Question 1

Armando has AGI of $80,000 and makes the following charitable contributions:
?
- $\$ 10,000$ cash to American Heart Society.
- $\$ 18,000$ cash to Redemption Church.
$\$ 24,000$ worth of AOL stock acquired in 2005 with a basis of $\$ 10,000$ to Upper State University.
What is Armando's maximum charitable deduction in the current year?

Accepted Answer

A) $18,000 
B) $24,000 
C) $28,000 
D) $48,000 
E) $52,000

Question 2

During the year, Arlene donates stock she had purchased in 2005 for $30,000 to a qualified public charitable organization. The fair market value of the stock at the time of the donation is $40,000. Her adjusted gross income for the year is $80,000. If the stock donation is her only charitable contribution, what is Arlene's charitable contribution deduction? What should she consider in determining the amount of the deduction?

Accepted Answer

The answer of During the year, Arlene donates stock she...

Question 3

Match each statement with the correct term below.
-Personal interest

Accepted Answer

A) Prepaid interest. 
B) Either a qualifying child or a qualifying relative 
C) One test for a qualifying relative. 
D) The minimum amount a taxpayer can deduct for personal expenditures. 
E) A deduction in this category is always allowed. That is, there is no minimum allowable amount and generally no income limitation placed on these deductions.
F)Generally, these deductions are for specifically allowed personal expenditures.
G)An exception to this test is a custodial parent.
H)Interest paid on debt used to buy securities.
I)Interest paid on credit cards, personal loans, car loans, etc.
J)Interest paid on a mortgage secured by the taxpayer's residence. The proceeds of the loan are used to pay off a credit card, the interest is not deductible.
k.A tax designed to prevent the shifting of unearned income to children of the taxpayer.

Question 4

For purposes of the relationship test for dependents, which of the following does not qualify as a relative?

Accepted Answer

A) Mother. 
B) Nephew. 
C) Cousin. 
D) Grandfather. 
E) Stepbrother.

Question 5

During the current year, Robbie and Anne pay the following taxes:
?
$$\begin{array} { l r } 
\text { State income tax (bal ance due for last year) } & \$ 1,000 \
\text { Estimated state income tax } & 2,400 \
\text { Estimated federal income tax } & 3,250 \
\text { Sales tax (Federal Sales tax table) } & 600 \
\text { State gift tax } & 700 \
\text { Property tax on personal residence } & 2,450 \
\text { Real estate tax on condominium in Breckinridge, CO. } & 1,100
\end{array}$$
What amount can Robbie and Anne claim as an itemized deduction for taxes on their federal income tax return for the year?

Accepted Answer

A) $5,850 
B) $6,950 
C) $7,550 
D) $8,050 
E) $11,300

Question 6

Discuss why the distinction between deductions for adjusted gross income and deductions from adjusted gross income is important for individual taxpayers.

Accepted Answer

The answer of Discuss why the distinction between deductions for...

Question 7

During 2018, Stephanie earns $2,700 from a summer job. She also has interest income of $400. Stephanie, age 19, is a full-time student at Omega College. She is a dependent of her parents. What is the amount of Stephanie's taxable income for 2018?

Accepted Answer

A) $- 0 - 
B) $50 
C) $400 
D) $2,150 
E) $2,700

Question 8

Mary Lou is a 22-year old student at Wilson College. She earned $4,300 at a summer job, which is less than half of her support.
I.Mary Lou can claim a $500 family tax credit for herself even if her parents claim a $500 family tax credit as a dependent.
II.Because Mary Lou is a full-time college student, and she provides less than half of her own support, her parents can claim a $500 family tax credit because she is their dependent.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 9

Norton's spouse died in 2018. Norton has one child, age 7, living at home. Norton provides all of the support for the child. The child lives with Norton during 2018, 2019, 2020, and 2021. Norton's most advantageous filing status is

Accepted Answer

A) Married filing jointly in 2018, single in 2019, 2020, and 2021. 
B) Head of household for all four years. 
C) Head of household in 2018, surviving spouse in 2019, 2020, and 2021. 
D) Married filing jointly in 2018, surviving spouse in 2019 and 2020, head of household in 2021.

Question 10

In October of the current year, Brandy and her husband Ben split up and do not speak to each other. Neither individual will cooperate with the other on finalizing the divorce. Ben supports their two children after the split up and maintains their household. What is Ben's filing status for the current year?

Accepted Answer

A) Single. 
B) Head of household. 
C) Surviving spouse. 
D) Married, filing separately.

Question 11

Randy is a single individual who receives a salary of $30,000. During 2018, he has $7,000 withheld for payment of his federal income taxes and $2,500 for his state income taxes. In 2019, he receives a $400 refund after filing his 2018 federal tax return and a $50 refund after filing his state tax return.
I.Randy is allowed a deduction for the $2,500 of state taxes withheld from his salary on his 2018 federal tax return.
II.If Randy has total itemized deductions of $12,400 on his 2018 federal tax return, he must include the $50 state tax refund in his 2019 gross income.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 12

Which of the following individuals or couples qualify for the child and dependent-care credit?
I.Jeff and Marion are married with 2 children ages 5 and 7. Jeff earns $57,000 but Marion has no earned income. She works as a volunteer for the local hospital. When Marion is working as a volunteer, they hire their neighbor to care for the children. During the year they paid $1,200 to their neighbor.
II.Michael is single and earns $75,000. Michael pays $10,000 for a nurse to help care for his father who is disabled and lives with him. Michael is entitled to the dependency exemption for his father.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 13

Ariel has two children, Christopher and Pat. Christopher is 25 years old and Pat is 22. Christopher is a full time student at Southern College, has a full tuition scholarship, and lived at school during the year. Pat works full-time and lives at home. Which test will prevent both Pat and Christopher from being qualifying children of Ariel?

Accepted Answer

A) Age test. 
B) Gross income test. 
C) Principal residence test. 
D) Non-support test. 
E) Full time student test.

Question 14

Larry is a single parent with an 11-year-old daughter. Larry's adjusted gross income is $27,000, and he pays $2,100 in qualified child-care expenses. Larry can claim a child and dependent-care credit of:

Accepted Answer

A) $420 
B) $441 
C) $609 
D) $735 
E) $2,100

Question 15

Susan and Kyle are married and have two children ages 16 and 14. Their adjusted gross income for 2018 is $108,000. What total amount can they claim for the child tax credit plus the family tax credit?

Accepted Answer

A) $- 0 - 
B) $500 
C) $2,000 
D) $2,500 
E) $4,000

Question 16

The American Opportunity Scholarship Tax Credit provides for a 100% tax credit on the first $2,000 of qualifying expenses and a 50% tax credit for the next $2,000 of qualifying expenses paid during the year for each qualifying student.

Accepted Answer

A) True 
 B)False

Question 17

Julius is a single taxpayer. During the year he pays the following amounts. Julius's adjusted gross income is $100,000 before considering these expenses.
?
$\begin{array}{lc}
\text { State income tax withhel d from paycheck } & \$ 5,000 \
\text { Federal income tax withheld from paycheck } & \$ 15,000 \
\text { FICA taxes withheld from paycheck } & \$ 7,650 \
\text { Cash contribution to state university } & \$ 8,000 \
\text { Renter's insurance on apartment } & \$ 500 \
\text { Cash contribution to church } & \$ 2,000 \
\text { Cable television subscription fees } & \$ 1,000 \
\text { Cost of professional wardrobe } & \$ 7,000
\end{array}$

What is Julius's taxable income?

Accepted Answer

A) $70,350 
B) $77,350 
C) $85,000 
D) $87,000 
E) $88,000

Question 18

In addition to the regular standard deduction taxpayers who are blind qualify for a second standard deduction of the same amount.

Accepted Answer

A) True 
 B)False

Question 19

Toby, a single taxpayer with no dependents,made the following cash contributions during the current year.
?
$$\begin{array} { l r } 
\text { Salvation Army } & \$ 3,000 \
\text { Church } & 2,000
\end{array}$$
Toby's AGI is $100,000 and is in the 22% marginal tax rate. In addition to the expenditures described above, his only other qualified itemized deductions are home mortgage interest of $6,000 and property taxes of $2,000. What is the after-tax cost to Toby of his charitable contributions?

Accepted Answer

A) $- 0 - 
B) $3,900 
C) $4,340 
D) $4,780 
E) $5,000

Question 20

To qualify as a head of household, an unmarried taxpayer must pay more than half of the cost of maintaining a home that is the principal residence for more than half the year of a qualified dependent or an unmarried child who qualifies as a dependent.

Accepted Answer

A) True 
 B)False

Exam 8: Taxation of Individuals

Match each statement with the correct term below. -Personal interest

For purposes of the relationship test for dependents, which of the following does not qualify as a relative?

Discuss why the distinction between deductions for adjusted gross income and deductions from adjusted gross income is important for individual taxpayers.

During 2018, Stephanie earns $2,700 from a summer job. She also has interest income of $400. Stephanie, age 19, is a full-time student at Omega College. She is a dependent of her parents. What is the amount of Stephanie's taxable income for 2018?

Norton's spouse died in 2018. Norton has one child, age 7, living at home. Norton provides all of the support for the child. The child lives with Norton during 2018, 2019, 2020, and 2021. Norton's most advantageous filing status is

Larry is a single parent with an 11-year-old daughter. Larry's adjusted gross income is $27,000, and he pays $2,100 in qualified child-care expenses. Larry can claim a child and dependent-care credit of:

Susan and Kyle are married and have two children ages 16 and 14. Their adjusted gross income for 2018 is $108,000. What total amount can they claim for the child tax credit plus the family tax credit?

The American Opportunity Scholarship Tax Credit provides for a 100% tax credit on the first $2,000 of qualifying expenses and a 50% tax credit for the next $2,000 of qualifying expenses paid during the year for each qualifying student.

In addition to the regular standard deduction taxpayers who are blind qualify for a second standard deduction of the same amount.

To qualify as a head of household, an unmarried taxpayer must pay more than half of the cost of maintaining a home that is the principal residence for more than half the year of a qualified dependent or an unmarried child who qualifies as a dependent.