Question 1

Which of the following shows the correct relationship among standard deduction amounts for the respective filing statuses?

Accepted Answer

The standard deduction for single and MFS taxpayers is half that of MFJ taxpayers.

Question 2

Which of the following statements regarding tax deductions is False?

Accepted Answer

For AGI deductions tend to be associated with business activities.

Question 3

In year 1, the Bennetts' 25-year-old daughter, Jane, is a full-time student at an out-of-state university but she plans to return home after the school year ends. In previous years, Jane has never worked and her parents have always been able to claim her as a dependent. In year 1, a kind neighbor offers to pay for all of Jane's educational and living expenses. Which of the following statements is most accurate regarding whether Jane's parents would be allowed to claim Jane as a dependent for year 1 assuming the neighbor pays for all of Jane's support?

Accepted Answer

After the age of 24, children can no longer be considered qualifying children even if they are full-time students and must be tested as qualifying relatives. The support test for qualifying relatives is different than for qualifying children. The parents must provide more than half of her support to claim a Jane as a dependent.

Question 4

Which of the following statements is True?

Accepted Answer

Qualified dividends are taxed at a maximum rate of 15% or 20% (depending on the taxpayer's income) and are always taxed at a lower rate than the same amount of ordinary income would be. Income character determines the rate at which income is taxed and it does not depend on filing status. Finally, a taxpayer selling a capital asset at a gain recognizes capital gain not ordinary income.

Question 5

Jamison's gross tax liability is $7,000. Jamison had $2,000 of available credits and he had $4,000 of taxes withheld by his employer. What is Jamison's taxes due (or taxes refunded) with his tax return?

Accepted Answer

Gross tax liability minus credits minus payments equals taxes due ($7,000 − 2,000 − 4,000 = $1,000 taxes due).

Question 6

Which of the following statements regarding dependents is True?

Accepted Answer

The individual must be either a qualifying child or a qualifying relative of another to be a dependent of that person.

Question 7

Madison's gross tax liability is $9,000. Madison had $3,000 of tax credits available and she had $8,000 of taxes withheld by her employer. What is Madison's taxes due (or taxes refunded) with her tax return?

Accepted Answer

Gross tax liability minus credits minus payments equals tax refund ($9,000 − 3,000 − 8,000 = $2,000 tax refund).

Question 8

Which of the following relationships does NOT pass the relationship test for a qualifying child?

Accepted Answer

Stepsister's daughter, half-brother, and stepsister are all valid relationships for a qualifying child.

Question 9

Which of the following statements regarding tax credits is True?

Accepted Answer

Credits reduce the taxes payable dollar for dollar and are therefore not sensitive to marginal tax rates.

Question 10

Charlotte is the Lucas family's 22-year-old daughter. She is a full-time student at an out-of-state university but plans to return home when the school year ends. During the year, Charlotte earned $4,000 of income working part-time. Her support totaled $30,000 for the year. Of this amount, Charlotte paid $7,000 with her own funds, her parents paid $14,000, and Charlotte's grandparents paid $9,000. Which of the following statements most accurately describes whether Charlotte's parents can claim Charlotte as a dependent?

Accepted Answer

Because Charlotte is a full-time student and under 24 years of age she passes the age test of a qualifying child. Her time spent away from school is counted as time at home for the residence test. Also, Charlotte did not provide more than half of her own support. There is no gross income test for qualifying children.

Question 11

Joanna received $60,000 compensation from her employer, the value of her stock in ABC company appreciated by $5,000 during the year (but she did not sell any of the stock), she received $30,000 of life insurance proceeds from the death of her husband. What is the amount of Joanna's gross income from these items?

Accepted Answer

$60,000 compensation is included in gross income, the increase in the value of her stock is not realized income so it is not included in gross income, and the life insurance proceeds are excluded from gross income.

Question 12

Which of the following is not an itemized deduction?

Accepted Answer

Alimony paid is a for AGI deduction for divorce decrees before 2019.

Question 13

All of the following are for AGI deductions except:

Accepted Answer

Charitable contributions are from AGI deductions.

Question 14

All of the following are tests for determining qualifying child status except the ________.

Accepted Answer

Qualifying children must pass the relationship, age, support, and residence tests. There is no requirement relating to gross income for purposes of the qualifying child test.

Question 15

Which of the following statements regarding dependents is False?

Accepted Answer

To qualify as a dependent of another, an individual must be a resident of the United States, Canada, or Mexico. Also, there is no gross income test for a qualifying child but there is for a qualifying relative.

Question 16

All of the following represents a type or character of income except:

Accepted Answer

The types or characters of income include tax exempt, tax deferred, capital, ordinary, and qualified dividend. Normal income is not an income type or character.

Question 17

Which of the following statements regarding for AGI tax deductions is True?

Accepted Answer

Taxpayers subtract for AGI deductions from gross income to determine adjusted gross income.

Question 18

Which of the following is NOT a from AGI deduction?

Accepted Answer

From AGI deductions consist of the greater of the standard deduction or itemized deductions and the deduction for qualified business income.

Question 19

Which of the following types of income are not considered ordinary income?

Accepted Answer

Both net long-term capital gains and qualified dividend income are subject to preferential rates and are thus not considered to be ordinary income.

Question 20

Anna is a 21-year-old full-time college student (she plans on returning home at the end of the school year). Her total support for the year was $34,000 (including $8,000 of tuition). Anna covered $12,000 of her support costs out of her own pocket (from savings, she did not work) and she received an $8,000 scholarship that covered all of her tuition costs. Which of the following statements regarding who is allowed to claim Anna as an exemption is True?

Accepted Answer

Anna does not qualify as a qualifying child or relative of her grandparents because she provided more than half her own support. As it relates to the grandparents, the scholarship earned by Anna is treated as support provided by Anna (Anna provided $20,000 and the grandparents provided $14,000 of support). However, because Anna is a full-time college student under age 24, she qualifies as her parents' qualifying child (the scholarship does not count in the support test with respect to the parents).

Quiz 4: Individual Income Tax Overview, Dependents, and Filing Status