Individual Tax
anisa, who is 28 and single, had adjusted gross income of $55,000, itmeized deductions of $ 5,000 and a lifetime learning credit of $1,000. in 2020, anisa will have taxable income of: -$42,600 -$49,000 -$41,600 -$50,000
$42,600 (55,000-12,400)
property settlements made incident to a divorce have no immediate tax consequence; that is, the transfer from one spouse to another is not taxable.
true
the cash receipts and disbursements method of accounting is used by most individual taxpayer and most noncorporate businesses that do not have inventories.
true
the wherewithal to pay concept provides that a tax should be collected when the taxpayer has the financial resources to pay the tax
true
under the cash method of accounting, income is reported in the year the taxpayer actually or constructively receives the income
true
with some exceptions, amounts withdrawn from a pension plan prior to the normal starting date are subject to 10% nondeductible penalty
true
all of the following items are deductions for adjusted gross income except: - 1/2 of self-employment taxes on year's earnings -interest on student loans -unreimbursed employee business expenses -qualifying contributions to individual retirement accounts
unreimbursed employee business expenses
you may choose married filing jointly as your filing status if you are married and both you and you spouse agree to file a joint return. which of the following facts would prevent you from being considered married for filing purposes? -you were married for several years, but your divorce became final in december -you are married but living apart until some problems can be solved -your spouse died during the year -none of the above
you were married for several years, but your divorce became final in december
Charlotte pays $8,000 in tax deductible property taxes. Her marginal tax rate is 24%, effective tax rate is 20%. Her tax savings from paying the property tax is: -$1,920 -$1,760 -$1,600 -$8,000
$1,920
in 2020, brett and lashana (both 50) file a joint tax return claiming as a dependent their son who is blind. their standard deduction is -$26,450 -$14,150 -$24,800 -$26,100
$24,800
in 2020, 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: -$26,100 -$24,800 -$28,100 -$27,400
$27,400 24,800+(1300*2)
Rocky and Charlie from RC Partnership as equal partners, Rocky contribute $100,000 into RC while Charlie contributes real estate with a cost and FMV of $100,000. During the current year, RC distributes $200,000 to each partner. The amount Rocky should report on his individual tax return is -$200,000 -$300,000 -$0 -$100,000
$300,000
the corporate tax rate is
proportional
which is not a component of tax practice? -compliance -providing clients tax refund advance loans -tax research -tax planning and consulting
providing clients tax refund advance loans
which of the following is not an objective of the federal income tax law? -prevent taxpayers from paying a higher percentage of their income in personal taxes due to inflation -stimulate private investment -encourage research and development activities -redistribution of wealth
redistribution of wealth
Which of the following taxes is proportional? -income tax -Federal Insurance Contributions Act (FICA) -sales tax -gift tax
sales tax
ava reports income from a sole proprietorship and interest earned on savings accounts. in addition to the form 1040, she will need to file -form 1099 -schedule 1 -schedule 2 -none of the above
schedule 1
In 2020, an estate is not taxable unless the sum of the taxable estate and taxable gifts made after 1976 exceeds: -$4,577,800 -$11,580,000 -$10,000,000 $-5,000,000
$11,580,000
on june 1, 2020, ellen turned 65. she has been a widow for 5 years and has no dependents. her standard deduction is -$24,800 -$14,050 -$12,400 -$26,100
$14,050 (12,400+1,650)
Eric dies in the current year and has gross estate valued at $16,500,000. The estate incurs funeral and administrative expenses of $100,000 and also pays off Eric's debts which amount to $250,000. Eric bequeaths $600,000 to his wife. Eric made no taxable transfers during his life. Eric's taxable estate will be -$15,550,000 -$4,250,000 -$4,150,000 -$16,500,000
$15,550,000
Paul makes the following property transfers in the current year: -$22,000 cash to his wife -$34,000 cash to a qualified charity -$220,000 house to his son -$3,000 computer to unrelated friend The total of Paul's taxable gifts, assuming his does not elect gift splitting with his spouse, subject to the unified transfer tax is: -$245,000 -$205,000 $212,000 $279,000
$205,000 220,000-15,000=205,000 (15,000 tax exempt for indiviuals)
if an individual with a taxable income of $15,000 has a long term capital gain in 2020, it is taxed at -0% -10% -20% -15%
0%
if a single taxpayer with a marginal tax rate of 24% has a long term capital gain in 2020, it is taxed at: -15% -20% -0% -25%
15%
until about 100 years ago, attempts to improve a federal income tax were ruled unconstitutional. the amendment to the u.s constitution allowing the imposition of a federal income tax is the -2nd amendment -19th amendment -16th amendment -13th amendment
16th amendment
a corporation has revenue of $350,000 and deductible business expenses of $240,000. what is the federal income, before credits? -38,500 -23,100 -26,400 -22,000
23,100 (350,000-240,000)*21%
taxable income for an individual is generally defined as -AGI reduced by the greater of the standard deduction or itemized deductions -AGI for reduced tax credits -AGI reduced by itemized deductions and tax credits -gross income reduced by itemize deductionsdq
AGI reduced by the greater of the standard deduction or itemized deductions
Which of the following individuals is most likely to be auditied? -Jerry is a school teacher with two children earning $55,000 a year. He also receives $200 in interest income on a bank account -Marvella has a $145,000 net loss from her unincorporated business (horse farm). She also received $950,000 salary as a CEO of a corporation -Melvin is retired and receives Social Security benefits -Lola has AGI of $35,000 from wages and uses the standard deduction
B
interest on Series E and Series EE, U.S savings bonds need not be reported until the bonds mature
true
All of the following are classified as flow-though entities for tax purposes, except -S corporations -partnerships -C corporations -limited liability companies
C corporations
When property is transferred, the gift tax is based on -replacement cost of the transferred property -the transferor's original cost of the the transferred property -fair market value on the date of transfer -the transferor's depreciated cost of the transferred property
FMV on the date of transfer
What are the correct monthly rates for calculating failure to file and failure to pay penalties? -
Failure to file 5.0% Failure to pay 0.5%
The largest source of revenues for the federal government comes from
Individual Income Taxes
ray is starting a new bisness with a fiend and trying to decide between a C corporation, S corporation, and partnership. which of the following statements regarding his decision is correct? -a shareholder in a C corporation is taxed on his or her share of corporate income -S corporation play taxes on their current year income -a partner in a partnership is taxed on his or her share of partnership income -an S corporation owner must pay income taxes only on the salary received
a partner in a partnership is taxed on his or her share of partnership income
The term "tax law" includes -internal revenue code -treasury regulations -judicial decisions -all of the above
all of the above
married couples will normally file jointly. identify a situation where a married couple may prefer to file separately. -the spouse with lower income has substantial medical expenses -a couple is separated and contemplating divorce -one spouse can be held responsible for the entire tax liability -all of the above
all of the above
a taxpayer can receive innocent spouse relief if -the understated tax attributable to erroneous items of the other spouse -under the circumstances, it would be inequitable to hold the innocent spouse liable for the understated tax -the innocent spouse did not know and had no reason to know that there was an understatement of tax -all of the above conditions apply
all of the above conditions apply
Which of the following is not a social objective of the tax law? -a deduction for charitable contributions - creation of tax-favored pension plans -an exclusion for interest earned by large businesses -prohibition of a deduction for illegal bribes, finals, and penalties
an exclusion for interest earned by large businesses
In an S Corporation, shareholders -are only taxed on salaries -are taxed only on dividends -are taxed on their proportionate share of earnings - may allocate income among themselves in order to consider special contributions
are taxed on their proportionate share of earnings
assuming a calendar tax year and the conventional 15th of the month due date, all of the following business entities must file their 2020 tax returns by the march 15, 2021 except: -the c corporation -the s corporation -the partnership -all of the above entities must file their 2020 tax returns by march 15, 2021
c corporation
all of the following items are included in gross income except: -child support payments received -pension benefits received -interest earned on a bank account -rent income
child support payments received
Which of the following steps, related to a tax bill, occurs first? -consideration by the joint conference committee -signature or veto by the president of the U.S -consideration by the senate -consideration by the house ways and means committee
consideration by the house ways and means committee
for federal income tax purposes, income is allocated between a husband and wife depending on the state of residence
true
when new tax legislation is being consider by congress:
difference versions of the house and senate bills are reconciled by a joint conference committee
which of the following credits is considered a refundable credit? -lifetime learning credit -adoption expense credit -earned income credit -credit for elderly and disabled
earned income credit
gregory receives 100 shares of stock from his employer as a year end bonus. the FMV of the stock should be included in gregory's income for the year
true
gross income may be realized when a taxpayer receives economic benefit even if no cash is received
true
form 4868, a 6 month extension of time to file, allows a taxpayer to:
extend the filing date of the return but the estimated amount of tax due must still be paid by the original due date of the return
a company buys 200 shares of target corporation stock. in lieu of receiving quarterly dividends, the individual signs an agreement to have dividends reinvested by Target into additional shares of stock. the individual does not receive dividend checks so he need not recognize the quarterly dividends for tax purposes.
false
a married couple separates in late 2018, but the related legal documents are not drafted and finalized until 2019. the alimony payments will be taxable to the recipient and deductible by the payor, but the property settlement and child support have no tax
false
ellen, a cpa, prepares a tax return for frank, a plumber, in exchange for installing a new sink. since no cash changed hands, neither taxpayer is required to report any income
false
for a cash basis taxpayer, security deposits on rental property are taxable to the landlord upon receipt
false
gross income is limited to amounts received in the form of cash
false
payments from an annuity purchased from an insurance company are not taxable until the taxpayer has recovered the purchase price of the annuity
false
qualified dividends received by individuals are taxed at the same rate as ordinary income
false
the portion of a taxpayer's wages that are garnished by court order and forwarded to pay a delinquent bank loan are not taxable income to the taxpayer
false
Which of the following taxes is progressive? -property tax -federal income tax -sales tax -excise tax
federal income tax
The senate equivalent of the House Ways and Means Committee is the Senate -ways and means committee -joint committee on taxation -finance committee -joint conference committee
finance committee
Which of the following statements is incorrect? -gift taxes are imposed on the recipient of a gift -the estate tax is based on the far market value of property at death or the alternate valuation date -excise tax are assessed on items such as gasolines and telephone use -property tax are levied on real estate
gift taxes are imposed on the recipient of a gift
when a spouse dies, the surviving spouse for the year of death: -may file a married filing joint return -must file a tax return using the single filing status -may file a married filing jointly return only of the death occurred in the last half of the year -must file a tax return using the head of household filing status
may file a married filing joint return
improvements to leased property made by a lessee are includible in the lessor's gross income only if made in lieu of rent or if rent reduced because of the improvements.
true
interest credited to a bank savings account is taxed regardless of whether or not it is withdrawn
true
Which of the following is NOT a taxpaying entity? -C corporation -partnership -individual -all of the above aretaxpayers
partnership
all of the following items are deductions for adjusted gross income except: -rent ad royalty expenses -state and local income taxes -contributions to health savings accounts -trade or business expenses
state and local income taxes
in 2017, leo's wife died. leo has two small children, ages 2 and 4, living at home whom he supports entirely. leo does not remarry and is not claimed as a dependent on another's return during any of this period. In 2018, 2019, and 2020, Leo's most advantageous filing status is, respectively: -surviving spouse, surviving spouse, head of household -single for all three years -surviving spouse, surviving spouse, single -head of household for all three years
surviving spouse, surviving spouse, head of household
ben, 67, and karla, 58, have two children who live with them and for whom they provide total support. their daughter is 21, blind, is not a full time student and has no income. her twin brother is 21, good sight, is a full time student and has an income of $4,800. which of the following statements is correct regarding ben and karla's ability to claim their twins as dependents? -the couple can claim both twins as dependents -the couple cannot claim either twin as a dependent -the couple can only claim the son as a dependent -the couple can only claim the daughter as a dependent
the couple can claim both twins as dependents
in order to shift the taxation of dividend income from a parent to a child: -the parent must direct the corporation to pay the dividend to the child -the parent can deposit the dividend in the child's bank account -the parent must transfer ownership of the stock to the child -all of the above will result in shifting the taxation to the child
the parent must transfer ownership of the stock to the child
tom and alice were married on december 31 of last year. what is their filing status for the last year? -they file as single for 364 days and married filing jointly for one day -they file as single for half the year and married filing jointly for the other half -they file as married filing jointly or married filing separately -they file as single
they file as married filing jointly or married filing separately
a check received after banking hours is considered constructively received by the payee even though the check cannot be converted to cash.
true
a taxpayer may not avoid responsibility for payment of income taxes by assigning the income to a third party.
true
alimony received under the terms of a divorce agreement entered into 2018 is taxable to the recipient while child support payments are not
true
becky wins a car and furniture on a TV game show. the FMV of these items is taxable to becky
true
except as otherwise provided, gross income means all income from whatever source derived
true