income this year (all of her income is from a part-time job). She is considering applying for a second part-time job that would give her an additional $10,000 of taxable income. By how much will the income from the second job increase her tax liability (use the tax rate schedules)?

Accepted Answer

A)  $1,000 
B)  $1,500 
C)  $1,600 
D)  $2,500 
A)  $1,000 
B)  $1,500 
C)  $1,600 
D)  $2,500

Question 10

If an employer withholds taxes from an employee, in general, when are these taxes treated as paid to the IRS?

Accepted Answer

A)  As withheld 
B)  As the employee requests on his/her W-4 form 
C)  Evenly throughout the year 
D)  On April 15 
A)  As withheld 
B)  As the employee requests on his/her W-4 form 
C)  Evenly throughout the year 
D)  On April 15

Question 11

Linda is a qualifying widow in 2014. In 2014, she reported $75,000 of taxable income (all ordinary). What is her gross tax liability using the tax rate schedules?

Accepted Answer

A)  $10,463 
B)  $14,606 
C)  $14,679 
D)  $13,163 
A)  $10,463 
B)  $14,606 
C)  $14,679 
D)  $13,163

Question 12

Generally, income from an active trade or business is subject to the 3.8% Net Investment Income tax.

Accepted Answer

A) True 
 B)False

Question 13

Candace is claimed as a dependent on her parent's tax return. Her parents' ordinary income marginal tax rate is 33%. In 2014, 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

The answer of Candace is claimed as a dependent on...

Question 14

During 2014, Montoya (age 15) received $2,200 from a corporate bond. He also received $600 from a savings account established for him by his parents. Montoya lives with his parents and he is their dependent. What is Montoya's taxable income?

Accepted Answer

A)  $0 
B)  $2,200 
C)  $2,800 
D)  $1,800 
A)  $0 
B)  $2,200 
C)  $2,800 
D)  $1,800

Question 15

The child and dependent care credit entitles qualifying taxpayers to a credit equal to the full amount of qualified expenses.

Accepted Answer

A) True 
 B)False

Question 16

If a married couple has one primary breadwinner, filing a joint return will likely result in a marriage penalty.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following items is not added back to regular taxable income in computing alternative minimum taxable income?

Accepted Answer

A)  Home mortgage interest expense 
B)  Real property taxes 
C)  Tax exempt interest from a private activity bond issued in 2007 
D)  Miscellaneous itemized deductions in excess of the 2% floor 
A)  Home mortgage interest expense 
B)  Real property taxes 
C)  Tax exempt interest from a private activity bond issued in 2007 
D)  Miscellaneous itemized deductions in excess of the 2% floor

Question 18

Baker earned $225,000 of salary as an employee in 2014. How much should his employer have withheld from his paycheck for FICA taxes (rounded to the nearest whole dollar amount)?

Accepted Answer

A)  $10,742 
B)  $10,517 
C)  $7,254 
D)  $17,213 
A)  $10,742 
B)  $10,517 
C)  $7,254 
D)  $17,213

Question 19

For taxpayers who receive both salary as an employee and self-employment income as an independent contractor in the same year, which of the following statements regarding FICA and self-employment taxes is most accurate?

Accepted Answer

A)  The Social Security limit applies to the salary but not to the self-employment income. 
B)  The Social Security limit applies to the self-employment income but not to the salary. 
C)  Salary is first applied against the Social Security limit and then self-employment income is applied against the Social Security limit. 
D)  Self-employment income is first applied against the Social Security limit and then salary is applied against the Social Security limit. 
A)  The Social Security limit applies to the salary but not to the self-employment income. 
B)  The Social Security limit applies to the self-employment income but not to the salary. 
C)  Salary is first applied against the Social Security limit and then self-employment income is applied against the Social Security limit. 
D)  Self-employment income is first applied against the Social Security limit and then salary is applied against the Social Security limit.

Question 20

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)  Two of these 
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)  Two of these

The earned income credit is sometimes referred to as a negative income tax.

Which of the following is not true of the lifetime learning credit?

All else equal, taxpayers are more likely to be classified as employees rather than independent contractors if they are allowed to determine their own working hours and work without frequent oversight.

Which of the following statements regarding the earned income credit is true?

The American opportunity credit is available only for those students who are in their first or second year of postsecondary education.

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

The AMT exemption amount is phased-out for high income taxpayers.

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.

If an employer withholds taxes from an employee, in general, when are these taxes treated as paid to the IRS?

Linda is a qualifying widow in 2014. In 2014, she reported $75,000 of taxable income (all ordinary). What is her gross tax liability using the tax rate schedules?

Generally, income from an active trade or business is subject to the 3.8% Net Investment Income tax.

During 2014, Montoya (age 15) received $2,200 from a corporate bond. He also received $600 from a savings account established for him by his parents. Montoya lives with his parents and he is their dependent. What is Montoya's taxable income?

The child and dependent care credit entitles qualifying taxpayers to a credit equal to the full amount of qualified expenses.

If a married couple has one primary breadwinner, filing a joint return will likely result in a marriage penalty.

Which of the following items is not added back to regular taxable income in computing alternative minimum taxable income?

Baker earned $225,000 of salary as an employee in 2014. How much should his employer have withheld from his paycheck for FICA taxes (rounded to the nearest whole dollar amount)?

For taxpayers who receive both salary as an employee and self-employment income as an independent contractor in the same year, which of the following statements regarding FICA and self-employment taxes is most accurate?

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

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual Deductions

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Investments

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Filters

Exam 7: Individual Income Tax Computation and Tax Credits

The earned income credit is sometimes referred to as a negative income tax.

Which of the following is not true of the lifetime learning credit?

All else equal, taxpayers are more likely to be classified as employees rather than independent contractors if they are allowed to determine their own working hours and work without frequent oversight.

Which of the following statements regarding the earned income credit is true?

The American opportunity credit is available only for those students who are in their first or second year of postsecondary education.

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

The AMT exemption amount is phased-out for high income taxpayers.

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.

If an employer withholds taxes from an employee, in general, when are these taxes treated as paid to the IRS?

Linda is a qualifying widow in 2014. In 2014, she reported $75,000 of taxable income (all ordinary). What is her gross tax liability using the tax rate schedules?

Generally, income from an active trade or business is subject to the 3.8% Net Investment Income tax.

During 2014, Montoya (age 15) received $2,200 from a corporate bond. He also received $600 from a savings account established for him by his parents. Montoya lives with his parents and he is their dependent. What is Montoya's taxable income?

The child and dependent care credit entitles qualifying taxpayers to a credit equal to the full amount of qualified expenses.

If a married couple has one primary breadwinner, filing a joint return will likely result in a marriage penalty.

Which of the following items is not added back to regular taxable income in computing alternative minimum taxable income?

Baker earned $225,000 of salary as an employee in 2014. How much should his employer have withheld from his paycheck for FICA taxes (rounded to the nearest whole dollar amount)?

For taxpayers who receive both salary as an employee and self-employment income as an independent contractor in the same year, which of the following statements regarding FICA and self-employment taxes is most accurate?

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

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual Deductions

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Investments

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Filters