Question 1

Figure 4-1

-Refer to Figure 4-1.How much more will Tony and Liz save in taxes by itemizing deductions rather than by taking the standard deduction?

Accepted Answer

A)  $570
B)  $1,860
C)  $2,430
D)  $3,800 A

Question 2

There are some cases when you should file a federal income tax return even if you are not legally required to do so.

Accepted Answer

A) True 
 B)False  True

Question 3

Interest paid on automobile loans is partially deductible as an itemized deduction (for those who can itemize).

Accepted Answer

A) True 
 B)False  False

Question 4

The tax rate paid on your last dollar of income is called the average tax rate.

Accepted Answer

A) True 
 B)False

Question 5

Charitable contributions of goods and property to a qualifying organization should be valued at fair market value when used as an itemized deduction.

Accepted Answer

A) True 
 B)False

Question 6

Prior to age 65,if one can itemize deductions,all of his or her qualifying unreimbursed medical expenses will be deductible.

Accepted Answer

A) True 
 B)False

Question 7

Because of their tax-exempt status,municipal bonds offer higher nominal returns than taxable alternatives.

Accepted Answer

A) True 
 B)False

Question 8

Income taxes must be paid when distributions are taken from most qualified retirement plans.

Accepted Answer

A) True 
 B)False

Question 9

Sal is a 27-year-old single taxpayer in the 28 percent marginal tax bracket.Assuming Sal's standard deduction is $5,800 and she has itemized deductions totaling $6,500,Sal should take the ____ for the additional tax savings of ____.

Accepted Answer

A)  standard deduction; $700
B)  standard deduction; $196
C)  itemized deduction; $700
D)  itemized deduction; $196

Question 10

The strategy of shifting the payment dates of deductible items is called

Accepted Answer

A)  postponing income.
B)  tax deferral.
C)  accelerated deductions.
D)  income splitting.

Question 11

Interest income under $10 in a given year is exempt from federal income taxation.

Accepted Answer

A) True 
 B)False

Question 12

The Fishers did very well on their investment choice.They earned $280 in dividend income from their stock investment this year.Later in the same year when they sold the stock,they realized a long-term capital gain of $2,984.How much of this dividend and capital gain income will they have to pay taxes on?

Accepted Answer

A)  $2,704
B)  $2,984
C)  $3,264
D)  $280

Question 13

You may claim both the American Opportunity credit and the lifetime learning credit for the same year.

Accepted Answer

A) True 
 B)False

Question 14

Section 529 college savings plans are state-sponsored.

Accepted Answer

A) True 
 B)False

Question 15

State sales tax is an example of a regressive tax.

Accepted Answer

A) True 
 B)False

Question 16

It is illegal to prepay the next year's professional association dues and take the deduction during the current year.

Accepted Answer

A) True 
 B)False

Question 17

All of a taxpayer's income is subject to federal income taxes.

Accepted Answer

A) True 
 B)False

Question 18

If a taxpayer expects to be in a lower tax bracket the next year,he or she would benefit by defering income to the later year.

Accepted Answer

A) True 
 B)False

Question 19

Long-term capital gains are taxed at a maximum rate of ____ percent.

Accepted Answer

A)  15
B)  20
C)  28
D)  35

Question 20

One must file a tax return to receive the earned income credit.

Accepted Answer

A) True 
 B)False

Exam 4: Managing Income Taxes

Figure 4-1 -Refer to Figure 4-1.How much more will Tony and Liz save in taxes by itemizing deductions rather than by taking the standard deduction?

There are some cases when you should file a federal income tax return even if you are not legally required to do so.

Interest paid on automobile loans is partially deductible as an itemized deduction (for those who can itemize).

The tax rate paid on your last dollar of income is called the average tax rate.

Charitable contributions of goods and property to a qualifying organization should be valued at fair market value when used as an itemized deduction.

Prior to age 65,if one can itemize deductions,all of his or her qualifying unreimbursed medical expenses will be deductible.

Because of their tax-exempt status,municipal bonds offer higher nominal returns than taxable alternatives.

Income taxes must be paid when distributions are taken from most qualified retirement plans.

Sal is a 27-year-old single taxpayer in the 28 percent marginal tax bracket.Assuming Sal's standard deduction is $5,800 and she has itemized deductions totaling $6,500,Sal should take the for the additional tax savings of .

The strategy of shifting the payment dates of deductible items is called

Interest income under $10 in a given year is exempt from federal income taxation.

You may claim both the American Opportunity credit and the lifetime learning credit for the same year.

Section 529 college savings plans are state-sponsored.

State sales tax is an example of a regressive tax.

It is illegal to prepay the next year's professional association dues and take the deduction during the current year.

All of a taxpayer's income is subject to federal income taxes.

If a taxpayer expects to be in a lower tax bracket the next year,he or she would benefit by defering income to the later year.

Long-term capital gains are taxed at a maximum rate of ____ percent.

One must file a tax return to receive the earned income credit.