Question 1

In determining the filing requirement based on gross income received, both additional standard deductions (i.e., age and blindness) are taken into account.

Accepted Answer

A) True 
 B)False

Question 2

Regarding the rules applicable to filing of income tax returns, which, if any, of the following is an incorrect statement:

Accepted Answer

A) Married persons who file joint returns cannot later (after the due date of the return) substitute separate returns. 
B) Married persons who file separate returns can later (after the due date of the return) substitute a joint return. 
C) The usual test as to when a taxpayer must file a return is based on the total of the following: personal exemption + basic standard deduction + both additional standard deductions. 
D) Special filing requirement rules exist for taxpayers who are claimed as dependents of another. 
E) None of the above. 
A) Married persons who file joint returns cannot later (after the due date of the return) substitute separate returns. 
B) Married persons who file separate returns can later (after the due date of the return) substitute a joint return. 
C) The usual test as to when a taxpayer must file a return is based on the total of the following: personal exemption + basic standard deduction + both additional standard deductions. 
D) Special filing requirement rules exist for taxpayers who are claimed as dependents of another. 
E) None of the above.

Question 3

In satisfying the support test and the gross income test for claiming a dependency exemption, a scholarship received by the person being claimed is handled the same way for each test.Do you agree or disagree with this statement? Why?

Accepted Answer

Disagree.For purposes of the s

Question 4

Evan and Eileen Carter are husband and wife and file a joint return for 2012.Both are under 65 years of age.They provide more than half of the support of their daughter, Pamela (age 25), who is a full-time medical student.Pamela receives a $5,000 scholarship covering her tuition at college.They furnish all of the support of Belinda (Evan's grandmother), who is age 80 and lives in a nursing home.They also support Peggy (age 66), who is a friend of the family and lives with them.How many dependency exemptions may the Carters 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 5

Which, if any, of the following is a deduction for AGI?

Accepted Answer

A) Alimony payments. 
B) Child support payments. 
C) Funeral expenses. 
D) Loss on the sale of a personal residence. 
E) Interest on home mortgage. 
A) Alimony payments. 
B) Child support payments. 
C) Funeral expenses. 
D) Loss on the sale of a personal residence. 
E) Interest on home mortgage.

Question 6

Which of the following taxpayers may file as a head of household in 2012? Ron provides all the support for his mother, Betty, who lives by herself in an apartment in Fort Lauderdale.Ron pays the rent and other expenses for the apartment and properly claims his mother as a dependent.
Tammy provides over one-half the support for her 18-year old brother, Dan.Dan earned $4,200 in 2012 working at a fast food restaurant and is saving his money to attend college in 2013.Dan lives in Tammy's home.
Joe's wife left him late in December of 2011.No legal action was taken and Joe has not heard from her in 2012.Joe supported his 6-year-old son, who lived with him throughout 2012.

Accepted Answer

A) Ron only. 
B) Tammy only. 
C) Joe only. 
D) Ron and Joe only. 
E) Ron, Tammy, and Joe. 
A) Ron only. 
B) Tammy only. 
C) Joe only. 
D) Ron and Joe only. 
E) Ron, Tammy, and Joe.

Question 7

The Martins have a teenage son who has become an accomplished bagpiper.With proper promotion and scheduling, the son has good income potential by charging for his services at special events (particularly funerals).However, the Martins are fearful that the income could generate a kiddie tax and cause them the loss of a dependency exemption deduction.Are the Martins' concerns justified? Explain.

Accepted Answer

The income received by the son would be

Question 8

Tom is single and for 2012 has AGI of $50,000. He is age 70 and has no dependents. For 2012, he has itemized deductions from AGI of $7,000.Determine Tom's taxable income for 2012.

Accepted Answer

$38,800. Tom's standard deduction is $5,

Question 9

Merle is a widow, age 80 and blind, who is claimed as a dependent by her son.During 2012, she received $4,800 in Social Security benefits, $2,200 in bank interest, and $1,800 in cash dividends from stocks.Merle's taxable income is:

Accepted Answer

A) $4,000 - $950 - $2,900 = $150. 
B) $4,000 - $2,900 = $1,100. 
C) $4,000 - $950 - $1,450 = $1,600. 
D) $8,800 - $950 - $2,900 = $4,950. 
E) None of the above. 
A) $4,000 - $950 - $2,900 = $150. 
B) $4,000 - $2,900 = $1,100. 
C) $4,000 - $950 - $1,450 = $1,600. 
D) $8,800 - $950 - $2,900 = $4,950. 
E) None of the above.

Question 10

Claude's deductions from AGI slightly exceed the standard deduction allowed for 2012.Under these circumstances, Claude cannot claim the standard deduction.

Accepted Answer

A) True 
 B)False

Question 11

For the current year, David has salary income of $80,000 and the following property transactions:   What is David's AGI for the current year?

Accepted Answer

A) $76,000. 
B) $77,000. 
C) $78,000. 
D) $89,000. 
E) None of the above. 
A) $76,000. 
B) $77,000. 
C) $78,000. 
D) $89,000. 
E) None of the above.

Question 12

Buddy and Hazel are ages 72 and 71 and file a joint return.If they have itemized deductions of $14,000 for 2012, they should not claim the standard deduction.

Accepted Answer

A) True 
 B)False

Question 13

In terms of the tax formula applicable to individual taxpayers, which, if any, of the following statements is correct?

Accepted Answer

A) In arriving at taxable income, a taxpayer must choose between the standard deduction and deductions from AGI. 
B) In arriving at AGI, personal and dependency exemptions must be subtracted from gross income. 
C) In arriving at taxable income, a taxpayer must choose between the standard deduction and claiming personal and dependency exemptions. 
D) The formula does not apply if a taxpayer elects to claim the standard deduction. 
E) None of the above. 
A) In arriving at taxable income, a taxpayer must choose between the standard deduction and deductions from AGI. 
B) In arriving at AGI, personal and dependency exemptions must be subtracted from gross income. 
C) In arriving at taxable income, a taxpayer must choose between the standard deduction and claiming personal and dependency exemptions. 
D) The formula does not apply if a taxpayer elects to claim the standard deduction. 
E) None of the above.

Question 14

In early 2012, Ben sold a yacht, held for 9 months and for pleasure, for a $5,000 gain.Concerned about offsetting the gain before year-end, Ben is considering selling one of the following-each of which would yield a $5,000 loss:
· Houseboat used for recreation.
· Truck used in business.
· Stock investment held for 13 months.
Evaluate each choice.

Accepted Answer

The sale of the houseboat produces no be

Question 15

Which, if any, of the following is a deduction for AGI?

Accepted Answer

A) State and local sales taxes. 
B) Interest on home mortgage. 
C) Charitable contributions. 
D) Unreimbursed moving expenses of an employee. 
E) None of the above. 
A) State and local sales taxes. 
B) Interest on home mortgage. 
C) Charitable contributions. 
D) Unreimbursed moving expenses of an employee. 
E) None of the above.

Question 16

In meeting the criteria of a qualifying child for dependency exemption purposes, when if ever, might the child's income become relevant?

Accepted Answer

The amount of income earned by the quali

Question 17

In which, if any, of the following situations may the individual not be claimed as a dependent of the taxpayer?

Accepted Answer

A) A former spouse who lives with the taxpayer (divorce took place last year). 
B) A stepmother who does not live with the taxpayer. 
C) A married daughter who lives with the taxpayer. 
D) A half brother who does not live with the taxpayer and is a citizen and resident of Costa Rica. 
E) A cousin who lives with the taxpayer. 
A) A former spouse who lives with the taxpayer (divorce took place last year). 
B) A stepmother who does not live with the taxpayer. 
C) A married daughter who lives with the taxpayer. 
D) A half brother who does not live with the taxpayer and is a citizen and resident of Costa Rica. 
E) A cousin who lives with the taxpayer.

Question 18

For the year a spouse dies, the surviving spouse is considered married for the entire year for income tax purposes.

Accepted Answer

A) True 
 B)False

Question 19

The Deweys are expecting to save on their taxes for 2012.Not only have both incurred large medical expenses, but both reached age 65.During the year, they also recognized a $30,000 loss on some land they sold which was purchased as an investment several years ago.Are the Deweys under a mistaken understanding regarding their tax position? Explain.

Accepted Answer

The Deweys are expecting to qualify for

Question 20

When married persons file a joint return, joint and several liability results.What does this mean?

Accepted Answer

Joint and several liability me

Exam 3: Computing the Tax

In determining the filing requirement based on gross income received, both additional standard deductions (i.e., age and blindness) are taken into account.

Regarding the rules applicable to filing of income tax returns, which, if any, of the following is an incorrect statement:

In satisfying the support test and the gross income test for claiming a dependency exemption, a scholarship received by the person being claimed is handled the same way for each test.Do you agree or disagree with this statement? Why?

Which, if any, of the following is a deduction for AGI?

Tom is single and for 2012 has AGI of $50,000. He is age 70 and has no dependents. For 2012, he has itemized deductions from AGI of $7,000.Determine Tom's taxable income for 2012.

Merle is a widow, age 80 and blind, who is claimed as a dependent by her son.During 2012, she received $4,800 in Social Security benefits, $2,200 in bank interest, and $1,800 in cash dividends from stocks.Merle's taxable income is:

Claude's deductions from AGI slightly exceed the standard deduction allowed for 2012.Under these circumstances, Claude cannot claim the standard deduction.

For the current year, David has salary income of $80,000 and the following property transactions: What is David's AGI for the current year?

Buddy and Hazel are ages 72 and 71 and file a joint return.If they have itemized deductions of $14,000 for 2012, they should not claim the standard deduction.

In terms of the tax formula applicable to individual taxpayers, which, if any, of the following statements is correct?

Which, if any, of the following is a deduction for AGI?

In meeting the criteria of a qualifying child for dependency exemption purposes, when if ever, might the child's income become relevant?

In which, if any, of the following situations may the individual not be claimed as a dependent of the taxpayer?

For the year a spouse dies, the surviving spouse is considered married for the entire year for income tax purposes.

When married persons file a joint return, joint and several liability results.What does this mean?

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

Filters