Business Chapter 4

Andrew Lowy has adjusted gross income of $28,000. During the year, Andrew decided he needed a larger home. He purchased a home on a golf course in the same town as his first home. Andrew incurred $7,500 in moving expenses. How much of this can he deduct from adjusted gross income?

$0

A person has $4,000 in medical expenses and an adjusted gross income of $32,000. If taxpayers are allowed to deduct the amount of medical expenses that exceed 7.5 percent of adjusted gross income, what would be the amount of the deduction in this situation?

$1,600

An itemized deduction of $500 with a 36 percent tax rate would reduce a person's taxes by:

$180

Angelic Bringas bought 20 shares of stock one and half years ago. She recently sold her stock making a profit of $1,400. She is in the 28% tax bracket. Her tax on this investment is

$210

George Washburn had earnings from his salary of $34,000, interest on savings of $800, a contribution to a traditional individual retirement account of $1,500, and dividends from mutual funds of $600. George's adjusted income (AGI) would be:

$33,900

A tax credit of $50 for a person in a 28 percent tax bracket would reduce a person's taxes by:

$50

Michele Walsh is considering an additional charitable contribution of $2,000 to a tax-deductible charity, bringing her total itemized deductions to $16,000. If Michele is in a 28 percent tax bracket, how much will this $2,000 contribution reduce her taxes?

$560

Anthony Garcia is single and earns $40,000 in taxable income. He used the following tax rate schedule to calculate the taxes he owes: Calculate the dollar amount of estimated taxes that Kim owes.

$6,181.25

Approximately what percent of tax filers are audited each year?

1%

A taxpayer with a taxable income of $47,856 and a total tax bill of $5,889 would have an average tax rate of ___ percent.

12.3

Joshua Second is single and earns $40,000 in taxable income. He uses the following tax rate schedule to calculate the taxes he owes. What is Al's average tax rate?

15.45%

Which one of the following is a retirement plan sponsored by an employer?

401(k) Plan

Which of the following would qualify a person for an exemption when computing taxable income?

A dependent

Which one of the following people is least likely to have to file a federal income tax return?

A person earning less than $9,000

Reductions from gross income for such items as individual retirement account contributions and alimony payments will result in:

Adjusted gross income

Which of the following would be deducted from gross income to obtain adjusted gross income

Alimony payments

Many taxpayers with high incomes and high amounts if deductions must pay an additional tax referred to as the __________ tax

Alternative minimum

Not included in the recent tax credits is a/an ________ tax credit.

Credit card

The interest paid on which type of loan is not tax deductible?

Credit card

Money received by an individual for personal effort is classified as _________ income

Earned

Which of these statements correctly applies to a Roth IRA?

Earnings on the account are tax-free after five years

What type of tax is imposed on the value of an individual's property at the time of his or her death?

Estate

Franseca Romeo just died. At the time of her death the total value of her assets was $150,000. The federal government collected $7,500 in taxes based on this value. What type of tax is this most likely to be?

Estate tax

Robert claimed an additional $3,000 in deductions he knowingly knew he did not qualify for so he could reduce his tax bill. This is referred to as tax

Evasion

Which type of tax is imposed on specific goods and services at the time of purchase?

Excise

The state of Oklahoma imposes a tax of $.17 per gallon on gasoline. What type of tax is this most likely to be?

Excise tax

Nathalia Castre worked in Poland for part of the year and earned $50,000 while she was there. This income will not be included in her taxable income for the year. This represents a tax:

Exclusion

Which one of the following is not included in gross income?

Exclusion

Which of the following would result in a reduction of taxable income

Exclusions

Ivanna's Embroidery Emporium which is run out of Ivanna's home is visited by an IRS agent who wants to verify the office expenses Ivanna claims are valid. What type of IRS audit is this?

Field audit

A allows a taxpayer to put pre-tax dollars into an employer-sponsored program to cover medical and child care costs.

Flexible spending account

Alexander Ackerman goes into a local department store and purchases a new suit. He pays $43 in taxes on this purchase. What type of tax is this most likely to be?

General tax sales

The main purpose of taxes is to:

Generate revenue for funding government programs

Most people pay federal income tax by:

Having amounts withheld from income

A short-term capital gain is is profit earned on an investment that is:

Held less than 12 months

For which of the following types of credit plans is the interest tax deductible?

Home equity loan

Matthew Henning earns $4,500 per month from his job at Cisco Systems; $900 is withheld from this amount each month for taxes. What type of tax is this most likely to be?

Income tax

Taxable income is used to compute a person's

Income tax

Money received in the form of dividends or interest is classified as __________income

Investment

________ are expenses that a taxpayer is allowed to deduct from adjusted gross income.

Itemized deductions

Ana Rementeria goes on Jeopardy and earns $875,000 in winnings. What type of income is this?

Other income

A person with a total tax liability of $4,350 and withholding of federal taxes of $3,975 would:

Owe $375

Capital gains refers to:

Profits from the sale of an investment asset

An expense that would be included in the itemized deductions of a taxpayer is:

Real estate property taxes

An exclusion affects a person's taxes by:

Reducing the amount of taxable income

Which one of the following items is a set amount of income on which no taxes are paid?

Standard deduction

Mr. and Mrs. Romain want to give their son Widley a total of $24,000. They each write him a check for $12,000 so they won't have to pay any gift tax. This is an example of:

Tax avoidance

Tax-deferred retirement plans are a type of:

Tax shelter

A traditional IRA, Keogh plan, and 401(k) plan at examples of:

Tax-deferred retirement plans

The "head of household" filing status is for people who are:

Unmarried and have dependent children