Chapter 4 Review

Some tax deductions are subtracted _____ AGI and some are subtracted _____ AGI.

for; from

Which of the following choices is NOT a form of a tax prepayment? Income tax withheld from a taxpayer's salary or wages by an employer An overpayment of taxes in the prior year that was applied as an estimated payment for the current year Estimated tax payments the taxpayer made directly to the IRS A tax refund received in the current year for the prior year

A tax refund received in the current year for the prior year

Income that is taxed in the current year according to the tax rate schedule is referred to as ______ income.

ordinary

Examples of a tax _____ include income taxes withheld from a taxpayer's salary by an employer, estimated tax payments paid directly to the IRS, and amounts from a prior year overpayment that were applied to the current year's tax liability.

prepayment

The U.S. tax laws are based on the all-inclusive concept where gross income includes all realized income from "whatever ________ ___________ ."

source derived

Which of the following statements is INCORRECT? Both tax deductions and tax credits reduce taxable income. Both tax deductions and tax credits are a matter of legislative grace. Both tax deductions and tax credits are specifically defined by Congress and are narrowly defined.

Both tax deductions and tax credits reduce taxable income. (Tax deductions reduce taxable income, while tax credits reduce the tax liability dollar for dollar.)

Lan is from Vietnam and has lived in the U.S. for five months during the year. He is not yet considered a resident because he hasn't lived in the U.S. for long enough. He resides with his uncle who is a U.S. citizen. Lan is single and a full-time student. If eligible, Lan would otherwise be considered a qualifying child of his uncle. Which of the following is correct regarding Lan's status as a dependent? -Lan can NOT be claimed by his uncle because he would need to meet the qualifying relative requirements, rather than the qualifying child. -Lan can be claimed as a dependent by his uncle because his uncle is a citizen and Lan is a qualifying child. -Lan can be claimed by his uncle because he will not have to file a tax return since he has no income. -Lan can NOT be claimed as a dependent by his uncle because he is not a citizen or resident of the U.S..

Lan can NOT be claimed as a dependent by his uncle because he is not a citizen or resident of the U.S..

A tax ______ reduces taxable income and a tax _______ reduces the tax liability dollar for dollar.

deduction; credit

True or false: The U.S. tax laws are based on the all-inclusive concept where gross income includes all realized income from whatever source derived.

True

Will and Lyndsey are married with no dependents and file a joint tax return. In 2019, they paid $3,000 in qualified student loan interest in addition to $22,550 in itemized deductions. What is the total of their "FROM AGI" deductions in 2019? $24,400 $25,550 $27,400 $22,550

$24,400

Which of the following criteria is necessary to qualify as a dependent of another taxpayer? (Check all that apply.) Must be considered both a qualifying child and a qualifying relative Must NOT file a joint return unless there is no tax liability on the couple's return and no tax liability on either return if they filed separately Must NOT be required to file a tax return of his own Must be considered either a qualifying child or a qualifying relative Must be a citizen of the U.S. or a resident of the U.S., Canada, or Mexico

-Must NOT file a joint return unless there is no tax liability on the couple's return and no tax liability on either return if they filed separately -Must be considered either a qualifying child or a qualifying relative -Must be a citizen of the U.S. or a resident of the U.S., Canada, or Mexico

Which of the following choices describe tax deductions? (Choose all that apply.) Tax deductions, like income, follow the all-inclusive concept. Tax deductions reduce an individual's tax liability dollar for dollar. Taxpayers are NOT allowed to deduct anything unless a specific tax provision allows them to do so. Tax deductions are a matter of legislative grace.

Tax deductions are a matter of legislative grace.