Question 1

Which of the following is not one of the general tax credit categories?

Accepted Answer

A)  Nonrefundable personal 
B)  Refundable personal 
C)  Business 
D)  Refundable business 
A)  Nonrefundable personal 
B)  Refundable personal 
C)  Business 
D)  Refundable business

Question 2

During all of 2014, Mr. and Mrs. Clay lived with their four children (all are under the age of 17). They provided over one-half of the support for each child. Mr. and Mrs. Clay file jointly for 2014. Neither is blind, and both are under age 65. They reported the following tax-related information for the year $\begin{array}{llcc}
  \text {Salary income  } &\$125,000  \
 \text {  Prize from local radio station} &1,500\
\
 \text {Medical expenses (no health insurance)  } &4,000\
 \text {Real estate taxes  } &4,200\
 \text { Alimony paid by Mr. Clay } &12,000\
 \text {State income taxes withheld in 2014  } &1,800\
  \text {State income taxes paid with 2014 tax return (return was filed  } &  \
 \text { in April, 2015)  } &1,500\
 \text {Federal income tax withholding  } &7,500\
 \text { Qualified home mortgage interest } &11,000\
 \text {Charitable contributions  } &4,000\
\end{array}$
 A. What is the Clays' taxes payable or (refund due) (ignore the alternative minimum tax)?
B. What is the Clays' tentative minimum tax and alternative minimum tax?

Accepted Answer

A. Tax refund is $1,687.
B. A

Question 3

Which of the following statements regarding FICA taxes is true?

Accepted Answer

A)  Low income employees are not required to pay FICA taxes. 
B)  An employee who has two different employers during the year may be entitled to a tax credit for overpaid FICA taxes. 
C)  The maximum amount of Medicare taxes an employee is required to pay is capped each year but the maximum amount of Social Security taxes is not. 
D)  The wage base limit for Social Security taxes depends on the taxpayer's filing status. 
A)  Low income employees are not required to pay FICA taxes. 
B)  An employee who has two different employers during the year may be entitled to a tax credit for overpaid FICA taxes. 
C)  The maximum amount of Medicare taxes an employee is required to pay is capped each year but the maximum amount of Social Security taxes is not. 
D)  The wage base limit for Social Security taxes depends on the taxpayer's filing status.

Question 4

Cassy reports a gross tax liability of $1,000. She also claims $400 of nonrefundable personal credits, $700 of refundable personal credits, and $200 of business credits. What is Cassy's tax refund or tax liability due after applying the credits?

Accepted Answer

A)  $1,000 taxes payable 
B)  $0 refund or taxes payable 
C)  $700 refund 
D)  $300 refund 
A)  $1,000 taxes payable 
B)  $0 refund or taxes payable 
C)  $700 refund 
D)  $300 refund

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Clarissa's gross tax liability for 2014 is $1,300. She has a $1,500 nonrefundable personal tax credit, a $750 business tax credit, and a $400 refundable personal tax credit. Her employer withheld $1,000 from her pay for taxes. What is her net tax due or refund for this year?

Accepted Answer

The answer of Clarissa's gross tax liability for 2014 is...

Question 7

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 8

Hera wants to reduce her income tax liability by shifting some of her income to her 10-year-old daughter (a dependent), Athena. Last year, Hera gifted corporate bonds to Athena. This year, Athena received $1,500 in interest income from the bonds. What amount of tax will Athena pay on the interest income?

Accepted Answer

The answer of Hera wants to reduce her income tax...

Question 9

Selene made $54,300 in 2014 working at the local burger joint, Moon Café. How much should her employer withhold from her paycheck for FICA taxes if the calculation is made correctly?

Accepted Answer

The answer of Selene made $54,300 in 2014 working at...

Question 10

Hester (age 17) is claimed as a dependent by his parents, Charlton and Abigail. In 2014, Hester received $10,000 of qualified dividends and he received $6,000 from a part time job. What is his taxable income for 2014?

Accepted Answer

A)  $16,000 
B)  $15,000 
C)  $9,800 
D)  $9,650 
A)  $16,000 
B)  $15,000 
C)  $9,800 
D)  $9,650

Question 11

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 12

John and Sally pay Janet (Sally's older sister) to watch John and Sally's child Dexter during the day. Janet cares for Dexter in her home. John and Sally may claim a child and dependent care credit based on the amount they pay Janet to care for Dexter.

Accepted Answer

A) True 
 B)False

Question 13

Carolyn has an AGI of $38,000 (all from earned income), two qualifying children, and is filing as a head of household. What amount of earned income credit is she entitled to?

Accepted Answer

A)  $0 
B)  $1,212 
C)  $3,305 
D)  $4,248 
E)  $5,460 
A)  $0 
B)  $1,212 
C)  $3,305 
D)  $4,248 
E)  $5,460

Question 14

Which of the following statements regarding the child and dependent care credit is true?

Accepted Answer

A)  A married couple must file jointly to claim the credit. 
B)  A taxpayer may claim a credit for dependent care expenses for a dependent who is 14 years old or older but only if the dependent lives in the taxpayer's home for the entire year. 
C)  All else equal, a taxpayer making qualifying expenditures for three children may claim more dependent care credit than a taxpayer making (the same amount of) qualifying expenditures for two children. 
D)  None of these statements is true. 
A)  A married couple must file jointly to claim the credit. 
B)  A taxpayer may claim a credit for dependent care expenses for a dependent who is 14 years old or older but only if the dependent lives in the taxpayer's home for the entire year. 
C)  All else equal, a taxpayer making qualifying expenditures for three children may claim more dependent care credit than a taxpayer making (the same amount of) qualifying expenditures for two children. 
D)  None of these statements is true.

Question 15

Which of the following is not typical of taxpayers who are most likely affected by the AMT?

Accepted Answer

A)  Have many dependents 
B)  Pay high state income tax 
C)  Pay high property taxes 
D)  Have relatively low capital gains 
A)  Have many dependents 
B)  Pay high state income tax 
C)  Pay high property taxes 
D)  Have relatively low capital gains

Question 16

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 17

The tax rate schedules are set up to tax lower levels of income at higher tax rates than higher levels of income.

Accepted Answer

A) True 
 B)False

Question 18

During 2014, Jasmine (age 12) received $2,400 from a corporate bond. She also received $600 from a savings account established for her by her parents. Jasmine lives with her parents and she is their dependent. Assuming her parents' marginal tax rate is 28%, what is Jasmine's gross tax liability?

Accepted Answer

A)  $0 
B)  $100 
C)  $280 
D)  $380 
A)  $0 
B)  $100 
C)  $280 
D)  $380

Question 19

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 20

The alternative minimum tax is the AMT base multiplied by the AMT rate.

Accepted Answer

A) True 
 B)False

Exam 7: Individual Income Tax Computation and Tax Credits

Which of the following is not one of the general tax credit categories?

Which of the following statements regarding FICA taxes is true?

Cassy reports a gross tax liability of $1,000. She also claims $400 of nonrefundable personal credits, $700 of refundable personal credits, and $200 of business credits. What is Cassy's tax refund or tax liability due after applying the credits?

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

Clarissa's gross tax liability for 2014 is $1,300. She has a $1,500 nonrefundable personal tax credit, a $750 business tax credit, and a $400 refundable personal tax credit. Her employer withheld $1,000 from her pay for taxes. What is her net tax due or refund for this year?

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?

Selene made $54,300 in 2014 working at the local burger joint, Moon Café. How much should her employer withhold from her paycheck for FICA taxes if the calculation is made correctly?

Hester (age 17) is claimed as a dependent by his parents, Charlton and Abigail. In 2014, Hester received $10,000 of qualified dividends and he received $6,000 from a part time job. What is his taxable income for 2014?

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

John and Sally pay Janet (Sally's older sister) to watch John and Sally's child Dexter during the day. Janet cares for Dexter in her home. John and Sally may claim a child and dependent care credit based on the amount they pay Janet to care for Dexter.

Carolyn has an AGI of $38,000 (all from earned income), two qualifying children, and is filing as a head of household. What amount of earned income credit is she entitled to?

Which of the following statements regarding the child and dependent care credit is true?

Which of the following is not typical of taxpayers who are most likely affected by the AMT?

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.

The tax rate schedules are set up to tax lower levels of income at higher tax rates than higher levels of income.

During 2014, Jasmine (age 12) received $2,400 from a corporate bond. She also received $600 from a savings account established for her by her parents. Jasmine lives with her parents and she is their dependent. Assuming her parents' marginal tax rate is 28%, what is Jasmine's gross tax liability?

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

The alternative minimum tax is the AMT base multiplied by the AMT rate.

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