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Exam 4: Individual Tax Overview

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Question 21

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Which of the following statements regarding exclusions and/or deferrals is false?

A) Exclusions are favorable because taxpayers never pay tax on income that is excluded.
B) Interest income from municipal bonds is excluded from gross income.
C) Deferrals are income items taxpayers realize in one year but include in gross income in a subsequent year.
D) An income item need not be realized in order to qualify as an exclusion item.An exclusion is realized income that is permanently excluded from taxation.If the income is not realized,it would not be included in gross income to begin with so it need not be excluded from income.

E) A) and B)
F) A) and D)

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Question 22

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Sullivan's wife Susan died four years ago.Sullivan has not remarried and he maintains a home for his dependent child Sammy.In 2013,Sullivan received $70,000 of salary from his employer and he paid $6,000 of itemized deductions.What is Sullivan's taxable income for 2013?

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Question 23

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An individual may never be considered as both a qualifying relative and a qualifying child of the same taxpayer.A qualifying relative is a person who is not a qualifying child and satisfies three other tests.

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?

Qualified dividends are taxed at the same rate as ordinary income.

Lydia and John Wickham filed jointly in year 1.They divorced in year 2.In late year 2,the IRS discovered that the Wickham's underpaid their year 1 taxes by $2,000.Both Lydia and John worked in year 1 and received equal income but John had $2,000 less tax withheld than did Lydia.Who is legally liable for the tax underpayment?

Jennifer and Stephan are married at year end and they file separate tax returns.If Jennifer itemizes deductions on her return,Stephan must also itemize deductions on his return even if his itemized deductions don't exceed his standard deduction.

Catherine de Bourgh has one child,Anne,who is 18 years old at the end of the year.Anne lived at home for seven months during the year before leaving home to attend State University for the rest of the year.During the year,Anne earned $6,000 while working part time.Catherine provided 80 percent of Anne's support and Anne provided the rest.Which of the following statements regarding whether Anne is Catherine's qualifying child for the current year is correct?

Which of the following statements regarding tax deductions is false?

Which of the following is not a filing status?

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

In June of year 1,Edgar's wife Cathy died and Edgar did not remarry during the year.What is his filing status for year 1 (assuming they did not have any dependents) ?

In June of year 1,Jake's wife Darla died.The couple did not have any children and Jake did not remarry in year 1 or year 2.Which is the most favorable filing status for Jake in year 2?

It is generally more advantageous from a nontax perspective for a married couple to file separately than it is for them to file jointly.

Jasmine and her husband Arty have been married for 25 years.In May of this year,the couple divorced.During the year,Jasmine provided all the support for herself and her 22-year-old child Dexter who lived in the same home as Jasmine for the entire year.Dexter is employed full-time,earning $29,000 this year.What is the Jasmine's most favorable filing status for the year?

Tax credits reduce taxable income dollar for dollar.Tax credits directly reduce taxes payable.

Sam and Tacy have been married for 25 years.They have filed a joint return every year of their marriage.They have two sons Christopher and Zachary.Christopher is 19 years old and Zachary is 14 years old.Christopher lived in his parents' home from January through August and he lived in his own apartment from September through December.During the year,Christopher attended college for one month before dropping out.Christopher's living expenses totaled $12,000 for the year.Of that,Christopher paid $5,000 from income he received while working a part time job.Sam and Tacy provided the remaining $7,000 of Christopher's support.Zachary lived at home the entire year and did not earn any income.How many personal and dependency exemptions are Sam and Tacy entitled to claim for the year and for whom are they allowed to claim the exemption(s) ?

Which of the following types of income are subject to a tax rate not provided for in the tax tables or tax rate schedules?

The character of income determines the rate at which the income is taxed.

In June of year 1,Eric's wife Savannah died.Eric did not remarry during year 1,year 2,or year 3.Eric maintains the household for his dependent daughter Catherine in year 1,year 2,and year 3.Which is the most advantageous filing status for Eric in year 2?