Question 1

During the year, Irv had the following transactions:
   How are these transactions handled for income tax purposes?

Accepted Answer

Ordinary loss of $7,000 on the business

Question 2

Jayden and Chloe Harper are husband and wife and use the calendar year for tax purposes.

Accepted Answer

The answer of Jayden and Chloe Harper are husband and...

Question 3

For the qualifying relative category (for dependency exemption purposes):

Accepted Answer

A) The dependent must be under age 19 or a full-time student under age 24. 
B) The dependent need not reside with the taxpayer claiming the exemption. 
C) The dependent must be related to the taxpayer claiming the exemption. 
D) The dependent must be a citizen or resident of the U.S. 
E) None of the above. 
A) The dependent must be under age 19 or a full-time student under age 24. 
B) The dependent need not reside with the taxpayer claiming the exemption. 
C) The dependent must be related to the taxpayer claiming the exemption. 
D) The dependent must be a citizen or resident of the U.S. 
E) None of the above.

Question 4

Pedro is married to Consuela, who lives with him.Both are U.S.citizens and residents of Nebraska.Pedro furnishes all of the support of his parents, who are citizens and residents of Mexico.He also furnishes all of the support of Consuela's parents, who are citizens and residents of El Salvador.Consuela has no gross income for the year.If Pedro files as a married person filing separately, how many personal and dependency exemptions can he claim on his return?

Accepted Answer

Four.A personal exemption for Pedro and

Question 5

The major advantage of being classified as an abandoned spouse is that the taxpayer is treated for tax purposes as being single and not married.This means that an abandoned spouse can use the more favorable tax rates available to single persons than those available to married persons filing separately.Comment on the accuracy of this conclusion.

Accepted Answer

The conclusion is incorrect.The classifi

Question 6

In which, if any, of the following situations will the kiddie tax not apply?

Accepted Answer

A) The child is married but does not file a joint return. 
B) The child has unearned income of $1,900 or less. 
C) The child has unearned income that exceeds more than half of his (or her) support. 
D) The child is under age 24 and a full-time student. 
E) None of the above. 
A) The child is married but does not file a joint return. 
B) The child has unearned income of $1,900 or less. 
C) The child has unearned income that exceeds more than half of his (or her) support. 
D) The child is under age 24 and a full-time student. 
E) None of the above.

Question 7

After Carolyn moves out of the apartment she had rented as her personal residence, she recovers her damage deposit of $500.The $500 is income to Carolyn.

Accepted Answer

A) True 
 B)False

Question 8

Deductions for AGI are often referred to as "above-the-line" or "page 1" deductions.Explain.

Accepted Answer

"Above the line" means before

Question 9

Match the statements that relate to each other.Note: Choice L may be used more than once.

Accepted Answer

The answer of Match the statements that relate to each...

Question 10

During 2012, Jen (age 66) furnished more than 50% of the support of the following persons:   Presuming all other dependency tests are met, on a separate return how many personal and dependency exemptions may Jen claim?

Accepted Answer

A) Two. 
B) Three. 
C) Four. 
D) Five. 
E) None of the above. 
A) Two. 
B) Three. 
C) Four. 
D) Five. 
E) None of the above.

Question 11

Millie, age 80, is supported during the current year as follows:   During the year, Millie lives in an assisted living facility.Under a multiple support agreement, indicate which parties can qualify to claim Millie as a dependent.

Accepted Answer

A) Weston and Faith. 
B) Faith. 
C) Weston, Faith, Jake, and Brayden. 
D) Faith, Jake, and Brayden. 
E) None of the above. 
A) Weston and Faith. 
B) Faith. 
C) Weston, Faith, Jake, and Brayden. 
D) Faith, Jake, and Brayden. 
E) None of the above.

Question 12

Homer (age 68) and his wife Jean (age 70) file a joint return.They furnish all of the support of Luther (Homer's 90-year old father), who lives with them.For 2012, they received $6,000 of interest income on city of Chicago bonds and interest income on corporate bonds of $48,000.Compute Homer and Jean's taxable income for 2012.

Accepted Answer

$22,400.Their gross income is $48,000 si

Question 13

Derek, age 46, is a surviving spouse.If he has itemized deductions of $12,100 for 2012, Derek should not claim the standard deduction.

Accepted Answer

A) True 
 B)False

Question 14

For 2012, Stuart has a short-term capital loss, a collectible long-term capital gain, and a long-term capital gain from land held as investment.The short-term loss is first applied to the collectible capital gain.

Accepted Answer

A) True 
 B)False

Question 15

The kiddie tax does not apply as to a child whose earned income is more than one-half of his or her support.

Accepted Answer

A) True 
 B)False

Question 16

Ellen, age 39 and single, furnishes more than 50% of the support of her parents, who do not live with her.Ellen practices as a self-employed interior decorator and has gross income in 2012 of $120,000.Her deductions are as follows: $30,000 business and $8,100 itemized.

Accepted Answer

The answer of Ellen, age 39 and single, furnishes more...

Question 17

During 2012, Addison has the following gains and losses:

Accepted Answer

The answer of During 2012, Addison has the following gains...

Question 18

Which, if any, of the statements regarding the standard deduction is correct?

Accepted Answer

A) Some taxpayers may qualify for two types of standard deductions. 
B) Not available to taxpayers who choose to deduct their personal and dependency exemptions. 
C) Not available to taxpayers who choose to claim their deduction for AGI. 
D) The basic standard deduction is indexed for inflation but the additional standard deduction is not. 
E) None of the above. 
A) Some taxpayers may qualify for two types of standard deductions. 
B) Not available to taxpayers who choose to deduct their personal and dependency exemptions. 
C) Not available to taxpayers who choose to claim their deduction for AGI. 
D) The basic standard deduction is indexed for inflation but the additional standard deduction is not. 
E) None of the above.

Question 19

A qualifying child cannot include:

Accepted Answer

A) A nonresident alien. 
B) A married son who files a joint return. 
C) A daughter who is away at college. 
D) A brother who is 28 years of age and disabled. 
E) A grandmother. 
A) A nonresident alien. 
B) A married son who files a joint return. 
C) A daughter who is away at college. 
D) A brother who is 28 years of age and disabled. 
E) A grandmother.

Question 20

During the current year, Doris received a large gift from her parents and a sizeable inheritance from an uncle. She also paid premiums on an insurance policy on her life. Doris is confused because she cannot find any place on Form 1040 to report these items. Explain.

Accepted Answer

Gifts and inheritances are exclusions fr

Exam 3: Computing the Tax

During the year, Irv had the following transactions: How are these transactions handled for income tax purposes?

Jayden and Chloe Harper are husband and wife and use the calendar year for tax purposes.

For the qualifying relative category (for dependency exemption purposes):

In which, if any, of the following situations will the kiddie tax not apply?

After Carolyn moves out of the apartment she had rented as her personal residence, she recovers her damage deposit of $500.The $500 is income to Carolyn.

Deductions for AGI are often referred to as "above-the-line" or "page 1" deductions.Explain.

Match the statements that relate to each other.Note: Choice L may be used more than once.

During 2012, Jen (age 66) furnished more than 50% of the support of the following persons: Presuming all other dependency tests are met, on a separate return how many personal and dependency exemptions may Jen claim?

Millie, age 80, is supported during the current year as follows: During the year, Millie lives in an assisted living facility.Under a multiple support agreement, indicate which parties can qualify to claim Millie as a dependent.

Derek, age 46, is a surviving spouse.If he has itemized deductions of $12,100 for 2012, Derek should not claim the standard deduction.

For 2012, Stuart has a short-term capital loss, a collectible long-term capital gain, and a long-term capital gain from land held as investment.The short-term loss is first applied to the collectible capital gain.

The kiddie tax does not apply as to a child whose earned income is more than one-half of his or her support.

Ellen, age 39 and single, furnishes more than 50% of the support of her parents, who do not live with her.Ellen practices as a self-employed interior decorator and has gross income in 2012 of $120,000.Her deductions are as follows: $30,000 business and $8,100 itemized.

During 2012, Addison has the following gains and losses:

Which, if any, of the statements regarding the standard deduction is correct?

A qualifying child cannot include:

During the current year, Doris received a large gift from her parents and a sizeable inheritance from an uncle. She also paid premiums on an insurance policy on her life. Doris is confused because she cannot find any place on Form 1040 to report these items. Explain.

An Introduction to Taxation and Understanding the Federal Tax Law

Working With the Tax Law

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

A: Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges-Part 1

Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges-Part 2

Property Transactions: Capital Gains and Losses, 1231, Recapture Provisions

Alternative Minimum Tax

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

S: Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

Income Taxation of Trusts and Estates

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