Question 1

An individual's taxable income equals adjusted gross income less the exemption amount.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following situations result in a marriage penalty for federal income tax purposes?

Accepted Answer

A)  Mr. and Mrs. Gooding, who have filed a joint return for 11 years, divorce before the end of the tax year. 
B)  Mr. Dylan, who is a head of household, marries Ms. Boyle, who has no taxable income, before the end of the tax year. 
C)  Mr. and Mrs. Small, who have filed a joint return for 20 years, elect to file separate tax returns this year. 
D)  Mr. Langley, a single taxpayer, marries Ms. Nuyen, also a single taxpayer. Both individuals earn a salary in excess of $100,000.

Question 3

Mrs. Lincoln was employed by GGH Inc. until October, when he accepted a new position with Murdock Inc. Mrs. Lincoln earned $145,000 compensation from GGH and $36,000 compensation from Murdock. Which of the following statements is false?

Accepted Answer

A)  Murdock must withhold Social Security tax from Mrs. Lincoln's $36,000 compensation. 
B)  Murdock must withhold Medicare tax from Mrs. Lincoln's $36,000 compensation. 
C)  Mrs. Lincoln is entitled to an income tax credit for both excess Social Security tax and excess Medicare tax withheld by her employers this year. 
D)  Both GGH and Murdock must pay the full amount of employer payroll tax on the compensation paid to Mrs. Lincoln.

Question 4

Julie, an unmarried individual, lives in a home with her 13-year-old dependent son, Oscar. This year, Julie had the following tax information.  Compute Julie's adjusted gross income (AGI) and taxable income.

Accepted Answer

A)  AGI $118,000; taxable income $103,700 
B)  AGI $118,000; taxable income $93,850 
C)  AGI $118,000; taxable income $100,750 
D)  AGI $107,000; taxable income $89,750

Question 5

Mr. and Mrs. Casey have two dependent children, ages 3 and 6. The Caseys spent $10,300 for child care this year. Mrs. Casey is employed full-time as an attorney. Mr. Casey is an unpublished novelist who has yet to earn any money from his writing. The Caseys are eligible for a dependent care credit.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements regarding the calculation of taxable income is false?

Accepted Answer

A)  The first step in the calculation of taxable income is determining the taxpayer's total income. 
B)  Adjusted gross income is equal to total income less above-the-line deductions. 
C)  Adjusted gross income can be reduced by the greater of the standard deduction or itemized deductions. 
D)  Taxpayers are allowed to deduct the greater of itemized deductions or above-the-line deductions in calculating taxable income.

Question 7

Which of the following statements concerning the overall limitation on itemized deductions is true?

Accepted Answer

A)  The limitation has no effect on a taxpayer's standard deduction. 
B)  The limitation can reduce a taxpayer's total itemized deductions to zero. 
C)  The limitation applies only to taxpayers with a 39.6% marginal income tax rate. 
D)  Statements A., B., and C. are false.

Question 8

In computing taxable income, an individual is allowed to deduct both the standard deduction and any itemized deduction for the year.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements concerning extensions of time to file an individual tax return is false?

Accepted Answer

A)  The extension of time to file does not extend the time for payment of any tax due. 
B)  An individual may receive an automatic extension of the filing date without providing any explanation to the IRS. 
C)  The extended due date of a calendar-year individual tax return is October 15 of the following year. 
D)  An extension request must be filed before the end of the taxable year.

Question 10

In computing taxable income, an individual is allowed to deduct the lesser of itemized deductions or the standard deduction.

Accepted Answer

A) True 
 B)False

Question 11

Mr. and Mrs. Queen provide 90% of the financial support for Mrs. Queen's mother, Doreen, who lives in the couples' home. Doreen's only income this year is a $7,500 taxable pension from her former employer. Mr. and Mrs. Queen can't claim Doreen as a dependent this year.

Accepted Answer

A) True 
 B)False

Question 12

Ms. Dorley's regular tax liability on her Form 1040 is $45,890. Which of the following statements is true?

Accepted Answer

A)  If Ms. Dorley's tentative minimum tax is $50,700, her total tax liability is $97,590. 
B)  If Ms. Dorley's AMT is $6,380, her total tax liability is $52,270. 
C)  If Ms. Dorley's AMT is $10,112, her total tax liability is $45,890. 
D)  If Ms. Dorley's tentative minimum tax is $38,682, her total tax liability is $38,682.

Question 13

Lennie and Margo spent $2,800 for child care for their 7-year-old son. Lennie's earned income was $41,000, Margo's earned income was $24,800, and the AGI on their joint return was $71,200. Calculate their dependent care credit.

Accepted Answer

A)  $0 
B)  $560 
C)  $980 
D)  $2,800

Question 14

Miss Blixen's regular income tax is $77,390, and her tentative minimum tax is $74,100. Consequently, Miss Blixen's alternative minimum tax (AMT) is zero.

Accepted Answer

A) True 
 B)False

Question 15

Only natural and adopted children or stepchildren can be a qualifying child for tax purposes.

Accepted Answer

A) True 
 B)False

Question 16

Mr. Thomas is age 69, has perfect vision, and files as a single taxpayer. His standard deduction for 2015 is $7,850.

Accepted Answer

A) True 
 B)False

Question 17

The standard deduction for single individuals equals one-half of the standard deduction for married individuals filing jointly.

Accepted Answer

A) True 
 B)False

Question 18

Ms. Kilo is an unmarried individual. She has $219,344 taxable income in 2015. Compute Ms. Kilo's regular tax liability if she files as a single taxpayer and if she files as a surviving spouse.

Accepted Answer

A)  Single $57,500; surviving spouse $61,924 
B)  Single $55,990; surviving spouse $54,174 
C)  Single $43,896; surviving spouse $48,468 
D)  None of the above.

Question 19

Mr. and Mrs. Anderson file a joint return. They provide more than 50% of the financial support of their two children, Dana, age 26, and John, age 17. Both children live in the Andersons' home. Dana earned $7,100 from a part-time job, while John earned no income this year. Which of the following statements is true?

Accepted Answer

A)  Both Dana and John are qualifying children of the Andersons. 
B)  Dana is a qualifying relative and John is a qualifying child of the Andersons. 
C)  John is a qualifying child of the Andersons. 
D)  Neither Dana nor John is a qualifying child of the Andersons.

Question 20

An individual must pay the greater of her regular income tax or her alternative minimum tax (AMT) for the year.

Accepted Answer

A) True 
 B)False

Exam 14: The Individual Tax Formula

An individual's taxable income equals adjusted gross income less the exemption amount.

Which of the following situations result in a marriage penalty for federal income tax purposes?

Mrs. Lincoln was employed by GGH Inc. until October, when he accepted a new position with Murdock Inc. Mrs. Lincoln earned $145,000 compensation from GGH and $36,000 compensation from Murdock. Which of the following statements is false?

Julie, an unmarried individual, lives in a home with her 13-year-old dependent son, Oscar. This year, Julie had the following tax information. Compute Julie's adjusted gross income (AGI) and taxable income.

Mr. and Mrs. Casey have two dependent children, ages 3 and 6. The Caseys spent $10,300 for child care this year. Mrs. Casey is employed full-time as an attorney. Mr. Casey is an unpublished novelist who has yet to earn any money from his writing. The Caseys are eligible for a dependent care credit.

Which of the following statements regarding the calculation of taxable income is false?

Which of the following statements concerning the overall limitation on itemized deductions is true?

In computing taxable income, an individual is allowed to deduct both the standard deduction and any itemized deduction for the year.

Which of the following statements concerning extensions of time to file an individual tax return is false?

In computing taxable income, an individual is allowed to deduct the lesser of itemized deductions or the standard deduction.

Mr. and Mrs. Queen provide 90% of the financial support for Mrs. Queen's mother, Doreen, who lives in the couples' home. Doreen's only income this year is a $7,500 taxable pension from her former employer. Mr. and Mrs. Queen can't claim Doreen as a dependent this year.

Ms. Dorley's regular tax liability on her Form 1040 is $45,890. Which of the following statements is true?

Lennie and Margo spent $2,800 for child care for their 7-year-old son. Lennie's earned income was $41,000, Margo's earned income was $24,800, and the AGI on their joint return was $71,200. Calculate their dependent care credit.

Miss Blixen's regular income tax is $77,390, and her tentative minimum tax is $74,100. Consequently, Miss Blixen's alternative minimum tax (AMT) is zero.

Only natural and adopted children or stepchildren can be a qualifying child for tax purposes.

Mr. Thomas is age 69, has perfect vision, and files as a single taxpayer. His standard deduction for 2015 is $7,850.

The standard deduction for single individuals equals one-half of the standard deduction for married individuals filing jointly.

Ms. Kilo is an unmarried individual. She has $219,344 taxable income in 2015. Compute Ms. Kilo's regular tax liability if she files as a single taxpayer and if she files as a surviving spouse.

An individual must pay the greater of her regular income tax or her alternative minimum tax (AMT) for the year.