FIN 381 Chp 4

A person's filing status is affected by marital status and dependents.

True

An estate tax is imposed on the value of an individual's property at the time of his or her death.

True

An office audit requires that a taxpayer visit an IRS office to clarify some aspect of his or her tax return.

True

Capital gains refer to profits from the sale of stocks, bonds, or real estate.

True

Haley Thomas has adjusted gross income of $40,000. She paid $3,600 in property taxes during the year. How much of the tax can she include as an itemized deduction? a. $3,600 b. $3,000 c. $1,800 d. $600 e. $0

a. $3,600

An excise tax is imposed by the federal and state governments on all of the following specific goods, except: a. clothing. b. gasoline. c. cigarettes. d. tires. e. air travel.

a. clothing

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? a. $0 b. $560 c. $1,600 d. $2,000 e. $4,480

b. $560

Which one of the following is most apt to qualify as an itemized deduction? a. Interest on a credit card or charge account b. Unreimbursed job-related travel expenses c. Cost of commuting to work d. Life insurance premiums e. Traffic violation fee

b. Unreimbursed job-related travel expenses

Money received in the form of dividends or interest is commonly called: a. earned income. b. investment income. c. passive income. d. tax-deferred income. e. tax-exempt income.

b. investment income.

Joan Sanchez is single and earns $40,000 in taxable income. She uses the following tax rate schedule to calculate the taxes she owes. Up to $9,275 10% $9,275 - $37,650 15% $37,650 - $91,150 25% $91,150 - $190,150 28% What is Joan's marginal tax rate? a. 10% b. 15% c. 25% d. 28% e. between 10% and 15%

c. 25%

Elaine's Embroidery Emporium which is run out of Elaine's home is visited by an IRS agent who wants to verify the office expenses Elaine claims are valid. What type of IRS audit is this? a. Correspondence audit b. Office audit c. Field audit d. Detailed audit e. Research audit

c. Field audit

A person with a total tax liability of $4,350 and withholding of federal taxes of $3,975 would: a. receive a refund of $3,975. b. owe $4,350. c. owe $375. d. receive a refund of $4,350. e. receive a refund of $375.

c. owe $375.

An expense that would be included in the itemized deductions of a taxpayer is: a. personal postage expenses. b. life insurance premiums. c. real estate property taxes. d. retirement plan contributions. e. annual interest paid on credit cards.

c. real estate property taxes.

Which type of audit is the least complicated for taxpayers? a. A field audit b. An office audit c. A research audit d. A correspondence audit e. A documentation audit

d. A correspondence audit

Personal property taxes may tax the value of: a. automobiles. b. boats. c. farm equipment. d. All of these e. None of these

d. All of these

Which one of these investments produces tax-exempt income? a. U.S. savings bonds b. Corporate stock c. Stock mutual fund d. Municipal bond e. Corporate bond

d. Municipal bond

Factors that affect a person's filing status include marital status and: a. employment status. b. age. c. occupation. d. dependents. e. place of residence.

d. dependents.

Estimated quarterly tax payments must be made by people who: a. are employed in a foreign country. b. receive regular payroll checks. c. work for the government. d. do not have taxes withheld from income. e. itemize deductions.

d. do not have taxes withheld from income.

An itemized deduction of $500 with a 36 percent tax rate would reduce a person's taxes by: a. $500. b. $36. c. $464. d. $280. e. $180.

e. $180

Effective personal tax strategies include: a. take advantage of tax credits for which you qualify. b. consider tax-exempt investments, such as municipal bonds. c. search out all possible itemized deductions. d. maximize contributions to tax-deferred retirement programs. e. All of these

e. All of these