2023 10 Hour Federal Tax Law

In 2023, Anna and Matt earn $420,000 of adjusted gross income and figure $50,000 of total itemized deductions on their Schedule A, comprised entirely of qualified home mortgage interest and gifts to charity. They are married and are filing jointly. Anna and Matt can deduct what amount of itemized deductions on their income tax return?

$50,000

Which of the following is not an example of a barter arrangement?

A babysitting cooperative run by neighborhood parents

Which of the following is not an advantage of filing a joint income tax return?

Joint filers can claim double the amount of the personal exemption deduction

Which of the following statements about a sole proprietorship is correct?

A sole proprietorship is a type of business entity that is owned and operated by one individual and in which there is no legal distinction between the owner and the business

If taxes are not paid, and the IRS is not notified why the taxes cannot be paid, the law requires that enforcement action be taken. However, the IRS will generally not take enforced collection actions during which of the following circumstances?

All of the above

A cafeteria plan provides participants an opportunity to receive qualified benefits on a pre-tax basis. It is a written plan that allows employees to choose between receiving cash or taxable benefits, instead of certain qualified benefits for which the law provides an exclusion from wages. A cafeteria plan can include all of the following benefits except:

Dependent care assistance

Some dividends may not be qualified dividends even if they are shown in Box 1b of Form 1099-DIV. Which of the following is a qualified dividend?

Dividends paid from a stock held for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date

Mark and Sara have recently adopted a little girl from China. They incurred various expenses throughout this adoption process. Which one of the following is not a qualified adoption expenses for Mark and Sara?

Expenses reimbursed by an employer under a written qualified adoption assistance program

Harinder originally reported $39,750 as his adjusted gross income on his 2022 Form 1040. He received another Form W-2 for $500 after he filed his original income tax return. Which of the following statements is true?

Harinder should use Form 1040-X - Amended U.S. Individual Income Tax Return to correct the Form 1040

A taxpayer should increase his or her withholding on Form W-4 - Employee's Withholding Certificate for which of the following reasons?

He or she has income from sources other than jobs or self-employment that is not subject to withholding

On November 22 of 2023, David Charles purchased a dishwasher for his rental property. The appliance was delivered on December 7, 2023 but was not installed and ready for use until January 3 of 2024. When is the dishwasher considered to be placed in service for the purposes of depreciation?

January 3, 2024

The rule for involuntary conversions does not apply to which of the following?

Like-kind exchanges

Bruce owns XYZ Co. common stock, which he bought in 2020. He was paid a dividend of $500 for the current year. These qualified dividends are generally taxed at what tax rate?

Long-term capital gains tax rate

In 2023, for which of the following situations is the taxpayer not required to file Schedule H - Household Employment Taxes?

Paid $2,000 to his or her father to help install a new fence

Bill and Karen Green filed a joint return showing Karen's wages of $50,000 and Bill's self-employment income of $10,000. The IRS audited their return and found that Bill did not report $20,000 of self-employment income. The additional income resulted in a $6,000 understated tax, plus interest and penalties. After obtaining a legal separation from Bill, Karen filed Form 8857 - Request for Innocent Spouse Relief to request separation of liability relief. The IRS proved that Karen actually knew about the $20,000 of additional income at the time she signed the joint return. Bill is liable for all of the understated tax, interest, and penalties because all of it was due to his unreported income. Which of the following is true regarding Karen's liability for the understated tax, interest and penalties due for the unreported income of $20,000?

The IRS can collect the entire $6,000 plus interest and penalties from either Karen or Bill because they are jointly and individually liable for it

A taxpayer goes to a casino and wins $10,000. The casino withholds $500 for Federal income taxes. What is the proper tax treatment by the taxpayer?

The taxpayer must report the winnings on Schedule 1 (Form 1040) and can claim the amount of Federal income tax withheld on page 2 of Form 1040

Generally, the Earned Income Tax Credit (EITC) is available for which of the following taxpayers?

Unmarried nonresident aliens using an Individual Taxpayer Identification Number (ITIN)

If the taxpayer's employer gives him or her virtual currency (such as Bitcoin) as payment for his or her services, the taxpayer must include the fair market value of the currency in his or her income. The fair market value of virtual currency paid as wages is subject to all of the following except:

Value-added Tax

Which of the following statements is false regarding capital gains and losses?

When a taxpayer carries over any capital loss, its character will be long-term

Silver Leaf, a retail bakery, traded two ovens having a total adjusted basis of $680 for a new oven costing $1,320. They received an $800 trade-in allowance for the old ovens and paid $520 in cash for the new oven. The bakery also traded a used van with an adjusted basis of $4,500 for a new van costing $9,000. They received a $4,800 trade-in allowance on the used van and paid $4,200 in cash for the new van. What portion of the new properties' bases qualifies for the Section 179 deduction?

$4,720

Oscar is divorced. His dependent son, Sam, lived with him all year. Property taxes of $1,000 and mortgage interest of $5,000 on the home where he and Sam live are divided equally with his ex-wife. Oscar also paid all the utilities of $150 per month. What amount of the yearly household expenses can Oscar use to determine if he qualifies for the head of household filing status?

$4,800

Alvaro and Fernanda are married and file jointly. In 2023, they sold their home in Denver and made a profit of $562,000. They owned and used the property as a principal residence for the past seven years. Alvaro and Fernanda are entitled to claim an exclusion on the gain from the sale for what amount?

$500,000

Stella's mortgage on her main home is $1 million and meets all the qualifications for the Mortgage Interest Deduction. She is a joint filer and paid $60,000 in interest for 2023. Stella can claim the Mortgage Interest Deduction for what amount on her income tax return?

$60,000

Kevin and Jennifer are married and filing a joint tax return. They have a combined taxable income of $80,000. They have four children, whom they claim as dependents. When they file their 2023 income tax return, Kevin and Jennifer's taxable income will be reduced by what amount for their personal exemption deduction?

$0

Ray, who is single and 22 years old, was unemployed for a few months during 2022. He earned $6,700 in wages before he was laid off, and he received $1,400 in unemployment compensation afterwards. He had no other income. Even though he had gross income of $8,100, he did not have to pay income tax because his gross income was less than the filing requirement for a single person under age 65. He filed a return only to have his withheld income tax refunded to him. In 2023, Ray began regular work as an independent contractor and earned $28,000. Ray made no estimated tax payments in 2023 and he did owe tax at the end of the year. What amount does Ray owe for the underpayment penalty in 2023?

$0

Sandy is a single taxpayer. She has a $29,000 student loan. She pays $308 each month with $121 of that payment going toward student loan interest. Over the first year in repayment, she repays $3,696 overall: $2,244 in principal and $1,452 in interest. Her modified adjusted gross income in 2023 was $45,000. Assuming she meets all other criteria, Sandy's student loan interest deduction is what amount?

$1,452

In 2023, Charlotte purchases solar panels for her main home for $30,000. The installation qualifies for the Residential Energy Property Credit. When Charlotte completes her income tax return what amount can she claim for the Residential Energy Property Credit?

$10,000

Jane is a single taxpayer with a modified adjusted gross income (MAGI) of $50,000. When her daughter, Soraya, was born in 2022 two separate Coverdell Education Savings Accounts (CESA) were set up for her, one by Jane and one by her daughter's grandfather. In 2023, Jane contributed $1,000 and the grandfather contributed $600 to Soraya's CESAs. Also, in 2023, Jane establishes one CESA account for her son, Edgar. During 2023, she can contribute what amount to her son Edgar's CESA?

$2,000

In 2023, Sebastian had two employers during the year. Both employers withheld Social Security tax from his wages in the amounts of $5,790.45 and $5,590.95. What amount can Sebastian claim as a credit against his income tax when he files his income tax return?

$2,452

A 62-year-old married taxpayer files a Married Filing Separately tax return and lives apart from her spouse for an entire taxable year. What is the taxpayer's base amount for computing taxable Social Security benefits?

$25,000

Jill inherited 100 shares of GoTech Inc. stock when her mother died on October 21, 2020; the fair market value of the stock was $20 per share. Her mother paid $200 per share when she purchased the stock March 1, 2013. If Jill sells all 100 shares for $50 per share on July 3, 2023, how should she report the sale on her income tax return?

$3,000 long-term capital gain

Patrick and Nathalie Simons sold stock that resulted in a short-term capital loss of $5,000. They had no other capital transactions during the year. Their taxable income was $10,000. How much of the capital loss is deductible on their joint return and how much must be carried over to the next year?

$3,000 loss; $2,000 carryover

Jean Knox received certain income benefits in 2023. She received $1,400 of state unemployment insurance benefits, $2,000 from a Federal Unemployment Trust Fund and $3,700 worker's compensation received for an occupational injury. What amount of the payments must Jean include in her income?

$3,400

Nathan donated $100 to the American Red Cross, $200 to the Boy Scouts of America, and $300 to his neighbor whose home was destroyed by an earthquake. What amount can Nathan use to determine his deduction for charitable contributions?

$300

In January 2023, Patricia takes out a $500,000 mortgage to purchase a main home with a fair market value of $800,000. In February 2023, she takes out a $250,000 home equity loan to put an addition on the main home. Both loans are secured by the main home and the total does not exceed the cost of the home. During 2023 Patricia paid interest of $7,000 on the loans and will therefore be able to deduct what amount of the interest paid on her income tax return?

$7,000

Leah, age 50, is married with no taxable compensation for 2023. She and her spouse, age 48, reported taxable compensation of $60,000 on their 2023 joint return. Leah may contribute what amount to her Individual Retirement Account (IRA) for 2023?

$7,500

Sophia sold a painting that she held as an investment on an online auction website for $100. She bought the painting for $20 at a garage sale years ago. Sophia should report what amount as a capital gain on her Schedule D (Form 1040)?

$80

Luis Sanchez is a single taxpayer who has an Alternative Minimum Taxable Income (AMTI) of $150,000 for 2023. Therefore, his Alternative Minimum Tax (AMT) exemption is equal to what amount?

$81,300

If the taxpayer obtains a court decree of annulment, which holds that no valid marriage ever existed, he or she is considered unmarried even if he or she filed joint returns for earlier years. The taxpayer must file amended returns (Form 1040-X) claiming which of the following filing status for all tax years that are affected by the annulment and not closed by the statute of limitations for filing a tax return?

A or B

The Working Condition Benefits exclusion applies to property and services an employer provides to an employee so that the employee can perform his or her job. Which of the following is not an example of working condition benefits?

A service or property provided under a flexible spending account in which the employer agrees to provide the employee, over a time-period, a certain level of unspecified noncash benefits with a predetermined cash value

People who are in an independent trade, business, or profession in which they offer their services to the general public are generally independent contractors. However, whether a person is an independent contractor or an employee depends on the facts in each case. Which of the following individuals is an independent contractor?

An individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done

Which of the following taxpayers is eligible to claim the standard deduction on his or her tax return?

An individual who claims the Earned Income Tax Credit and the Child Tax Credit

If a taxpayer filed his or her return on April 15, 2021, the due date for the return that year, paid $100 with the return, and then determined the amount of tax was overpaid, he or she has until what date to claim a refund?

April 15, 2024

Generally, under the Tax Cuts and Jobs Act, which of the following major items cannot be subtracted from gross income?

Moving expenses

For tax years beginning after December 31, 2017 until January 1, 2026, a taxpayer can claim itemized deductions for certain miscellaneous itemized deductions to the extent that the taxpayer's total miscellaneous expenses exceed 2% of the taxpayer's adjusted gross income (AGI) for which of the following items?

None of the above

The Department of Treasury's Bureau of the Fiscal Service (BFS) issues IRS tax refunds and Congress authorizes BFS to conduct the Treasury Offset Program (TOP). Through the TOP program The Bureau of Fiscal Service (BFS) may apply part or all of a tax refund to pay a taxpayer's debt for which of the following unpaid debts?

Past-due child support payments

A refundable tax credit is a tax credit that can reduce tax liability below zero. It is possible to receive a tax refund from this type of credit. Which of the following is a refundable tax credit?

Retirement Savings Contributions Credit (Saver's Credit)

If an employer fails to file a correct Form W-2 by the due date and cannot show reasonable cause, he or she may be subject to a penalty as provided under Section 6721. For which of the following reasons does the penalty not apply to the employer?

The employer makes an inconsequential error that does not prevent the SSA/IRS from processing the Form W-2

For 2023, all of the following statements are true regarding the higher additional standard deduction under the Tax Cuts and Jobs Act except:

The taxpayer can claim the higher standard deduction for a dependent

Which of the following statements is incorrect regarding the Annual Gift Tax Exemption?

The taxpayer gives a gift if he or she gives property and expects to receive something of at least equal value in return