Tax Exam 1 Chapters 1-3

David, age 62, retires and receives $1,000 per month annuity from his employer's qualified pension plan. David made $65,000 of after-tax contributions to the plan prior to his retirement. Under the simplified method, David's number of anticipated payments is 260. What is the amount includible in income in the first year of withdrawals assuming 12 monthly payments? A) $9,000 B) $2,600 C) $3,000 D) $12,000

A) $9,000

Lester, a widower qualifying as a surviving spouse, has $209,000 of salary, five personal and dependency exemptions and itemizes deductions. Lester must use which form to report taxable income? A) Form 1040 B) Form 1040ES C) Form 1040A D) Form 1040EZ

A) Form 1040

Examples of income which are constructively received include all of the following except A) a paycheck received from employer, when employer does not have funds in the bank to cover the check B) dividend available on December 31; unclaimed dividends will be mailed out C) interest credited to a savings account D) a check received after banking hours

A) a paycheck received from employer, when employer does not have funds in the bank to cover the check

Which of the following dependent relatives does not have to live in the same household as the taxpayer who is claiming head of household filing status? A) father B) brother C) nephew D) uncle

A) father

Charlotte pays $16,000 in tax deductible property taxes. Charlotte's marginal tax rate is 28%, effective tax rate is 22%, and average tax rate is 25%. Charlotte's tax savings from paying the property tax is A)$3,520 B) $4,480 C) $4,000 D)$11,520

B) $4,480 (25% * $16,000)

Annisa, who is 28 and single, has adjusted gross income of $55,000 and itemized deductions of $5,000. In 2015, Annisa will have taxable income of A) $48,700 B) $44,700 C) $51,000 D) $46,000

B) $44,700

Cheryl is claimed as a dependent on her parent's tax return. She had a part-time job during 2015 and earned $4,900 during the year, in addition to $600 of interest income. What is her standard deduction? A) $6,300 B) $5,250 C) $4,900 D) $1,050

B) $5,250 ($4,900 + $350)

Taxable income for an individual is defined as A) total income reduced by the standard deduction B) AGI reduced by deductions from AGI and personal and dependency exemptions C) AGI reduced by personal and dependency exemptions D) AGI reduced by itemized deductions

B) AGI reduced by deductions from AGI and personal and dependency exemptions

Alimony is A) an item which does not affect the payor's or the payee's tax reporting B) deductible by the payor and included in income by the payee C) deductible by both the payor and the payee D) included in income by the payor and deducted by the payee

B) deductible by the payor and included in income by the payee

Which one of the following items is not considered gross income for tax purposes? A) illegal income B) face amount of life insurance received due to the death of the insured C) cash dividends D) gambling winnings

B) face amount of life insurance received due to the death of the insured

All of the following items are deductions for adjusted gross income except A) trade or business expenses B) state and local income taxes C) rent and royalty expenses D) alimony paid

B) state and local income taxes

In 2015 the standard deduction for a married taxpayer filing a joint return and who is 67 years old with a spouse who is 65 years old is A) $15,700 B) $13,850 C) $15,100 D) $12,600

C) $15,100

Ms. Marple's books and records for 2015 reflect the following information: Salary earned this year: $65,000 Interest on savings account (credited to her account in 2015, drawn in 2016) Interest on county bonds earned and collected in 2015: 2,000 What is the amount Ms. Marple should include in her gross income in 2015? A) $65,000 B) $68,000 C) $66,000 D) $67,000

C) $66,000

If an individual with a marginal tax rate of 15% has a long-term capital gain, it is taxed at A) 20% B)10% C)0% D)15%

C) 0%

John supports Kevin, his cousin, who lived with him throughout 2015. John also supports three other individuals who do not live with him: Donna, who is John's mother, Melissa, who is John's stepsister, and Morris, who is Kevin's brother. Assume that Donna, Melissa, Morris, and Kevin each earn less than $4,000. How many personal and dependency exemptions may John claim? A) 2 B) 3 C)4 D)5

C) 4

All of the following items are included in gross income except: A) alimony received B) interest earned on a bank account C) child support payments received D) rent income

C) child support payments received

Which of the following steps, related to a tax bill, occurs first? A) consideration by the Joint Conference Committee B) signature or veto by the President of the United States C) consideration of the House Ways and Means Committee D) consideration by the Senate

C) consideration by the House Ways and Means Committee

The largest source of revenue for the federal government comes from A) corporate income taxes B) estate and gift taxes C)individual income taxes D)Social Security and Medicare taxes (FICA)

C) individual income taxes

Thomas and Sally were divorced last year. As a result, Thomas must pay Sally alimony of $100,000 per year starting this year and relinquish the house and car with a combined value of $170,000 and a combined cost basis of $155,000. The house and car are given as a property settlement. As a result of these transactions Thomas has a deduction of A) $170,000 B) $155,000 C) $270,000 D) $100,000

D) $100,000

A single taxpayer provided the following information for 2015: Salary: $80,000 Interest on local government bonds (qualifies as a tax exclusion): 4,000 Allowable itemized deductions: 13,000 What is taxable income? A) $63,400 B) $67,000 C) $67,400 D) $63,000

D) $63,000

Tom and Alice were married on December 31 of last year. What is their filing status for last year? A) They file as single for half the year and married for the other half. B) They file as single for 364 days and married for one day. C) They file as single. D) They file as married joint or married separate.

D) They file as married joint or married separate

Jan purchased an antique desk at auction. For two years, the desk sat in Jan's garage until she decided to restore it. This year, while cleaning and restoring the desk, Jan discovered $1,500, Jan must A) report only $750 due to the statute of limitations B) report nothing C) amend her previous tax return and report the $1,500 D) report $1,500 on this year's tax return

D) report $1,500 on this year's tax return