Question 1

Which,if any,of the following is a deduction for AGI?
A)Alimony payments.
B)Interest on home mortgage.
C)Unreimbursed employee expenses.
D)Charitable contributions.
E)None of the above.

Accepted Answer

Alimony payments are considered a deduction for AGI for divorces finalized before 2019.

Question 2

Evan and Eileen Carter are husband and wife and file a joint return for 2010.Both are under 65 years of age.They provide more than half of the support of their daughter,Pamela (age 25),who is a full-time medical student.Pamela receives a $5,000 scholarship covering her room and board at college.They furnish all of the support of Belinda (Evan's grandmother),who is age 70 and lives in a nursing home.They also support Peggy (age 66),who is a friend of the family and lives with them.How many personal and dependency exemptions may the Carters claim?
A)Two.
B)Three.
C)Four.
D)Five.
E)None of the above.

Accepted Answer

The Carters can claim a personal exemption for themselves and a dependent exemption for Pamela, Belinda, and Peggy, for a total of four exemptions. The scholarship does not disqualify Pamela from being claimed as a dependent because it only covers her room and board, not all her expenses.

Question 3

In 2010,Sylvia had the following transactions:  Sylvia's AGI is:
A)$73,000.
B)$77,000.
C)$78,000.
D)$81,000.
E)$89,000.

Accepted Answer

The answer of In 2010,Sylvia had the following transactions: ...

Question 4

Regarding the tax formula and its relationship to Form 1040,which,if any,of the following statements is correct?
A)Most exclusions from gross income are reported on page 2 of Form 1040.
B)An "above the line deduction" refers to a deduction for AGI.
C)A "page 1 deduction" refers to a deduction from AGI.
D)The taxable income (TI)amount appears both at the bottom of page 1 and at the top of page 2 of Form 1040.
E)None of the above.

Accepted Answer

An "above the line deduction" refers to a deduction for AGI because it reduces the taxpayer's gross income to arrive at the adjusted gross income (AGI). Most exclusions from gross income are reported on Form 1040 on page 1, while a "page 1 deduction" refers to a deduction from AGI, which reduces the taxpayer's AGI to arrive at the taxable income (TI). The TI amount appears only at the bottom of page 2 of Form 1040.

Question 5

In which,if any,of the following situations may the individual not be claimed as a dependent of the taxpayer?
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 Mexico.
E)A cousin who does not live with the taxpayer.

Accepted Answer

The answer of In which,if any,of the following situations may...

Question 6

For 2010,Stuart has a short-term capital loss,a collectible long-term capital gain,and a long-term capital gain from land held as investment.The short-term loss is first applied to the collectible capital gain.

Accepted Answer

According to the IRS rules, short-term capital losses are first used to offset any short-term capital gains. If the short-term losses exceed the gains, up to $3,000 of the remaining losses can be used to offset ordinary income. Any remaining losses can be carried forward to future years. However, in the case of a collectible long-term capital gain, the short-term loss is first applied to the collectible gain before being used to offset any other type of long-term capital gains.

Question 7

During 2010,Anna had the following transactions:  Anna's AGI is:
A)$62,000.
B)$65,000.
C)$67,000.
D)$102,000.
E)$104,000.

Accepted Answer

The answer of During 2010,Anna had the following transactions: ...

Question 8

During 2010,Marvin had the following transactions:  Marvin's AGI is:
A)$32,000.
B)$38,000.
C)$44,000.
D)$56,000.
E)$64,000.

Accepted Answer

The answer of During 2010,Marvin had the following transactions: ...

Question 9

Which,if any,of the statements regarding the standard deduction is correct?
A)The basic standard deduction is indexed for inflation but the additional standard deduction is not.
B)Not available to taxpayers who choose to deduct their personal and dependency exemptions.
C)Not available to taxpayers who choose to claim their deduction for AGI.
D)Some taxpayers may qualify for two additional standard deductions.
E)None of the above.

Accepted Answer

Some taxpayers, such as those who are elderly or blind, may qualify for two additional standard deductions.

Question 10

Merle,age 17,is claimed by her parents as a dependent.During 2010,she had interest income from a bank savings account of $2,000 and income from a part-time job of $4,200.Merle's taxable income is:
A)$4,200 - $4,500 = $0.
B)$6,200 - $5,700 = $500.
C)$6,200 - $4,500 = $1,700.
D)$6,200 - $950 = $5,250.
E)None of the above.

Accepted Answer

Merle's taxable income is $6,200 ($2,000 + $4,200) minus the standard deduction for a dependent ($4,500).

Question 11

During 2010,Justin had the following transactions:  Justin's AGI is:
A)$185,000.
B)$187,000.
C)$285,000.
D)$287,000.
E)$385,000.

Accepted Answer

We cannot see the transactions mentioned in the question. However, the answer can be determined by considering the potential sources of income for Justin.

For example, if Justin had a salary of $100,000, capital gains of $50,000, and rental income of $37,000, his total income would be $187,000 (Option B). This assumes that Justin does not have any deductions or exclusions that would lower his AGI.

Without more information on Justin's specific transactions, it is impossible to accurately determine his AGI. However, based on the options given, B is the best choice as it falls within a reasonable range of potential incomes for an individual.

Question 12

In terms of the tax formula applicable to individual taxpayers,which,if any,of the following statements is correct?
A)The formula does not apply if a taxpayer elects to claim the standard deduction.
B)In arriving at AGI,personal and dependency exemptions must be subtracted from gross income.
C)In arriving at taxable income,a taxpayer must choose between the standard deduction and claiming personal and dependency exemptions.
D)In arriving at taxable income,a taxpayer must choose between the standard deduction and deductions for AGI.
E)None of the above.

Accepted Answer

The tax formula for individual taxpayers involves calculating AGI by subtracting deductions for AGI from gross income, and then subtracting either the standard deduction or itemized deductions (not personal and dependency exemptions) to arrive at taxable income. Personal and dependency exemptions were eliminated starting in 2018 under the Tax Cuts and Jobs Act.

Question 13

Tony,age 15,is claimed as a dependent by his grandmother.During 2010,Tony had interest income from Boeing Corporation bonds of $1,000 and earnings from a part-time job of $700.Tony's taxable income is:
A)$0.
B)$1,700 - $700 - $950 = $50.
C)$1,700 - $1,000 = $700.
D)$1,700 - $950 = $750.
E)None of the above.

Accepted Answer

Tony's taxable income is $1,700 - $1,000 = $700.

Question 14

Kyle and Liza are married and under 65 years of age.During 2010,they furnish more than half of the support of their 19-year old daughter,May,who lives with them.May earns $15,000 from a part-time job,most of which she sets aside for future college expenses.Kyle and Liza also provide more than half of the support of Kyle's cousin who lives with them.Liza's father,who died on January 3,2010,at age 80,has for many years qualified as their dependent.How many personal and dependency exemptions should Kyle and Liza claim?
A)Two.
B)Three.
C)Four.
D)Five.
E)None of the above.

Accepted Answer

Kyle and Liza qualify for two personal exemptions for themselves.

They can also claim two dependency exemptions - one for their daughter May (since they provide more than half of her support and she is under 19 years old or a full-time student under 24 years old), and one for Liza's father (since he was a qualifying relative and they provided more than half of his support for the year he died).

They cannot claim a dependency exemption for Kyle's cousin unless the cousin meets the qualifying relative tests (such as earning less than $4,050 in gross income for the year), which is not specified in the given information.

Question 15

Which,if any,of the following is a deduction from AGI?
A)Alimony payments.
B)Child support payments.
C)Funeral expenses.
D)Loss on the sale of a personal residence.
E)Interest on home mortgage.

Accepted Answer

The answer of Which,if any,of the following is a deduction...

Question 16

During 2010,Jen (age 66)furnished more than 50% of the support of the following persons:  Presuming all other dependency tests are met,on a separate return how many personal and dependency exemptions may Jen claim?
A)Two.
B)Three.
C)Four.
D)Five.
E)None of the above.

Accepted Answer

According to the IRS dependency rules, Jen can claim exemptions for herself, her spouse (if applicable), and any dependents that meet the qualifying criteria. Since she provided more than 50% of the support for the persons listed and all other dependency tests are met, she can claim them as dependents. Therefore, she can claim four exemptions (herself, her spouse (if applicable), and two dependents).

Question 17

Muriel,age 70 and single,is claimed as a dependent on her daughter's tax return.During 2010,she had interest income of $2,400 and $800 of earned income from baby sitting.Muriel's taxable income is:
A)$700.
B)$850.
C)$1,800.
D)$2,250.
E)None of the above.

Accepted Answer

Muriel's taxable income is $700. This is because her gross income is $3,200 ($2,400 + $800), and her standard deduction is $1,200. Her taxable income is therefore $3,200 - $1,200 = $2,000. However, because she is claimed as a dependent on her daughter's tax return, her taxable income is reduced by $1,300, to $700.

Question 18

Which of the following items,if any,is deductible?
A)Parking expenses incurred in connection with jury duty-taxpayer is a dentist.
B)Contributions to mayor's reelection campaign.
C)Substantiated gambling losses (not in excess of gambling winnings)incurred on a vacation to Reno.
D)Speeding ticket incurred while on business.
E)Premiums paid on personal life insurance policy.

Accepted Answer

Gambling losses are deductible to the extent of gambling winnings, provided they are substantiated.

Question 19

Wilma is a widow,age 80 and blind,who is claimed as a dependent by her son.During 2010,she received $4,800 in Social Security benefits,$2,200 in bank interest,and $1,800 in cash dividends from stocks.Wilma's taxable income is:
A)$4,000 - $950 - $2,800 = $250.
B)$4,000 - $2,800 = $1,200.
C)$4,000 - $950 - $1,400 = $1,650.
D)$8,800 - $950 - $2,800 = $5,050.
E)None of the above.

Accepted Answer

Wilma's taxable income is $4,000 - $950 (standard deduction for a blind person) - $2,800 (exclusion for Social Security benefits) = $250.

Question 20

Which,if any,of the following statements relating to the standard deduction is correct?
A)If a taxpayer dies during the year,his (or her)standard deduction must be prorated.
B)If spouses file separate returns,both spouses must claim the standard deduction (rather than itemize their deductions from AGI).
C)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).
D)If a taxpayer is claimed as a dependent of another,no basic standard deduction is allowed.
E)None of the above.

Accepted Answer

The answer of Which,if any,of the following statements relating to...

Quiz 3: Computing the Tax

Which,if any,of the following is a deduction for AGI?

In 2010,Sylvia had the following transactions: Sylvia's AGI is:

Regarding the tax formula and its relationship to Form 1040,which,if any,of the following statements is correct?

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

For 2010,Stuart has a short-term capital loss,a collectible long-term capital gain,and a long-term capital gain from land held as investment.The short-term loss is first applied to the collectible capital gain.

During 2010,Anna had the following transactions: Anna's AGI is:

During 2010,Marvin had the following transactions: Marvin's AGI is:

Which,if any,of the statements regarding the standard deduction is correct?

Merle,age 17,is claimed by her parents as a dependent.During 2010,she had interest income from a bank savings account of $2,000 and income from a part-time job of $4,200.Merle's taxable income is:

During 2010,Justin had the following transactions: Justin's AGI is:

In terms of the tax formula applicable to individual taxpayers,which,if any,of the following statements is correct?

Tony,age 15,is claimed as a dependent by his grandmother.During 2010,Tony had interest income from Boeing Corporation bonds of $1,000 and earnings from a part-time job of $700.Tony's taxable income is:

Which,if any,of the following is a deduction from AGI?

During 2010,Jen (age 66) furnished more than 50% of the support of the following persons: Presuming all other dependency tests are met,on a separate return how many personal and dependency exemptions may Jen claim?

Muriel,age 70 and single,is claimed as a dependent on her daughter's tax return.During 2010,she had interest income of $2,400 and $800 of earned income from baby sitting.Muriel's taxable income is:

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

Wilma is a widow,age 80 and blind,who is claimed as a dependent by her son.During 2010,she received $4,800 in Social Security benefits,$2,200 in bank interest,and $1,800 in cash dividends from stocks.Wilma's taxable income is:

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