Chapter 1 Questions

Iris, widowed in 2022, pays all costs related to the home in which she and her unmarried child live. Her child does not qualify as her dependent. What is her filing status for 2023? a. Married filing separately b. Single c. Head of household d. Surviving spouse

a. Single Head of household and surviving spouse require her child to be a dependent.

Which of the following is a goal of the tax law? a. Promoting goodwill with other countries b. Supporting certain economic goals such as increasing unemployment c. Encouraging smaller families d. Encouraging certain social goals such as contributions to charity

d. Encouraging certain social goals such as contributions to charity

Which of the following forms may be filed by individual taxpayers? a. Form 1065 b. Form 1120 c. Form 1041 d. Form 1040

d. Form 1040 Form 1041 is for trusts, Form 1065 is for partnerships, and Form 1120 is for corporations.

During 2023, Manfred, who is 60 years old and unmarried, provided all of the support of his elderly mother. His mother was a resident of a home for the aged for the entire year and had no income. What is Manfred's filing status for 2023, and how many dependents should he report on his tax return? a. Single and one dependent b. Head of household and two dependents c. Single and two dependents d. Head of household and one dependent

d. Head of household and one dependent Unlike other dependents, parents are not required to live with their children for the taxpayer to claim head of household status.

Which of the following is an economic goal of the tax law? a. Reducing unemployment b. Lowering the cost of adoption c. Ensuring that all persons pay the same amount of tax d. Encouraging charitable contributions

a. Reducing unemployment

Kofi is a 25-year-old full-time student at a state university. Kofi lives with his unmarried sister, Abbey, who provides over half of his support. His only income is $4,900 of wages from a part-time job at the college bookstore. What is Abbey's filing status for 2023? a. Single b. Married filing separately c. Head of household d. Surviving spouse

a. Single Because Kofi's income exceeds $4,700, he does not qualify as a dependent.

In 2023, Schedule 1 of Form 1040 is used to report what? a. Income from wages b. Unemployment compensation c. Withholding on wages d. Capital gains and losses

b. Unemployment compensation

Elliot and Karmen are married. For 2023, Elliot earned $35,000 and Karmen earned $40,000. They have decided to file separate returns. They have no deductions for adjusted gross income. Karmen's itemized deductions are $15,600 so she is going to itemize. Elliot's itemized deductions are $4,750. Assuming Elliot and Karmen do not live in a community property state, what is Elliot's taxable income? a. $24,400 b. $21,150 c. $30,250 d. $15,600

c. $30,250 ($35,000 − $4,750). When married filing separately, if one spouse itemizes, then both spouses must itemize (the same is true if using the standard deduction).

Which of the following is correct regarding reporting and taxable entities? a. A corporation is a reporting entity but not a taxable entity. b. A partnership is a taxable entity and a reporting entity. c. A partnership is a reporting entity but not a taxable entity. d. An individual is a reporting entity but not a taxable entity.

c. A partnership is a reporting entity but not a taxable entity. Individuals and corporations must report and are taxed, whereas partnerships only report but are not taxed (the partners are taxed separately on their share of the partnership's income, gains, deductions, and losses).

Partnership income is reported on _____. a. Form 1120S b. Form 1040X c. Form 1065 d. Form 1040PTR

c. Form 1065

Dalton is a divorced taxpayer who provides a home for their dependent child, Edward. What filing status should Dalton indicate on their tax return? a. Surviving spouse b. Single c. Head of household d. Married filing separately

c. Head of household

Which of the following is used to report capital gains and losses? a. Schedule B b. Schedule A c. Schedule D d. Schedule C

c. Schedule D Schedule A is used for itemized deductions, Schedule B is for interest and dividend income, Schedule C is for profit or loss from business, and Schedule D is used to report capital gains and losses.

During 2023, Howard maintained his home in which he and his 16-year-old son resided. The son qualifies as his dependent. Howard's wife died in 2022. What is his filing status for 2023? a. Single b. Head of household c. Surviving spouse d. Married filing separately

c. Surviving spouse

An individual is a head of household. What is this individual's 2023 standard deduction? a. $13,850 b. $27,700 c. $1,850 d. $20,800

d. $20,800

Roberto is a single taxpayer who has AGI of $145,000 in 2023; his taxable income is $122,000. What is his federal tax liability for 2023? a. $29,280 b. $16,290 c. $21,437 d. $22,680

d. $22,680 $16,290 + [($122,000 − $95,375) × 24%] = $22,680

Kelly and Morgan have no dependents and file a joint income tax return for 2023. They have adjusted gross income (all wages) of $140,000 and itemized deductions of $30,000. What is the amount of taxable income that Kelly and Morgan must report on their 2023 income tax return? a. $112,300 b. $140,000 c. $119,200 d. $110,000

d. $110,000 Their itemized deductions are larger than the standard deduction, so they should itemize. ($140,000 − $30,000 = $110,000)

Which of the following factors are important in determining whether an individual is required to file an income tax return? a. The taxpayer's gross income and total itemized deductions b. The taxpayer's total itemized deductions and filing status c. The taxpayer's total itemized deductions and number of dependents d. The taxpayer's filing status and gross income

d. The taxpayer's filing status and gross income