Question 1

Which of the following statements regarding personal and dependency exemptions is true?

Accepted Answer

A)  To qualify as a dependent of another, an individual must be a resident of the United States. 
B)  To qualify as a dependent of another, an individual may not file a joint return with the individual's spouse under any circumstance. 
C)  To qualify as a dependent of another, an individual must have a family relationship with the other person. 
D)  To qualify as a dependent of another, an individual must be either a qualifying child or a qualifying relative of the other person. 
A)  To qualify as a dependent of another, an individual must be a resident of the United States. 
B)  To qualify as a dependent of another, an individual may not file a joint return with the individual's spouse under any circumstance. 
C)  To qualify as a dependent of another, an individual must have a family relationship with the other person. 
D)  To qualify as a dependent of another, an individual must be either a qualifying child or a qualifying relative of the other person.

Question 2

The relationship requirement for qualifying relative includes cousins.

Accepted Answer

A) True 
 B)False

Question 3

Earl and Lawanda Jackson have been married for 15 years. They have no children. Ned, who is an old friend from high school, has been living with the Jacksons during the current year. Which of the following is a true statement regarding whether the Jacksons can claim a dependency exemption for Ned in the current year?

Accepted Answer

A)  If Ned moved into the Jackson's home in June and he lived there for the remainder of the year, he may qualify as the Jackson's qualifying relative. 
B)  Assume that Ned originally moved into the Jackson's home two years ago and he has lived there ever since. If, this year, Ned earned $3,000 at a part time job and he received $5,000 in municipal bond interest, he may qualify as the Jackson's dependent as long as the Jacksons provided more than half his support. 
C)  If Ned lived in the Jackson's home for the entire year, he will qualify as their dependent no matter who provided his support. 
D)  If Ned is over 19 or he is not a full-time student, he cannot qualify as the Jackson's dependent. 
A)  If Ned moved into the Jackson's home in June and he lived there for the remainder of the year, he may qualify as the Jackson's qualifying relative. 
B)  Assume that Ned originally moved into the Jackson's home two years ago and he has lived there ever since. If, this year, Ned earned $3,000 at a part time job and he received $5,000 in municipal bond interest, he may qualify as the Jackson's dependent as long as the Jacksons provided more than half his support. 
C)  If Ned lived in the Jackson's home for the entire year, he will qualify as their dependent no matter who provided his support. 
D)  If Ned is over 19 or he is not a full-time student, he cannot qualify as the Jackson's dependent.

Question 4

What is the couple's taxable income?

Accepted Answer

$38,150, s

Question 5

For AGI deductions are commonly referred to as deductions "above the line."

Accepted Answer

A) True 
 B)False

Question 6

What is the couple's adjusted gross income?

Accepted Answer

$62,400, s

Question 7

An individual may meet the relationship test to be a taxpayer's qualifying relative even if the individual has no family relationship with the taxpayer.

Accepted Answer

A) True 
 B)False

Question 8

Tax credits reduce taxable income dollar for dollar.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements regarding exclusions and/or deferrals is false?

Accepted Answer

A)  Exclusions are favorable because taxpayers never pay tax on income that is excluded. 
B)  Interest income from municipal bonds is excluded from gross income. 
C)  Deferrals are income items taxpayers realize in one year but include in gross income in a subsequent year. 
D)  An income item need not be realized in order to qualify as an exclusion item. 
A)  Exclusions are favorable because taxpayers never pay tax on income that is excluded. 
B)  Interest income from municipal bonds is excluded from gross income. 
C)  Deferrals are income items taxpayers realize in one year but include in gross income in a subsequent year. 
D)  An income item need not be realized in order to qualify as an exclusion item.

Question 10

Which of the following statements regarding the difference between the requirements for a qualifying child and the requirements for a qualifying relative is false?

Accepted Answer

A)  The relationship requirement is more broadly defined (more inclusive) for qualifying relatives than for qualifying children. 
B)  Qualifying children are subject to age restrictions while qualifying relatives are not. 
C)  The support test for qualifying relatives focuses on the support the potential dependent self provides while the support test for qualifying children focuses on the support the taxpayer provides. 
D)  Qualifying relatives are subject to a gross income restriction while qualifying children are not. 
A)  The relationship requirement is more broadly defined (more inclusive) for qualifying relatives than for qualifying children. 
B)  Qualifying children are subject to age restrictions while qualifying relatives are not. 
C)  The support test for qualifying relatives focuses on the support the potential dependent self provides while the support test for qualifying children focuses on the support the taxpayer provides. 
D)  Qualifying relatives are subject to a gross income restriction while qualifying children are not.

Question 11

Taxpayers are generally allowed to claim deductions for expenditures unless a specific tax provision indicates the expenditure is not deductible.

Accepted Answer

A) True 
 B)False

Question 12

Charles, who is single, pays all of the costs of maintaining a home for himself and Damarcus. Charles and Damarcus have no family relationship but Damarcus lives with Charles for the entire year. Damarcus qualifies as a qualifying relative for Charles (Charles claims a dependency exemption for Damarcus on his tax return). Charles qualifies for head of household filing status.

Accepted Answer

A) True 
 B)False

Question 13

In order to be a qualifying relative of another, an individual's gross income must be less than ________.

Accepted Answer

A)  the applicable standard deduction amount 
B)  the personal and dependency exemption amount 
C)  one-half of the individual's support 
D)  None of these 
A)  the applicable standard deduction amount 
B)  the personal and dependency exemption amount 
C)  one-half of the individual's support 
D)  None of these

Question 14

The relationship requirement is more broadly defined (includes more relationships) for a qualifying relative than it is for a qualifying child.

Accepted Answer

A) True 
 B)False

Question 15

When determining whether a child meets the qualifying child support test for the child's grandparents, scholarships earned by the child do not count as self support provided by the child.

Accepted Answer

A) True 
 B)False

Question 16

William and Charlotte Collins divorced in November of year 1. William moved out and Charlotte remained in their house with their 10-month-old daughter Autumn. Diana, Charlotte's mother, lived in the home and acted as Autumn's nanny for all of year 1. William provided 70% of Autumn's support, Diana provided 20%, and Charlotte provided 10%. When the time came to file their tax returns for year 1, William, Charlotte, and Diana each wanted to claim Autumn as a dependent. Their respective AGIs for year 1 were $50,000, $35,000, and $52,000. Who has priority to claim Autumn as a dependent?

Accepted Answer

A)  William 
B)  Charlotte 
C)  Diana 
D)  They must negotiate amongst themselves. 
A)  William 
B)  Charlotte 
C)  Diana 
D)  They must negotiate amongst themselves.

Question 17

Inventory is a capital asset.

Accepted Answer

A) True 
 B)False

Question 18

The Inouyes filed jointly in 2014. Their AGI is $78,000. They reported $16,000 of itemized deductions and they have two children, one of whom qualifies as their dependent. The 2014 standard deduction amount is $12,400 and each exemption is $3,950. What is the total amount of from AGI deductions they are allowed to claim on their 2014 tax return?

Accepted Answer

$27,850, determined as follows:
From AGI

Question 19

Catherine de Bourgh has one child, Anne, who is 18 years old at the end of the year. Anne lived at home for seven months during the year before leaving home to attend State University for the rest of the year. During the year, Anne earned $6,000 while working part time. Catherine provided 80 percent of Anne's support and Anne provided the rest. Which of the following statements regarding whether Anne is Catherine's qualifying child for the current year is correct?

Accepted Answer

A)  Anne is a qualifying child of Catherine. 
B)  Anne is not a qualifying child of Catherine because she fails the gross income test. 
C)  Anne is not a qualifying child of Catherine because she fails the residence test. 
D)  Anne is not a qualifying child of Catherine because she fails the support test. 
A)  Anne is a qualifying child of Catherine. 
B)  Anne is not a qualifying child of Catherine because she fails the gross income test. 
C)  Anne is not a qualifying child of Catherine because she fails the residence test. 
D)  Anne is not a qualifying child of Catherine because she fails the support test.

Question 20

Which of the following statements is true:

Accepted Answer

A)  Income character determines the tax year in which the income is taxed. 
B)  Income character depends on the taxpayer's filing status. 
C)  Qualified dividend income is taxed at a lower rate than the same amount of ordinary income. 
D)  A taxpayer selling a capital asset at a gain recognizes ordinary income. 
A)  Income character determines the tax year in which the income is taxed. 
B)  Income character depends on the taxpayer's filing status. 
C)  Qualified dividend income is taxed at a lower rate than the same amount of ordinary income. 
D)  A taxpayer selling a capital asset at a gain recognizes ordinary income.

Which of the following statements regarding personal and dependency exemptions is true?

The relationship requirement for qualifying relative includes cousins.

What is the couple's taxable income?

For AGI deductions are commonly referred to as deductions "above the line."

What is the couple's adjusted gross income?

An individual may meet the relationship test to be a taxpayer's qualifying relative even if the individual has no family relationship with the taxpayer.

Tax credits reduce taxable income dollar for dollar.

Which of the following statements regarding exclusions and/or deferrals is false?

Which of the following statements regarding the difference between the requirements for a qualifying child and the requirements for a qualifying relative is false?

Taxpayers are generally allowed to claim deductions for expenditures unless a specific tax provision indicates the expenditure is not deductible.

In order to be a qualifying relative of another, an individual's gross income must be less than ________.

The relationship requirement is more broadly defined (includes more relationships) for a qualifying relative than it is for a qualifying child.

When determining whether a child meets the qualifying child support test for the child's grandparents, scholarships earned by the child do not count as self support provided by the child.

Inventory is a capital asset.

Which of the following statements is true:

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Gross Income and Exclusions

Individual Deductions

Individual Income Tax Computation and Tax Credits

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 4: Individual Income Tax Overview, Exemptions, and Filing Status

Which of the following statements regarding personal and dependency exemptions is true?

The relationship requirement for qualifying relative includes cousins.

What is the couple's taxable income?

For AGI deductions are commonly referred to as deductions "above the line."

What is the couple's adjusted gross income?

An individual may meet the relationship test to be a taxpayer's qualifying relative even if the individual has no family relationship with the taxpayer.

Tax credits reduce taxable income dollar for dollar.

Which of the following statements regarding exclusions and/or deferrals is false?

Which of the following statements regarding the difference between the requirements for a qualifying child and the requirements for a qualifying relative is false?

Taxpayers are generally allowed to claim deductions for expenditures unless a specific tax provision indicates the expenditure is not deductible.

In order to be a qualifying relative of another, an individual's gross income must be less than ________.

The relationship requirement is more broadly defined (includes more relationships) for a qualifying relative than it is for a qualifying child.

When determining whether a child meets the qualifying child support test for the child's grandparents, scholarships earned by the child do not count as self support provided by the child.

Inventory is a capital asset.

Which of the following statements is true:

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Gross Income and Exclusions

Individual Deductions

Individual Income Tax Computation and Tax Credits

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