Deck 3: Computing the Tax

Question 1

Jason and Peg are married and file a joint return.Both are over 65 years of age and Jason is blind.Their standard deduction for 2012 is $15,350 ($11,900 + $1,150 + $1,150 + $1,150).

Answer 1

True

Question 2

An "above the line" deduction refers to a deduction for AGI.

Answer 2

True

Question 3

Under the Federal income tax formula for individuals, a choice must be made between claiming deductions for AGI and itemized deductions.

Answer 3

False

Question 4

The filing status of a taxpayer (e.g., single, head of household) must be identified before taxable income is determined.

Question 5

Many taxpayers who previously itemized will start claiming the standard deduction when they purchase a home.

Question 6

Lee, a citizen of Korea, is a resident of the U.S.Any rent income Lee receives from land he owns in Korea is not subject to the U.S.income tax.

Question 7

Derek, age 46, is a surviving spouse.If he has itemized deductions of $12,100 for 2012, Derek should not claim the standard deduction.

Question 8

Because they appear on page 1 of Form 1040, itemized deductions are also referred to as "page 1 deductions."

Question 9

In 2012, Ed is 66 and single.If he has itemized deductions of $7,300, he should claim the standard deduction alternative.

Question 10

Howard, age 82, dies on January 2, 2012.On Howard's final income tax return, the full amount of the basic and additional standard deductions will be allowed even though Howard lived for only 2 days during the year.

Question 11

Claude's deductions from AGI slightly exceed the standard deduction allowed for 2012.Under these circumstances, Claude cannot claim the standard deduction.

Question 12

After Carolyn moves out of the apartment she had rented as her personal residence, she recovers her damage deposit of $500.The $500 is income to Carolyn.

Question 13

A decrease in a taxpayer's AGI could decrease the amount of charitable contribution that can be claimed.

Question 14

The additional standard deduction for age and blindness is not the same amount for single as for married taxpayers.

Question 15

The basic and additional standard deductions are not subject to an annual adjustment for inflation.

Question 16

An increase in a taxpayer's AGI will increase the amount of medical expenses that can be deducted.

Question 17

As opposed to itemizing deductions from AGI, the majority of individual taxpayers choose the standard deduction.

Question 18

Under the Federal income tax formula for individuals, the determination of adjusted gross income (AGI) follows that of taxable income (TI).

Question 19

Under the income tax formula, a taxpayer must choose between deductions from AGI and the standard deduction.

Question 20

Once they reach age 65, many taxpayers will switch from itemizing their deductions from AGI and start claiming the standard deduction.

Question 21

Katrina, age 16, is claimed as a dependent by her parents.During 2012, she earned $5,600 as a checker at a grocery store.Her standard deduction is $5,900 ($5,600 earned income + $300).

Question 22

Buddy and Hazel are ages 72 and 71 and file a joint return.If they have itemized deductions of $14,000 for 2012, they should not claim the standard deduction.

Question 23

Monique is a resident of the U.S.and a citizen of France. If she files a U.S.income tax return, Monique can claim the standard deduction.

Question 24

Albert buys his mother a TV.For purposes of meeting the support test, Albert cannot include the cost of the TV.

Question 25

In determining whether the support test is met for dependency exemption purposes, only the taxable portion of a scholarship is considered.

Question 26

Even if the individual does not spend funds that have been received from another source (e.g., interest on municipal bonds), the unexpended amounts are considered for purposes of the support test.

Question 27

In 2012, Hal furnishes more than half of the support of his ex-wife and her father, both of whom live with him.The divorce occurred in 2011.Hal may claim the father-in-law and the ex-wife as dependents.

Question 28

Butch and Minerva are divorced in December of 2012.Since they were married for more than one-half of the year, they are considered asmarried for 2012.

Question 29

Keith, age 17 and single, earns $3,000 during 2012.Keith's parents cannot claim him as a dependent even if he does not live with them.

Question 30

Using borrowed funds from a mortgage on her home, Leah provides 52% of her own support, while her sons furnished the rest.Leah cannot be claimed as a dependent under a multiple support agreement.

Question 31

A dependent cannot claim a personal exemption on his or her own return.

Question 32

Darren, age 20 and not disabled, earns $4,000 during 2012.Darren's parents cannot claim him as a dependent unless he is a full-time student.

Question 33

For the year a spouse dies, the surviving spouse is considered married for the entire year for income tax purposes.

Question 34

Debby, age 18, is claimed as a dependent by her mother.During 2012, she earned $1,100 in interest income on a savings account.Debby's standard deduction is $1,400 ($1,100 + $300).

Question 35

Dan and Donna are husband and wife and file separate returns for the year.If Dan itemizes his deductions from AGI, Donna still can claim the standard deduction.

Question 36

After her divorce, Hope continues to support her ex-husband's sister, Cindy, who does not live with her.Hope can claim Cindy as a dependent.

Question 37

Clara, age 68, claims head of household filing status.If she has itemized deductions of $9,500 for 2012, she should not claim the standard deduction.

Question 38

Roy and Linda were divorced in 2011.The divorce decree awards custody of their children to Linda but is silent as to who is entitled to claim them as dependents.If Roy furnished more than half of their support, he can claim them as dependents in 2012.

Question 39

When separate income tax returns are filed by married taxpayers, one spouse cannot claim the other spouse as an exemption.

Question 40

Benjamin, age 16, is claimed as a dependent by his parents.During 2012, he earned $700 at a car wash.Benjamin's standard deduction is $1,250 ($950 + $300).

Question 41

Ed is divorced and maintains a home in which he and a dependent friend live.Ed does not qualify for head of household filing status.

Question 42

An individual taxpayer uses a fiscal year March 1-February 28.The due date of this taxpayer's Federal income tax return is May 15 of each tax year.

Question 43

The kiddie tax does not apply as to a child whose earned income is more than one-half of his or her support.

Question 44

In terms of income tax consequences, abandoned spouses are treated the same way as married persons filing separate returns.

Question 45

In determining the filing requirement based on gross income received, both additional standard deductions (i.e., age and blindness) are taken into account.

Question 46

In January 2012, Jake's wife dies and he does not remarry.For tax year 2012, Jake may not be able to use the filing status available to married persons filing joint returns.

Question 47

Married taxpayers who file a joint return cannot later (i.e., after the filing due date) switch to separate returns for that year.

Question 48

Sarah furnishes more than 50% of the support of her son and daughter-in-law who live with her.If the son and daughter-in-law file a joint return, Sarah cannot claim them as dependents.

Question 49

Married taxpayers who file separately cannot later change to a joint return.

Question 50

Once a child reaches age 19, the kiddie tax no longer applies.

Question 51

Surviving spouse filing status begins in the year in which the deceased spouse died.

Question 52

Since an abandoned spouse is treated as single and has one or more dependent children, he or she qualifies for the standard deduction available to head of household.

Question 53

Currently, the top income tax rate in effect is not the highest it has ever been.

Question 54

Katelyn is divorced and maintains a household in which she and her daughter, Crissa, live.Crissa, age 22, earns $11,000 during 2012 as a model.Katelyn does qualify for head of household filing status.

Question 55

A taxpayer who itemizes must use Form 1040, and cannot use Form 1040EZ or Form 1040A.

Question 56

For dependents who have income, special filing requirements apply.

Question 57

In terms of timing as to any one year, the Tax Tables are available before the Tax Rate Schedules.

Question 58

For tax purposes, married persons filing separate returns are treated the same as single taxpayers.

Question 59

Kim, a resident of Oregon, supports his parents who are residents of Canada but citizens of Korea.Kim can claim his parents as dependents.

Question 60

When the kiddie tax applies and the parents are divorced, the applicable parent (for determining the parental tax) is the one who has custody.

Question 61

Sylvia, age 17, is claimed by her parents as a dependent.During 2012, she had interest income from a bank savings account of $2,000 and income from a part-time job of $4,200.Sylvia'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.

Question 62

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

A)Parking expenses incurred in connection with jury duty-taxpayer is a dentist.
B)Substantiated gambling losses (not in excess of gambling winnings) from state lottery.
C)Contributions to mayor's reelection campaign.
D)Speeding ticket incurred while on business.
E)Premiums paid on personal life insurance policy.

Question 63

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

A)Some taxpayers may qualify for two types of standard deductions.
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)The basic standard deduction is indexed for inflation but the additional standard deduction is not.
E)None of the above.

Question 64

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

A)State and local sales taxes.
B)Interest on home mortgage.
C)Charitable contributions.
D)Unreimbursed moving expenses of an employee.
E)None of the above.

Question 65

A child who has unearned income of $1,900 or less cannot be subject to the kiddie tax.

Question 66

Tony, age 15, is claimed as a dependent by his grandmother.During 2012, 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.

Question 67

In 2012, Warren sold his personal use automobile for a loss of $9,000.He also sold a personal coin collection for a gain of $10,000.As a result of these sales, $1,000 is subject to income tax.

Question 68

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 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).
C)If spouses file separate returns, both spouses must claim the standard deduction (rather than itemize their deductions from AGI).
D)If a taxpayer is claimed as a dependent of another, no basic standard deduction is allowed.
E)None of the above.

Question 69

When the kiddie tax applies, the child need not file an income tax return because the child's income will be reported on the parents' return.

Question 70

During 2012, Esther had the following transactions: Esther's AGI is:

A)$62,000.
B)$64,000.
C)$67,000.
D)$102,000.
E)$104,000.

Question 71

During 2012, Leona had the following transactions: Leona's AGI is:

A)$185,000.
B)$187,000.
C)$285,000.
D)$287,000.
E)$385,000.

Question 72

Which, if any, of the following is a deduction for 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.

Question 73

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 from AGI.
C)A "page 1 deduction" refers to a deduction for 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.

Question 74

In 2012, Pierre had the following transactions: Pierre's AGI is:

A)$83,000.
B)$94,000.
C)$98,000.
D)$103,000.
E)$114,000.

Question 75

A child who is married can be subject to the kiddie tax.

Question 76

During 2012, Marvin had the following transactions: Marvin's AGI is:

A)$32,000.
B)$38,000.
C)$44,000.
D)$56,000.
E)$64,000.

Question 77

Gain on the sale of collectibles held for more than 12 months could be subject to tax at a rate lower than 28%.

Question 78

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

A)In arriving at taxable income, a taxpayer must choose between the standard deduction and deductions from AGI.
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)The formula does not apply if a taxpayer elects to claim the standard deduction.
E)None of the above.

Question 79

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

A)In arriving at AGI, a taxpayer must elect between claiming deductions for AGI and deductions from AGI.
B)In arriving at taxable income, a taxpayer must elect between claiming deductions for AGI and deductions from AGI.
C)If a taxpayer has deductions for AGI, the standard deduction is not available.
D)In arriving at taxable income, a taxpayer must elect between deductions for AGI and the standard deduction.
E)None of the above.

Question 80

For 2012, 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.