Accounting 303 Chapter 4
1. Income realized during the year that is excluded from gross income and never taxed. 2. Income realized during the year that is not included in gross income until a year later. 3. Income included in gross income in the current year and taxed at the ordinary rates per the tax rate schedules 4. Gains (or losses) on investment or personal use assets that may be taxed at favorable rates
1. Tax Exempt 2. Tax Deferred 3. Ordinary 4. Capital
Abandoned spouse
A taxpayer who is married at the end of the year, but lived apart from the other spouse for the last six months of the year, may qualify as a(n) ____ _____ and be able to use the head of household filing status
exemption; itemized
A taxpayer's from AGI deductions include the personal and dependency _____ amounts plus the greater of the standard deduction or the taxpayer's ____ deductions
(195,300-151,200) x .28 + 29,387.5 41,735.5
Amy and Ethan are married and file a joint return for 2015. Their taxable income is $195,300. What is the amount of their tax liability?
D.
Corey is 25 and has a full-time job. His younger brother, James, is 20 and was enrolled as a full-time student at the community college during the fall semester. James lives with Corey. Which of the following statements is correct with respect to the age requirement for a qualifying child? a. james must be older than corey in order to meet the age test. b. james does not meet the age test bc he was not enrolled as a full-time student for the entire year c. James does not meet the age test because he is not under the age of 19 d. james meets the age test bc he is younger than corey, bc he is under age 24 and a fulltime student
for; from
Deductions ____ AGI cause a reduction in AGI, which increases the deductibility of ___ AGI deductions subject to AGI limitations
Craig and David. Both contribute over 10%
Hillary, Craig, and David provide 60% of the support for their elderly aunt, Brooke. Hillary provides 8%, craig provides 40%, and david provides 12%. Which of the taxpayers are eligible to claim a dependency for Brooke?
3
How many filing statuses are available to taxpayers?
Head of household, single, qualifying widow or widower
If a taxpayer is unmarried at the end of the year, which of the following filing statuses could possibly be used by the individual
75,650 - 75,700 = 13,331
In 2014, ryan files as head of household and has taxable income of $75,673. None of his taxable income consists of capital gains or qualified dividends. Using the tax table for 2014, his tax liability totals _____
[(123,212-50,200) x .25] + 6,872.5 = 25,125.5
In 2015, Ryan files as head of household and has taxable income of $123,212. None of his taxable income consists of capital gains or qualified dividends. Using the tax rate schedule, his tax liability totals.
The taxpayer must provide over half of the individual's support; the individual must meet a "gross income test" INCORRECT: The individual must meet an age test, the taxpayer does not have to provide over half of the individual's support, but the individual cannot provide over half of his/her own support (required of child), the individual must meet a residence test
In order for an individual to be a qualifying relative, rather than a child, which of the following criteria must be met?
support
In order to meet the ____ test, the taxpayer must pay more than half of the living expenses for the qualifying relative
Child
In order to meet the criteria for a qualifying ____ (child/relative), the dependent must not have provided more than half of his or her own support for the year. However, the support may have been provided by someone other than the taxpayer
Personal Exemption
Individuals who qualify as dependents of another taxpayer may not claim a ____ ____ on their own tax return
1. Gross income 2. minus for AGI deductions 3. Equals adjusted gross income 4. minus from AGI deductions 5. Equals taxable income
Put the following items in the order in which they are found in the individual income tax formula
1. Married filing jointly 2. Head of Household 3. Single
Rank the filing statuses according to which is most favorable for taxpayers
Single
Ruida divorced on October 31st of the current year. He does NOT have any dependents. Which filing status should Ruida use for the current year
due; 159,800- 5500(for AGI)-10000(item. ded)- 4000(exemption)= 140,300 taxable income. Tax= 32,355.25 - 2000(credits) - 22,000 (prepayments) = 8,355.25.
Sharon Jones is single. During 2015, she had gross income of $159,800, deductions for AGI of $5500, itemized deductions of $10,000 and tax credits of $2000. Sharon had $22,000 withheld by their employer for federal income tax. She has a tax____ of $______
Gross Income
The all-inclusive concept means that ____ ____ generally includes all realized income from whatever source derived
Relationship, age, residence, and support
The four tests that must be met to qualify as a qualifying child are: ___, ___, ___, ___.
less
The gross income test requires that a qualifying relative's gross income for the year be ____ than the personal exemption amount
Exemption
The gross income test requires that a qualifying relative's gross income for the year be less than the ____ amount
False. The child may be receiving support from someone other than the taxpayer. The rule is that the child cannot provide over half of his/her own support
True or false: in order to meet the support test for a qualifying child, the taxpayer must provide more than half of the individual's support for the year
Single
Unmarried taxpayers will file as ____ if they do NOT qualify for head of household or qualifying widow(er) status
When the taxpayer can claim a dependency exemption for the parent and the taxpayer pays over half the cost of maintaining the parent's home
When can a single taxpayer's mother or father be a qualifying person for determining head of household filing status
When one spouse died during the year and the surviving spouse has not remarried
When can the married filing jointly or married filing separately status be used?
Married filing jointly
Which filing status is allowed the highest standard deduction amount?
Single
Which filing status is allowed the lowest standard deduction amount?
Both individuals should file "married filing separately"
Which filing status is best for a married couple that lives together, but one spouse does not want to be liable for the other's tax liability
Relationship, Support, Gross Income
Which of the choices below are the tests that must be met to qualify as a qualifying relative?
Up to two years after the end of year in which the other spouse died. Remain unmarried and pay over half the cost of maintaining a household where a dependent child lived for the entire year
Which of the following are criteria for widow status?
Stock held for investment; a house owned and used by a taxpayer. Incorrect: Inventory held for sale in a business, supplies used in a business
Which of the following assets are classified as capital assets?
Married filing jointly, head of household, single
Which of the following choices are filing statuses that may be used by a taxpayer
Tax deductions are a matter of legislative grace; taxpayers are not allowed to deduct anything unless a specific tax provision allows them to do so. INCORRECT- Tax deductions reduce an individual's tax liability dollar for dollar (tax credits); tax deductions, like income, follow the all-inclusive concept
Which of the following choices describe tax deductions?
A tax refund received in the current year for the prior year. Wrong answers: An overpayment of taxes, estimated tax payments made directly to the IRS, Income tax withheld from a taxpayer's salary or wages by an employer
Which of the following choices is not a form of a tax prepayment
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
Which of the following criteria is necessary to qualify as a dependent of another taxpayer
Be unmarried at the end of the year, pay more than half the costs of keeping up a home for the year, have lived with a qualifying person in the taxpayer's home for more than half the year, provide over half the cost of a household for a dependent parent not living with the taxpayer
Which of the following criteria will contribute toward qualifying a taxpayer for head of household status?
Medical and dental expenses, Taxes, (mortgage) interest expense, gifts to charity ,casualty and theft losses, job expenses and certain miscellaneous deductions, other miscellaneous deductions
Which of the following expenses are classified as itemized deductions for tax purposes?
Amy lived with her parents until the end of April. She moved into an apartment on into an apartment on May 1st Can: Justin attends college in a different state than where his parents live, Steven graudated from college in May and moved back in with his parents for two months. He moved out on July 15, Cathy was injured in a car accident in February. She remained in the hospital until September. (I hate this question format)
Which of the following individuals cannot meet the residence test for being a qualifying child of another taxpayer?
Half-sister(younger than the taxpayer), stepson, nephew(younger than the taxpayer), Grandchild Not: Cousin, aunt, or grandmother
Which of the following individuals would meet the relationship test for being a qualifying child of the taxpayer?
Grandchild, Niece, Brother, Father
Which of the following individuals would meet the relationship test for being a qualifying relative of the taxpayer if s/he has only lived with the taxpayer for eight months of the year
Health Insurance for self-employed persons, capital losses, alimony paid, contributions to (non Roth) qualified retirement accounts. Incorrect- Personal and dependency exemptions and mortgage interest on a personal residence
Which of the following items are deductions FOR adjusted gross income?
Pay more than half the costs of keeping up a home for the year and Be unmarried (or considered unmarried under the abandoned spouse provisions) at the end of the year
Which of the following requirements are necessary to qualify for head of household status?
C.
Which of the following statements is correct regarding exemptions?] A. a taxpayer who is married filing jointly with one dependent child will be able to deduct one personal exemption and two dependency exemptions b. Taxpayers will only deduct exemptions if their itemized deductions are lower than the exemption amount C. The amount of the exemption is the same for both personal exemptions and dependency exemptions D. Exemptions are deducted FOR AGI and may be deducted in addition to itemized deductions or the standard deduction
Filing status depends on marital status and whether the taxpayer has dependents
Which of the following statements is correct regarding the choice of a taxpayer's filing status?
A.
Which of the following statements is correct? A. Stock which has appreciated in value must be sold before it is considered part of gross income? B. Stock that has decreased in value during the year can be deducted from gross income C. Stock which has appreciated in value is included in gross income, regardless of whether or not it has been sold
Losses on personal use assets are fully deductible against ordinary income
Which of the following statements is incorrect when referring to capital gains and losses
C
Which of the following statements is incorrect? a. realized income items that taxpayers include in gross income in a subsequent year are called deferrals b. realized income items that are permanently excluded from gross income are referred to as exclusions c. certain types of realized income items may be deferred to a subsequent year, but no income may be excluded from taxation
Alternative minimum tax; self employment tax
Which of the following taxes may be imposed in addition to the individual income tax and are calculated on tax bases other than the regular taxable income?
A riding lawnmower used by a child to mow the family yard Would qualify: Summer camp, wedding dress, medical and dental care.
Which of the following would most likely not qualify as support for meeting the support test
Income from a transaction with a second party where there is a measurable change in property rights between parties
Which one of the following choices is the definition of realized income?
Married filing separately and single
Which two filing statuses have the same standard deduction amount?
$8000 ($4000 personal exemption x 2) + the greater of their standard deduction or itemized deductions ($12,650) = $20,650
Will and Lyndsey are married with no dependents and file a joint tax return. In 2015, they paid $3000 in qualified moving expenses and had $12,650 in itemized deductions. What is the total of their "FROM AGI" deductions in 2015?
deduction; credit
a tax ____ reduces taxable income and a tax ___ reduces the tax liability dollar for dollar
Parent
if an individual coult be a qualifying child for either her parent or her grandparent, the ______ is entitled to the dependency exemption
Married filing jointly (or separately)
which filing status is used if one spouse dies during the year and the surviving spouse does not remarry before the end of the year