Question 1

If a married couple has one primary breadwinner, filing a joint return will likely result in a marriage penalty.

Accepted Answer

A) True 
 B)False

Question 2

For alternative minimum tax purposes, taxpayers are allowed to deduct state income taxes but are not allowed to deduct charitable contributions.

Accepted Answer

A) True 
 B)False

Question 3

Angelena files as a head of household. In 2014, she reported $50,000 of taxable income, including a $10,000 qualified dividend. What is her gross tax liability, rounded to the nearest whole dollar amount (use the tax rate schedules)?

Accepted Answer

A)  $5,353 
B)  $5,443 
C)  $7,500 
D)  $6,913 
A)  $5,353 
B)  $5,443 
C)  $7,500 
D)  $6,913

Question 4

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

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 5

Long-term capital gains, dividends, and taxable interest income are all taxed at preferential rates.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following taxpayers (all age 40) are required to file a return? $$\begin{array} { | l | l | r | c | } 
\hline \text { Taxpayer } & \text { Filing Status } & \begin{array} { c } 
\text { Number } \
\text { of exemptions }
\end{array} & \begin{array} { c } 
\text { Gross } \
\text { Income }
\end{array} \
\hline \text { Jenny and Jim } & \begin{array} { l } 
\text { Married Filing } \
\text { Jointly }
\end{array} & 2 & \$ 21,000 \
\hline \text { Allen } & \text { Single } & 1 & \$ 9,200 \
\hline \text { Timmy } & \text { Head of Household } & 2 & \$ 10,800 \
\hline
\end{array}$$

Accepted Answer

A)  Jenny and Jim 
B)  Allen 
C)  Timmy 
D)  None of these 
A)  Jenny and Jim 
B)  Allen 
C)  Timmy 
D)  None of these

Question 7

Candace is claimed as a dependent on her parent's tax return. Her parents' ordinary income marginal tax rate is 33%. In 2014, Candace received $5,000 of interest income from corporate bonds she obtained several years ago. This is her only source of income. She is 15 years old at year end. What is her gross tax liability?

Accepted Answer

The answer of Candace is claimed as a dependent on...

Question 8

During 2014, Montoya (age 15) received $2,200 from a corporate bond. He also received $600 from a savings account established for him by his parents. Montoya lives with his parents and he is their dependent. What is Montoya's taxable income?

Accepted Answer

A)  $0 
B)  $2,200 
C)  $2,800 
D)  $1,800 
A)  $0 
B)  $2,200 
C)  $2,800 
D)  $1,800

Question 9

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

Accepted Answer

A)  Taxpayers may claim a credit for only a portion of qualifying dependent care expenditures. 
B)  If a taxpayer's income is too high, she will be ineligible to claim any child and dependent care credit. 
C)  A single taxpayer must have earned income to claim any child and dependent care credit. 
D)  A taxpayer is not eligible to claim the dependent care credit if any dependent relative provides the care. 
A)  Taxpayers may claim a credit for only a portion of qualifying dependent care expenditures. 
B)  If a taxpayer's income is too high, she will be ineligible to claim any child and dependent care credit. 
C)  A single taxpayer must have earned income to claim any child and dependent care credit. 
D)  A taxpayer is not eligible to claim the dependent care credit if any dependent relative provides the care.

Question 10

Which of the following represents the correct order in which credits are applied to gross tax liability (from first to last)?

Accepted Answer

A)  Nonrefundable personal, business, refundable 
B)  Business, nonrefundable personal, refundable 
C)  Refundable, nonrefundable personal, business 
D)  Refundable, business, nonrefundable personal 
A)  Nonrefundable personal, business, refundable 
B)  Business, nonrefundable personal, refundable 
C)  Refundable, nonrefundable personal, business 
D)  Refundable, business, nonrefundable personal

Question 11

Business credits are generally refundable credits.

Accepted Answer

A) True 
 B)False

Question 12

The amount of expenditures eligible for the child and dependent care credit is the least of three amounts. Which of the following is not one of those amounts?

Accepted Answer

A)  The total amount of child and dependent care expenditures for the year 
B)  $3,000 for one qualifying person or $6,000 for two or more qualifying persons 
C)  The dependent's earned income for the year 
D)  The taxpayer's earned income for the year 
A)  The total amount of child and dependent care expenditures for the year 
B)  $3,000 for one qualifying person or $6,000 for two or more qualifying persons 
C)  The dependent's earned income for the year 
D)  The taxpayer's earned income for the year

Question 13

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 14

Linda is a qualifying widow in 2014. In 2014, she reported $75,000 of taxable income (all ordinary). What is her gross tax liability using the tax rate schedules?

Accepted Answer

A)  $10,463 
B)  $14,606 
C)  $14,679 
D)  $13,163 
A)  $10,463 
B)  $14,606 
C)  $14,679 
D)  $13,163

Question 15

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 16

For alternative minimum tax purposes, taxpayers are required to add back the regular tax standard deduction amount for their filing status whether or not they itemized deductions for regular tax purposes.

Accepted Answer

A) True 
 B)False

Question 17

Individuals may file for and receive a six-month extension of time to file their tax return and pay their taxes without penalty.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following statements concerning tax credits is true?

Accepted Answer

A)  The tax benefit a taxpayer receives from a credit depends on the taxpayer's marginal tax rate. 
B)  Refundable tax credits are limited to a taxpayer's gross tax liability. 
C)  Tax credits are generally more beneficial than tax deductions. 
D)  None of these is a true statement. 
A)  The tax benefit a taxpayer receives from a credit depends on the taxpayer's marginal tax rate. 
B)  Refundable tax credits are limited to a taxpayer's gross tax liability. 
C)  Tax credits are generally more beneficial than tax deductions. 
D)  None of these is a true statement.

Question 19

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 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

If a married couple has one primary breadwinner, filing a joint return will likely result in a marriage penalty.

For alternative minimum tax purposes, taxpayers are allowed to deduct state income taxes but are not allowed to deduct charitable contributions.

Angelena files as a head of household. In 2014, she reported $50,000 of taxable income, including a $10,000 qualified dividend. What is her gross tax liability, rounded to the nearest whole dollar amount (use the tax rate schedules)?

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 18 19 20 21 22 (Federal Holiday)

Long-term capital gains, dividends, and taxable interest income are all taxed at preferential rates.

Which of the following taxpayers (all age 40) are required to file a return? Taxpayer Filing Status Number of exemptions Gross Income Jenny and Jim Married Filing Jointly 2 \ 21,000 Allen Single 1 \ 9,200 Timmy Head of Household 2 \ 10,800

During 2014, Montoya (age 15) received $2,200 from a corporate bond. He also received $600 from a savings account established for him by his parents. Montoya lives with his parents and he is their dependent. What is Montoya's taxable income?

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

Which of the following represents the correct order in which credits are applied to gross tax liability (from first to last)?

Business credits are generally refundable credits.

The amount of expenditures eligible for the child and dependent care credit is the least of three amounts. Which of the following is not one of those amounts?

Linda is a qualifying widow in 2014. In 2014, she reported $75,000 of taxable income (all ordinary). What is her gross tax liability using the tax rate schedules?

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

For alternative minimum tax purposes, taxpayers are required to add back the regular tax standard deduction amount for their filing status whether or not they itemized deductions for regular tax purposes.

Individuals may file for and receive a six-month extension of time to file their tax return and pay their taxes without penalty.

Which of the following statements concerning tax credits is true?

Which of the following is not true of the American opportunity 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

Filters