Question 1

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 A

Question 2

Which of the following statements regarding late filing penalties is true?

Accepted Answer

A)  If a taxpayer fails to file a tax return, the late filing penalty will continue to grow until the taxpayer files the tax return. 
B)  The amount of the late filing penalty is the same for both fraudulent failure to file and non fraudulent failure to file. 
C)  Taxpayers who owe no tax as of the due date of their tax returns are not subject to late filing penalties even if they file late. 
D)  None of these. 
A)  If a taxpayer fails to file a tax return, the late filing penalty will continue to grow until the taxpayer files the tax return. 
B)  The amount of the late filing penalty is the same for both fraudulent failure to file and non fraudulent failure to file. 
C)  Taxpayers who owe no tax as of the due date of their tax returns are not subject to late filing penalties even if they file late. 
D)  None of these. C

Question 3

All capital gains are taxed at preferential rates.

Accepted Answer

A) True 
 B)False  False

Question 4

Parents may claim a child and dependent care credit for expenses incurred in providing for their dependents while the parents work as long as the children are over age 14 and under age 20 at year end.

Accepted Answer

A) True 
 B)False

Question 5

The alternative minimum tax system requires taxpayers to apply an alternative tax rate on the regular income tax base to determine the amount of the alternative minimum tax.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following does not affect the amount of the earned income credit?

Accepted Answer

A)  Filing status 
B)  Amount of credit taken in previous years 
C)  Number of qualifying children 
D)  Taxpayer's AGI 
A)  Filing status 
B)  Amount of credit taken in previous years 
C)  Number of qualifying children 
D)  Taxpayer's AGI

Question 7

Max is a 14-year-old dependent of his parents. During 2014, Max earned $1,800 working part time jobs and he received $1,500 of interest income from corporate bonds that were given to him last year. What is Max's 2014 taxable income?

Accepted Answer

The answer of Max is a 14-year-old dependent of his...

Question 8

For married couples, the Social Security wage base limitation applies separately to each spouse.

Accepted Answer

A) True 
 B)False

Question 9

Hestia (age 17) is claimed as a dependent by her parents, Rhea and Chronus. In 2014, Hestia received $1,000 of interest income from a corporate bond that she owns. In addition, she has earned income of $200. What is her taxable income for 2014?

Accepted Answer

A)  $0 
B)  $200 
C)  $650 
D)  $1,200 
A)  $0 
B)  $200 
C)  $650 
D)  $1,200

Question 10

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 11

Depending on the year, the original (unextended) due date for an individual's tax return may be before April 15.

Accepted Answer

A) True 
 B)False

Question 12

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 13

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 14

The late payment penalty is based on the amount of tax owed and the number of days that the tax is not paid. The maximum amount of the penalty is unlimited.

Accepted Answer

A) True 
 B)False

Question 15

The computation of the alternative minimum tax base begins with regular taxable income. Which of the following is not part of the formula for computing the alternative minimum tax base?

Accepted Answer

A)  Subtract personal exemptions 
B)  Add the standard deduction amount if used for regular tax 
C)  Subtract the AMT exemption amount (if any) 
D)  Add back tax exempt interest from a private activity bond not issued in 2009 or 2010. 
A)  Subtract personal exemptions 
B)  Add the standard deduction amount if used for regular tax 
C)  Subtract the AMT exemption amount (if any) 
D)  Add back tax exempt interest from a private activity bond not issued in 2009 or 2010.

Question 16

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 17

Long-term capital gains are taxed at the stated AMT rate for purposes of the alternative minimum tax.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following suggests that a working taxpayer is an independent contractor rather than an employee?

Accepted Answer

A)  Works for more than one firm 
B)  May realize a loss from business activities 
C)  Sets own working hours 
D)  Works somewhere other than on employer premises 
E)  All of these suggest independent contractor status 
A)  Works for more than one firm 
B)  May realize a loss from business activities 
C)  Sets own working hours 
D)  Works somewhere other than on employer premises 
E)  All of these suggest independent contractor status

Question 19

Hera earned $175,000 salary in 2014. Her husband, Zeus, earned $100,000 salary in 2014. Hera and Zeus file a joint tax return. How much FICA taxes will they owe in 2014?

Accepted Answer

A)  $21,263 
B)  $17,667 
C)  $13,454 
D)  $4,213 
A)  $21,263 
B)  $17,667 
C)  $13,454 
D)  $4,213

Question 20

Demeter is a single taxpayer. Her AGI in 2014 is $81,200. Demeter may claim a child tax credit for her daughter Persephone. What amount of child tax credit is Demeter entitled to claim after any applicable phase-out?

Accepted Answer

The answer of Demeter is a single taxpayer. Her AGI...

Exam 7: Individual Income Tax Computation and Tax Credits

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

Which of the following statements regarding late filing penalties is true?

All capital gains are taxed at preferential rates.

Parents may claim a child and dependent care credit for expenses incurred in providing for their dependents while the parents work as long as the children are over age 14 and under age 20 at year end.

The alternative minimum tax system requires taxpayers to apply an alternative tax rate on the regular income tax base to determine the amount of the alternative minimum tax.

Which of the following does not affect the amount of the earned income credit?

Max is a 14-year-old dependent of his parents. During 2014, Max earned $1,800 working part time jobs and he received $1,500 of interest income from corporate bonds that were given to him last year. What is Max's 2014 taxable income?

For married couples, the Social Security wage base limitation applies separately to each spouse.

Hestia (age 17) is claimed as a dependent by her parents, Rhea and Chronus. In 2014, Hestia received $1,000 of interest income from a corporate bond that she owns. In addition, she has earned income of $200. What is her taxable income for 2014?

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

Depending on the year, the original (unextended) due date for an individual's tax return may be before April 15.

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

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

The late payment penalty is based on the amount of tax owed and the number of days that the tax is not paid. The maximum amount of the penalty is unlimited.

The computation of the alternative minimum tax base begins with regular taxable income. Which of the following is not part of the formula for computing the alternative minimum tax base?

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

Long-term capital gains are taxed at the stated AMT rate for purposes of the alternative minimum tax.

Which of the following suggests that a working taxpayer is an independent contractor rather than an employee?

Hera earned $175,000 salary in 2014. Her husband, Zeus, earned $100,000 salary in 2014. Hera and Zeus file a joint tax return. How much FICA taxes will they owe in 2014?

Demeter is a single taxpayer. Her AGI in 2014 is $81,200. Demeter may claim a child tax credit for her daughter Persephone. What amount of child tax credit is Demeter entitled to claim after any applicable phase-out?

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

Filters