Question 1

For the current year, David has wages of $80,000 and the following property transactions: $\begin{array}{lr}
\text { Stock investment sales- } \
\text {  Long-term capital gain } &\$ 9,000 \
\text { Short-term capital loss } &(12,000) \
\text { Loss on sale of camper (purchased 4 years ago and used for family vacations) } &(2,000)
\end{array}$ 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 these.  B

Question 2

During 2018, Enrique had the following transactions:

Enrique's AGI is:

Accepted Answer

A)    $62,000 \$ 62,000 $62,000 .
B)    $64,000 \$ 64,000 $64,000 .
C)    $67,000 \$ 67,000 $67,000 .
D)    $102,000 \$ 102,000 $102,000 .
E)    $104,000 \$ 104,000 $104,000   B

Question 3

Lee, a citizen of Korea, is a resident of the U.S. Any rent income Lee receives from land he owns in Korea is not
subject to the U.S. income tax.

Accepted Answer

A) True 
 B)False  False

Question 4

Married taxpayers who file a joint return cannot later i.e., after the filing due date) switch to separate returns for that year.

Accepted Answer

A) True 
 B)False

Question 5

During 2018, Trevor has the following capital transactions: $$\begin{array} { l r } 
\text { LTCG } & \$ 6,000 \
\text { Long-term collectible gain } & 2,000 \
\text { STCG } & 4,000 \
\text { STCL } & 10,000
\end{array}$$ After the netting process, the following results:

Accepted Answer

A)   Long-term collectible gain of $2,000.
B)   LTCG of $6,000, Long-term collectible gain of $2,000, and a STCL of $6,000.
C)   LTCG of $6,000, Long-term collectible gain of $2,000, and a STCL carryover to 2019 of $3,000.
D)   LTCG of $2,000.
E)   None of these.

Question 6

Many taxpayers who previously itemized will start claiming the standard deduction when they purchase a home.

Accepted Answer

A) True 
 B)False

Question 7

Which, if any, of the following statements relating to the standard deduction is correct?

Accepted Answer

A)   If a taxpayer dies during the year, his or her)  standard deduction must be prorated.
B)   If a taxpayer is claimed as a dependent of another, his or her)  additional standard deduction is allowed in full i.e., no adjustment is necessary) .
C)   If spouses file separate returns, both spouses must claim the standard deduction rather than itemize their deductions from AGI) .
D)   If a taxpayer is claimed as a dependent of another, no basic standard deduction is allowed.
E)   None of these.

Question 8

Mel is not quite sure whether an expenditure he made is a deduction for AGI or a deduction from AGI. Since he plans to choose the standard deduction option for the year, does the distinction matter? Explain.

Accepted Answer

The answer of Mel is not quite sure whether an...

Question 9

Which of the following items, if any, is deductible?

Accepted Answer

A)   Parking expenses incurred in connection with jury duty-taxpayer is a dentist.
B)   Substantiated gambling losses not in excess of gambling winnings)  from state lottery.
C)   Contributions to mayor's reelection campaign.
D)   Speeding ticket incurred while on business.
E)   Premiums paid on personal life insurance policy.

Question 10

Lucas, age 17 and single, earns $6,000 during 2018. Lucas's parents cannot claim him as a dependent if he does not live with them.

Accepted Answer

A) True 
 B)False

Question 11

A taxpayer who itemizes must use Form 1040, and cannot use Form 1040EZ or Form 1040A.

Accepted Answer

A) True 
 B)False

Question 12

Married taxpayers who file separately cannot later i.e., after the due date for filing) change to a joint return.

Accepted Answer

A) True 
 B)False

Question 13

Adjusted gross income AGI) appears at the bottom of page 1 and at the top of page 2 of Form 1040.

Accepted Answer

A) True 
 B)False

Question 14

Katrina, age 16, is claimed as a dependent by her parents. During 2018, she earned $5,600 as a checker at a grocery store. Her standard deduction is $5,950 $5,600 earned income + $350).

Accepted Answer

A) True 
 B)False

Question 15

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 Honduras.
E)   A cousin who lives with the taxpayer.

Question 16

Currently, the top income tax rate in effect is not the highest it has ever been.

Accepted Answer

A) True 
 B)False

Question 17

Ed is divorced and maintains a home in which he and a dependent friend live. Ed does not qualify for head of household filing status.

Accepted Answer

A) True 
 B)False

Question 18

Mandeep's parents live in another state and she cannot claim them as her dependents. If Mandeep pays their medical expenses, can she derive any tax benefit from doing so? Explain.

Accepted Answer

The answer of Mandeep's parents live in another state and...

Question 19

The basic and additional standard deductions both are subject to an annual adjustment for inflation.

Accepted Answer

A) True 
 B)False

Question 20

Roy and Linda were divorced in 2017. The divorce decree awards custody of their children under age 17) to Linda but is silent as to who is entitled to treat them as dependents for purposes of claiming the child credit. If Roy furnished more than half of their support, he can claim the child tax credit for them in 2018.

Accepted Answer

A) True 
 B)False

Exam 3: Tax Formula and Tax Determination an Overview of Property Transactions

During 2018, Enrique had the following transactions: $During 2018, Enrique had the following transactions: Enrique's AGI is: A) \$ 62,000 . B) \$ 64,000 . C) \$ 67,000 . D) \$ 102,000 . E) \$ 104,000$ Enrique's AGI is:

Lee, a citizen of Korea, is a resident of the U.S. Any rent income Lee receives from land he owns in Korea is not subject to the U.S. income tax.

Married taxpayers who file a joint return cannot later i.e., after the filing due date) switch to separate returns for that year.

During 2018, Trevor has the following capital transactions: $\begin{array} { l r } \text { LTCG } & \$ 6,000 \\\text { Long-term collectible gain } & 2,000 \\\text { STCG } & 4,000 \\\text { STCL } & 10,000\end{array}$ After the netting process, the following results:

Many taxpayers who previously itemized will start claiming the standard deduction when they purchase a home.

Which, if any, of the following statements relating to the standard deduction is correct?

Mel is not quite sure whether an expenditure he made is a deduction for AGI or a deduction from AGI. Since he plans to choose the standard deduction option for the year, does the distinction matter? Explain.

Which of the following items, if any, is deductible?

Lucas, age 17 and single, earns $6,000 during 2018. Lucas's parents cannot claim him as a dependent if he does not live with them.

A taxpayer who itemizes must use Form 1040, and cannot use Form 1040EZ or Form 1040A.

Married taxpayers who file separately cannot later i.e., after the due date for filing) change to a joint return.

Adjusted gross income AGI) appears at the bottom of page 1 and at the top of page 2 of Form 1040.

Katrina, age 16, is claimed as a dependent by her parents. During 2018, she earned $5,600 as a checker at a grocery store. Her standard deduction is $5,950 $5,600 earned income + $350).

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

Currently, the top income tax rate in effect is not the highest it has ever been.

Ed is divorced and maintains a home in which he and a dependent friend live. Ed does not qualify for head of household filing status.

Mandeep's parents live in another state and she cannot claim them as her dependents. If Mandeep pays their medical expenses, can she derive any tax benefit from doing so? Explain.

The basic and additional standard deductions both are subject to an annual adjustment for inflation.