Question 1

Jocelyn, a single taxpayer, had $742,000 of taxable income in 2014. All of the income is ordinary. What is her tax liability for the year?

Accepted Answer

$250,878, computed u

Question 2

Akiko and Hitachi (married filing jointly for 2014) are both educators. They attended a conference to further their job-related skills. Tuition for the conference was $2,000 for each person. Their AGI was $114,000. How much lifetime learning credit can they claim?

Accepted Answer

The answer of Akiko and Hitachi (married filing jointly for...

Question 3

The Olympians have three children. The kiddie tax applies to unearned income received by which of the following children?

Accepted Answer

A)  Poseidon is a 20-year-old full-time student who does not support himself 
B)  Demeter, a 23-year-old full-time student who supports herself with a job at a grocery store 
C)  Zeus is 20 years old and not a student 
D)  Two of these. 
E)  None of these. 
A)  Poseidon is a 20-year-old full-time student who does not support himself 
B)  Demeter, a 23-year-old full-time student who supports herself with a job at a grocery store 
C)  Zeus is 20 years old and not a student 
D)  Two of these. 
E)  None of these.

Question 4

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 5

What happens if the taxpayer owes an underpayment penalty, but does not compute it on Form 2210?

Accepted Answer

A)  Nothing, unless the taxpayer is audited 
B)  The taxpayer is immediately sent to the Tax Court 
C)  The IRS will compute and assess the penalty 
D)  The penalty is increased by five percentage points 
A)  Nothing, unless the taxpayer is audited 
B)  The taxpayer is immediately sent to the Tax Court 
C)  The IRS will compute and assess the penalty 
D)  The penalty is increased by five percentage points

Question 6

Which of the following statements regarding the AMT exemption amounts is not true?

Accepted Answer

A)  The amount of the exemption depends on the taxpayer's filing status. 
B)  The exemption amount is completely phased-out for high income taxpayers. 
C)  Taxpayers must choose whether they will claim the exemption or itemize deductions. 
D)  None of these statements is false (All of these statements are true). 
A)  The amount of the exemption depends on the taxpayer's filing status. 
B)  The exemption amount is completely phased-out for high income taxpayers. 
C)  Taxpayers must choose whether they will claim the exemption or itemize deductions. 
D)  None of these statements is false (All of these statements are true).

Question 7

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 8

Which of the following statements regarding the self-employment tax is most accurate?

Accepted Answer

A)  The self-employment tax base is generally the taxpayer's net income from self-employment (usually net income from Schedule 
C) . 
B)  Taxpayers who report less than $600 of net income from self-employment (usually net income from Schedule 
C)  are not required to pay self employment taxes. 
C)  The self-employment tax base is net earnings from self employment which is less than net income from self-employment. 
D)  The Social Security tax limit does not apply to self-employment taxes. 
A)  The self-employment tax base is generally the taxpayer's net income from self-employment (usually net income from Schedule 
C) . 
B)  Taxpayers who report less than $600 of net income from self-employment (usually net income from Schedule 
C)  are not required to pay self employment taxes. 
C)  The self-employment tax base is net earnings from self employment which is less than net income from self-employment. 
D)  The Social Security tax limit does not apply to self-employment taxes.

Question 9

If there is not enough gross tax liability to use the foreign tax credit, __________.

Accepted Answer

A)  it expires unused 
B)  it is carried back 2 years or forward 20 years 
C)  it is carried back 3 years or forward 5 years 
D)  it is carried back 1 year or forward 10 years 
A)  it expires unused 
B)  it is carried back 2 years or forward 20 years 
C)  it is carried back 3 years or forward 5 years 
D)  it is carried back 1 year or forward 10 years

Question 10

Alton reported net income from his sole proprietorship of $90,000. To determine his self employment tax, he would multiply $90,000 by the self-employment tax rate.

Accepted Answer

A) True 
 B)False

Question 11

Atlas earned $17,300 from his sole proprietorship in 2014. This was his only source of income. How much in self-employment taxes will Atlas be able to deduct?

Accepted Answer

The answer of Atlas earned $17,300 from his sole proprietorship...

Question 12

Paul and Melissa plan on filing jointly in 2014. For the year, the couple reported taxable income of $130,000. What is their gross tax liability?

Accepted Answer

$24,213, c

Question 13

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

Question 14

Allen Green is a single taxpayer with an AGI (and modified AGI) of $210,000, which includes $170,000 of salary, $25,000 of interest income, $10,000 of dividends, and $5,000 of long-term capital gains. What is Allen's Net Investment Income tax liability this year, rounded to the nearest whole dollar amount?

Accepted Answer

A)  $2,465 
B)  $1,520 
C)  $570 
D)  $380 
A)  $2,465 
B)  $1,520 
C)  $570 
D)  $380

Question 15

Harmony was self-employed for the first half of 2014, earning $18,000 of Schedule C (business) net income. During the second half of the year, she began working as an employee and earned $38,000 in salary. What amount of self-employment taxes is Harmony required to pay?

Accepted Answer

The answer of Harmony was self-employed for the first half...

Question 16

Jackson earned a salary of $254,000 in 2014. What amount of FICA taxes should Jackson's employer withhold from his paycheck?

Accepted Answer

The answer of Jackson earned a salary of $254,000 in...

Question 17

Which of the following statements best describes the deductions independent contractors may claim for valid business expenses?

Accepted Answer

A)  for AGI deductions 
B)  from AGI deductions not subject to the two percent of AGI floor 
C)  from AGI deductions subject to a two percent of AGI floor 
D)  for AGI deductions limited to income from the business activities 
A)  for AGI deductions 
B)  from AGI deductions not subject to the two percent of AGI floor 
C)  from AGI deductions subject to a two percent of AGI floor 
D)  for AGI deductions limited to income from the business activities

Question 18

Which of the following is not a taxpayer filing status for purposes of determining the appropriate tax rate schedule?

Accepted Answer

A)  Head of Household 
B)  Qualifying Widow or Widower 
C)  Married Filing Separately 
D)  Single 
E)  All of these are taxpayer filing statuses 
A)  Head of Household 
B)  Qualifying Widow or Widower 
C)  Married Filing Separately 
D)  Single 
E)  All of these are taxpayer filing statuses

Question 19

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 20

Jack paid $5,000 in daycare expenses for his five-year-old daughter so he could work. His AGI for the year was $37,500 (all earned income). What is the amount of his child and dependent care credit?

Accepted Answer

The answer of Jack paid $5,000 in daycare expenses for...

Exam 7: Individual Income Tax Computation and Tax Credits

Jocelyn, a single taxpayer, had $742,000 of taxable income in 2014. All of the income is ordinary. What is her tax liability for the year?

Akiko and Hitachi (married filing jointly for 2014) are both educators. They attended a conference to further their job-related skills. Tuition for the conference was $2,000 for each person. Their AGI was $114,000. How much lifetime learning credit can they claim?

The Olympians have three children. The kiddie tax applies to unearned income received by which of the following children?

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.

What happens if the taxpayer owes an underpayment penalty, but does not compute it on Form 2210?

Which of the following statements regarding the AMT exemption amounts is not true?

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.

Which of the following statements regarding the self-employment tax is most accurate?

If there is not enough gross tax liability to use the foreign tax credit, __________.

Alton reported net income from his sole proprietorship of $90,000. To determine his self employment tax, he would multiply $90,000 by the self-employment tax rate.

Atlas earned $17,300 from his sole proprietorship in 2014. This was his only source of income. How much in self-employment taxes will Atlas be able to deduct?

Paul and Melissa plan on filing jointly in 2014. For the year, the couple reported taxable income of $130,000. What is their gross tax liability?

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

Harmony was self-employed for the first half of 2014, earning $18,000 of Schedule C (business) net income. During the second half of the year, she began working as an employee and earned $38,000 in salary. What amount of self-employment taxes is Harmony required to pay?

Jackson earned a salary of $254,000 in 2014. What amount of FICA taxes should Jackson's employer withhold from his paycheck?

Which of the following statements best describes the deductions independent contractors may claim for valid business expenses?

Which of the following is not a taxpayer filing status for purposes of determining the appropriate tax rate schedule?

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

Jack paid $5,000 in daycare expenses for his five-year-old daughter so he could work. His AGI for the year was $37,500 (all earned income). What is the amount of his child and dependent care credit?

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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