Question 1

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 2

Wolfina's twins, Romulus and Remus, finished their first year of school at an accredited university in 2014. She paid $10,000 in qualified educational expenses for Romulus and $2,000 of qualifying expenses for Remus. Wolfina is a head of household with an AGI of $85,000. What amount of American opportunity credit may she claim?

Accepted Answer

The answer of Wolfina's twins, Romulus and Remus, finished their...

Question 3

Which of the following statements regarding the child tax credit is false?

Accepted Answer

A)  The child for whom the credit is claimed must be under the age of 15 at the end of the year 
B)  The credit is subject to phase-out based on the taxpayer's AGI 
C)  The full credit for a child who qualifies is $1,000 
D)  The child for whom the credit is claimed must meet the definition of a qualifying child 
A)  The child for whom the credit is claimed must be under the age of 15 at the end of the year 
B)  The credit is subject to phase-out based on the taxpayer's AGI 
C)  The full credit for a child who qualifies is $1,000 
D)  The child for whom the credit is claimed must meet the definition of a qualifying child

Question 4

Parents may claim a 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 5

Quantitatively, what is the relationship between the AGI phase-out thresholds for the child tax credit?

Accepted Answer

A) Head of household/Single = Married Filing Separately = Married Filing Jointly B) Head of household/Single Married Filing Jointly D) Head of household/Single > Married Filing Separately < Married Filing Jointly A) Head of household/Single = Married Filing Separately = Married Filing Jointly B) Head of household/Single Married Filing Jointly D) Head of household/Single > Married Filing Separately < Married Filing Jointly

Question 6

Which of the following is not true of the extension to file an individual tax return?

Accepted Answer

A)  It is granted automatically by the IRS if requested 
B)  It must be requested by the original due date of the return 
C)  It extends the due date for the return and associated tax payments beyond the original due date of the tax return 
D)  The extension is for six months beyond the original due date 
A)  It is granted automatically by the IRS if requested 
B)  It must be requested by the original due date of the return 
C)  It extends the due date for the return and associated tax payments beyond the original due date of the tax return 
D)  The extension is for six months beyond the original due date

Question 7

The wage base for which of the following taxes is capped?

Accepted Answer

A)  Federal income 
B)  Social Security 
C)  Medicare 
D)  Alternative minimum 
A)  Federal income 
B)  Social Security 
C)  Medicare 
D)  Alternative minimum

Question 8

Pyrrha, a 12-year-old dependent of Epimetheus and Pandora, received $2,100 of interest income in 2014. Her parents' marginal tax rate is 35%. What is Pyrrha's gross tax liability for the year?

Accepted Answer

The answer of Pyrrha, a 12-year-old dependent of Epimetheus and...

Question 9

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 10

Which of the following is not true of the American opportunity credit?

Accepted Answer

A)  A taxpayer with multiple eligible dependents can claim a credit for each dependent's qualifying expenses 
B)  The credit is available for students during their first four years of postsecondary education only 
C)  It is phased out based on the taxpayer's AGI 
D)  A taxpayer may not claim a credit unless the taxpayer pays a dependent's qualifying educational expenses 
A)  A taxpayer with multiple eligible dependents can claim a credit for each dependent's qualifying expenses 
B)  The credit is available for students during their first four years of postsecondary education only 
C)  It is phased out based on the taxpayer's AGI 
D)  A taxpayer may not claim a credit unless the taxpayer pays a dependent's qualifying educational expenses

Question 11

Looking at the following partial calendar for April, when will individual tax returns be due? $$\begin{array} { c} 
\begin{array} { | c | } 
\hline
{ \quad \quad \quad \quad \quad  \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad\text { April }  \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad  \quad \quad \quad \quad \quad \quad\quad \quad \quad \quad}
\end{array}\
\begin{array} { | r | r | r | r | r | r | r | } 
\hline \text { Sunday } & \text { Monday } & \text { Tuesday } & \text { Wednesday } & \text { Thursday } & \text { Friday } & \text { Saturday } \
\hline & & & & & & 1 \
\hline 2 & 3 & 4 & 5 & 6 & 7 & 8 \
\hline 9 & 10 & 11 & 12 & 13 & 14 & 15 \
\hline 16 & \begin{array} { r } 
17 \
\text { National } \
\text { Accountants } \
\text { Day }
\text { (Federal } \
\text { Holiday) }
\end{array} & 18 & 19 & 20 & 21 & 22 \
\hline

\end{array}
\end{array}$$

Accepted Answer

A)  Friday, April 14 
B)  Saturday, April 15 
C)  Sunday, April 16 
D)  Monday, April 17 
E)  Tuesday, April 18 
A)  Friday, April 14 
B)  Saturday, April 15 
C)  Sunday, April 16 
D)  Monday, April 17 
E)  Tuesday, April 18

Question 12

Which of the following best describes the manner in which self-employed taxpayers may deduct self-employment taxes?

Accepted Answer

A)  Deduct employer portion from AGI. 
B)  Deduct entire amount from AGI. 
C)  Deduct employer portion for AGI. 
D)  Deduct entire amount for AGI. 
E)  No deduction 
A)  Deduct employer portion from AGI. 
B)  Deduct entire amount from AGI. 
C)  Deduct employer portion for AGI. 
D)  Deduct entire amount for AGI. 
E)  No deduction

Question 13

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 14

Due to the alternative minimum tax rate structure, timing tax planning strategies are not effective under the alternative minimum tax system.

Accepted Answer

A) True 
 B)False

Question 15

An 80-year-old taxpayer with earned income and no dependent children could qualify for the earned income credit.

Accepted Answer

A) True 
 B)False

Question 16

Henry and Janice are married and file jointly. They have an AGI (and modified AGI) of $290,000, which includes $90,000 of salary, $170,000 of active business income, $10,000 of interest income, $15,000 of dividends, and $5,000 of long-term capital gains. What is Henry and Janice's Net Investment Income tax liability this year, rounded to the nearest whole dollar amount?

Accepted Answer

The answer of Henry and Janice are married and file...

Question 17

Maria and Tony are married. They are preparing to file their 2014 tax return. If they were to file as single taxpayers, Maria and Tony would report $10,000 and $70,000 of taxable income, respectively. On their joint tax return, their taxable income is $80,000. How much of a marriage penalty or benefit will Maria and Tony experience in 2014?

Accepted Answer

Filing jointly will

Question 18

Trudy is Jocelyn's friend. Trudy looks after Jocelyn's four-year-old son during the day so Jocelyn can go to work. During the year, Jocelyn paid Trudy $4,000 to care for her son. What is the amount of Jocelyn's child and dependent care credit if her AGI for the year was $30,000?

Accepted Answer

A)  $0 
B)  $810 
C)  $1,080 
D)  $3,000 
A)  $0 
B)  $810 
C)  $1,080 
D)  $3,000

Question 19

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 20

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

Accepted Answer

A) True 
 B)False

Exam 7: Individual Income Tax Computation and Tax Credits

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

Which of the following statements regarding the child tax credit is false?

Parents may claim a 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.

Quantitatively, what is the relationship between the AGI phase-out thresholds for the child tax credit?

Which of the following is not true of the extension to file an individual tax return?

The wage base for which of the following taxes is capped?

Pyrrha, a 12-year-old dependent of Epimetheus and Pandora, received $2,100 of interest income in 2014. Her parents' marginal tax rate is 35%. What is Pyrrha's gross tax liability for the year?

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 true of the American opportunity credit?

Looking at the following partial calendar for April, when will individual tax returns be due? April Sunday Monday Tuesday Wednesday Thursday Friday Saturday 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 National Accountants Day (Federal Holiday) 18 19 20 21 22

Which of the following best describes the manner in which self-employed taxpayers may deduct self-employment taxes?

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

Due to the alternative minimum tax rate structure, timing tax planning strategies are not effective under the alternative minimum tax system.

An 80-year-old taxpayer with earned income and no dependent children could qualify for the earned income credit.

Trudy is Jocelyn's friend. Trudy looks after Jocelyn's four-year-old son during the day so Jocelyn can go to work. During the year, Jocelyn paid Trudy $4,000 to care for her son. What is the amount of Jocelyn's child and dependent care credit if her AGI for the year was $30,000?

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

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

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

Entities Overview

Corporate Operations

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The Us Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning of the Cfa Institute

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