Question 1

If a person were given the choice of a $500 credit or a $500 deduction

Accepted Answer

A) he would take the deduction every time. 
B) he would take the credit every time. 
C) he would take the deduction if he were rich the credit if he were poor. 
D) he would take the deduction if he were poor credit if he were rich.

Question 2

The lower half of income earners pay ___ of federal income taxes.

Accepted Answer

A) 1% 
B) 2% 
C) 14% 
D) 38%

Question 3

In 2015, personal income taxes made up _____ of federal government revenues.

Accepted Answer

A) much more than a quarter 
B) much less than a quarter 
C) just more than half 
D) just less than half

Question 4

The filing status of a person who is legally married yet separated as a result of a messy impending divorce is likely to be

Accepted Answer

A) married filing jointly. 
B) married filing separately. 
C) single head of household. 
D) single.

Question 5

If a household has a single woman and three kids, has a standard deduction of $6,300, its itemized deductions are $10,650 and personal exemptions of $12,000 (3*$4,000), then the first _____ of income is federal income tax free.

Accepted Answer

A) $16,850 
B) $18,300 
C) $22,650 
D) $28,950

Question 6

The standard deduction depends on

Accepted Answer

A) family structure (i.e. filing status). 
B) family size. 
C) how money is spent (e.g. on state and local taxes or home mortgage interest). 
D) how much money is saved.

Question 7

Which of the following elements of the federal income tax code are not indexed for inflation?

Accepted Answer

A) The brackets 
B) The standard deduction 
C) The personal exemption 
D) All of these elements are indexed.

Question 8

Itemized deductions are reductions of adjusted gross income that depend on

Accepted Answer

A) family structure (i.e. filing status). 
B) family size. 
C) how money is spent (e.g. on state and local taxes or home mortgage interest). 
D) how much money is saved.

Question 9

If a person were given the choice of a $500 credit or a $2500 deduction

Accepted Answer

A) he would take the deduction every time. 
B) he would take the credit every time. 
C) he would take the deduction if he were in the 25% tax bracket, the credit if he were in the 15% tax bracket. 
D) he would take the deduction if he were in the 15% tax bracket, the credit if he were in the 25% tax bracket.

Question 10

The 2001 and 2003 tax cuts of the George W. Bush administration each had provisions to

Accepted Answer

A) lower the earned income tax credit. 
B) raise tax rates at the lower end. 
C) raise tax rates at the upper end. 
D) lower (or speed up the already scheduled lowering)of tax rates.

Question 11

Capital gains tax liabilities usually

Accepted Answer

A) do not include any taxation of actual inflation. 
B) are recognized only upon the sale of a capital asset. 
C) are recognized before the sale of a capital asset, as the gain actually accrues. 
D) must be recognized and paid by the estate of the decedent upon death.

Question 12

The child credit goes to

Accepted Answer

A) children directly. 
B) all households raising children under 18. 
C) only households raising foster children. 
D) states to help pay for child-care.

Question 13

If a household has a husband, wife and two kids, has a standard deduction of $12,600, its itemized deductions are $6,650 and personal exemptions of $16,000 (4*$4,000), then the first _____ of income is federal income tax free.

Accepted Answer

A) $13,250 
B) $20,650 
C) $28,600 
D) $34,250

Question 14

The instructions and rules for the alternative minimum tax are generally

Accepted Answer

A) far easier to understand than the instruction and rules for the 1040EZ. 
B) far easier to understand than the instruction and rules for the 1040. 
C) no more or less difficult to understand than the instructions and rules for the 1040. 
D) much more complicated than the instructions and rules for the 1040.

Question 15

If a person were in the 15% tax bracket and given the choice of a $500 credit or a $2500 deduction

Accepted Answer

A) he would take the deduction every time. 
B) he would take the credit every time. 
C) he would not care. They would constitute the same tax benefit. 
D) he would not qualify for either.

Exam 41: Personal Income Taxes