FIN 2100 Ch 4

An audit that requires a visit to your home, business or accountant's office which can be used to verify whether an individual has an office in the home is called:

A field audit.

A dollar of tax credit has:

A larger effect than a dollar of deductions.

A personal exemption refers to:

A reduction from adjusted gross income for the taxpayer(s) and each dependent listed on the tax return

A taxpayer has $10,000 in charitable contributions and will be using Schedule A with no limitations. The taxpayer is in the 28% marginal tax bracket. The charitable contribution reduced taxable income and his/her taxes by:

Taxable income is $10,000 lower; taxes reduced by $2,800.

You earn a salary of $5500 a month and your employer withholds $2500 a month in income and social security taxes on this salary. This is an example of:

Taxes on earnings.

Which of the following is not likely to be an allowable deduction (either in whole or part) for federal income taxes?

The $2.50 per day in tolls that you pay to drive to and from your office at work every day.

You are single and earn $35,000 during the year and have interest and dividend income of $4000. You have medical expenses totaling $9000 during the year, make charitable contributions of $2500, have job related expenses of $2000 and have mortgage interest of $3000. What is your taxable income?

$22,555

You are single and earn a salary of $40,000 for the year. You have earned $1000 in interest income on some corporate bonds that you own. You have earned $1500 in dividends for the year. Finally you earned a bonus this year of $5000. In addition, during the year you make an IRA contribution of $2000. What is your adjustable gross income for this year?

$45,500

Your adjusted gross income is $34,500. You have $12,000 in medical expenses for the year. What would be your itemized deduction for your medical expenses?

$8550

With respect to the taxability of corporate dividends paid to individuals and capital gains on stocks and bonds,

Both dividends from corporations and capital gains are taxable to individuals

A $1,000 tax deduction is more valuable than a $300 tax credit (assuming the taxpayer is in a 25% tax bracket).

False

You have calculated that you owe $16,075 in taxes for the year. During this same year you had $18,350 in withholding. You:

Have a refund of $2275 from the federal government.

An example of tax-exempt income is

Interest or mutual fund dividends derived from municipal bonds or municipal bond mutual funds.

You own 1000 shares of Abbott Laboratories and they paid you a dividend of $.94 per share last year. This money is part of:

Investment income.

_______________ is (are) fully deductible as an itemized deduction on Schedule A.

Mortgage interest on a primary residence

Interest income from __________ which are issued by state and local governments are not subject to federal income taxes.

Municipal bonds