Chapter 4 Learn Smart

A taxpayer's ____ ____ depends on his or her marital status at the end of the year and whether the taxpayer has dependents.

-filing -status

True or False: Commuting costs are classified as itemized deductions for tax purposes.

False

True or False: The gross income test requires that a qualifying relative's gross income for the year must be equal to or less than $5,000 for tax year 2020.

False The 2020 income limitation is $4,300.

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.

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.

When a divorced taxpayer pays over half the cost of maintaining a home where she and a dependent child lived for over half the year, she qualifies for which filing status? -Single -Qualifying widower -Married filing separately -Head of household

Head of household

Kara is single with no dependents. She has itemized deductions of $5,000 in 2020. What is the total of her "FROM AGI" deductions for 2020? -$5,000 -$12,400 -$24,800 -$17,400

$12,400 She can deduct the greater of her standard deduction ($12,400) or her itemized deductions ($5,000).

Zack is single and has collected the following information for preparing his 2020 taxes: Gross income $74,000, tax credits $2,500, itemized deductions $9,000, deductions for AGI $5,000, tax prepayments $8,400. Based on this information, Zack's "adjusted gross income" equals $____, and his "taxable income" equals $____.

-$69,000 -$56,600

Which of the following individuals would meet the relationship test for being a qualifying child of the taxpayer? -Brother (younger than the taxpayer) -Niece (younger than the taxpayer) -Father -Child -Cousin (younger than the taxpayer) -Grandchild

-Brother (younger than the taxpayer) -Niece (younger than the taxpayer) -Child -Grandchild

Which of the following statements is INCORRECT? -Realized income items that are permanently excluded from gross income are referred to as exclusions. -Realized income items that taxpayers include in gross income in a subsequent year are called deferrals. -Certain types of realized income items may be deferred to a subsequent year, but no income may be excluded from taxation.

Certain types of realized income items may be deferred to a subsequent year, but no income may be excluded from taxation.

Hillary, Craig, and David provide 60% of the support for their elderly aunt, Brooke. Hillary provides 8%, while Craig provides 40% and David provides 12%. Which of the taxpayers are eligible to claim Brooke as a dependent? -Craig and David -No one -Only Craig -Hillary, Craig and David

Craig and David Craig or David can claim the dependency since they both provided more than 10% of her support.

In a situation where the parents are divorced and the child resides with both parents for the same amount of time during the year, the parent with the ______ should claim the child as his or her dependent. -highest AGI -lowest AGI -lowest taxable income -highest taxable income

highest AGI

An individual that is unrelated to the taxpayer may meet the relationship test for a qualifying relative if he or she: -lives with the taxpayer for less than the entire year, but more than half the year. -marries the taxpayer during the year. -lives with the taxpayer for the entire year.

lives with the taxpayer for the entire year.

In order to meet the requirements of the residence test for a qualifying child, the individual must live with the taxpayer for: -longer than he has resided with anyone else during the year -more than half the year -at least one-third of the year -the entire year

more than half the year

Income that is taxed in the current year according to the tax rate schedule is referred to as ______ income. -long-term capital gains -tax-exempt -tax-deferred -ordinary

ordinary

If an individual could be a qualifying child for either her parent or her grandparent, the _______ (parent/grandparent) is entitled to claim the child as a dependent.

parent

Ruida divorced on October 31 of the current year. He does NOT have any dependents. Which filing status should Ruida use for the current year? -Qualifying widow -Single -Head of household -Married filing separately

single

Unmarried taxpayers will file as _ if they do NOT qualify for head of household or qualifying widow(er) status.

single

In order to meet the _____ test, the taxpayer must pay more than half of the living expenses for the qualifying relative.

support

Which of the following tests states that the qualifying child must NOT have provided more than half his or her own living expenses for the year? -Relationship -Gross income -Support -Residence

support

In 2020, Ryan files as single and has taxable income of $45,653. None of his taxable income consists of capital gains or qualified dividends. His tax liability rounded to the nearest dollar totals $_____ (use the tax rate schedules).

$5,834 =4617.5+(0.22(45653-40125))

Which of the following assets are classified as capital assets? -Stock held for investment -A house owned and used by a taxpayer -Inventory held for sale in a business -Supplies used in a business

-Stock held for investment -A house owned and used by a taxpayer

Head of household status is _____ (less/more) favorable than the married filing jointly status, but (less/more) _____ favorable than the single filing status.

-less -more

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

-source or sources -derived

Which of the following examples results in realized income? -A taxpayer borrowed $1,000 from the bank. -A taxpayer transferred $1,000 from her checking account to her savings account. -A taxpayer sold stock for $1,000. She had originally paid $300 for the stock. -A taxpayer held stock that appreciated in value during the year.

A taxpayer sold stock for $1,000. She had originally paid $300 for the stock.

Expenses such as alimony paid for divorces finalized before 1/1/2019, contributions to qualified retirement accounts, and business expenses for self-employed persons are deductions _____ AGI.

for

In 2020, 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. His tax liability rounded to the nearest dollar totals $_____ (use the tax rate schedules).

$10,997 =6162+(0.22(75673-53700))

Deductible capital losses can offset capital gains. If the losses exceeds the gains, then a maximum of $_____ may be used to offset ordinary income in any one year.

$3,000

Amy and Ethan are married and file a joint return for 2020. Their taxable income is $192,100. The amount of their tax liability, rounded to the nearest dollar, is $_____.

$34,263 =29211+(0.24(192100-171050))

The gross income test requires that a qualifying relative's gross income for 2020 be less than $______.

$4,300

Which of the following items are deductions FOR adjusted gross income? -Mortgage interest on a personal residence -Capital losses -Health insurance for self-employed persons -Deduction for Qualified Business Income -Contributions to (non Roth) qualified retirement accounts -Alimony paid for divorces finalized before 1/1/2019

-Capital losses -Health insurance for self-employed persons -Contributions to (non Roth) qualified retirement accounts -Alimony paid for divorces finalized before 1/1/2019

Which of the following choices are forms of tax prepayments? -A tax refund received in the current year for the prior year -A tax credit used to reduce the tax liability in the current year -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

-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

Which of the following choices are filing statuses that may be used by a taxpayer? -Unmarried but filing jointly -Married filing jointly -Single parent -Divorced -Head of household -Single

-Married filing jointly -Head of household -Single

Which of the following expenses are classified as itemized deductions for tax purposes? -Mortgage interest expense -Property insurance -Commuting costs -Higher education expenses for bachelor's degree -Charitable contributions

-Mortgage interest expense -Charitable contributions

Which of the following criteria is necessary to qualify as a dependent of another taxpayer? -Must be considered either a qualifying child or a qualifying relative -Must be considered both a qualifying child and a qualifying relative -Must NOT be required to file a tax return of his own -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 a citizen of the U.S. or a resident of the U.S., Canada, or Mexico

-Must be considered either a qualifying child or 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 be a citizen of the U.S. or a resident of the U.S., Canada, or Mexico

Which of the following criteria will contribute toward qualifying a taxpayer for head of household status? -Be a qualifying widow or widower -Be married with a spouse that is not employed outside the home -Provide over half the cost of maintaining a household for a dependent parent not living with the taxpayer -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 -Be unmarried (or considered unmarried under the abandoned spouse provisions) at the end of the year

-Provide over half the cost of maintaining a household for a dependent parent not living with the taxpayer -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 -Be unmarried (or considered unmarried under the abandoned spouse provisions) at the end of the year

If a taxpayer is unmarried at the end of the year, which of the following filing statuses could possibly be used by the individual? -Married filing jointly -Divorced -Married filing separately -Single -Qualifying widow or widower -Head of household

-Single -Qualifying widow or widower -Head of household

Which of the following individuals would meet the relationship test for being a qualifying child of the taxpayer? -Stepson -Nephew (younger than the taxpayer) -Aunt -Grandmother -Cousin (younger than the taxpayer) -Half-sister (younger than the taxpayer)

-Stepson -Nephew (younger than the taxpayer) -Half-sister (younger than the taxpayer)

Which of the following choices describe tax deductions? -Tax deductions are a matter of legislative grace. -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, like income, follow the all-inclusive concept.

-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.

Which of the following statements are correct concerning the married filing separately (MFS) filing status? -The MFS status may be useful when one spouse does NOT want to be liable for the tax liability of the other spouse. -Tax-related items for MFS taxpayers (i.e. tax rate schedules, standard deduction amounts), are half the amounts for married filing jointly taxpayers. -MFS taxpayers can capitalize on deductions when one spouse itemizes deductions, while the other spouse uses the standard deduction. -The MFS status is the only status that may be used when a spouse dies during the tax year.

-The MFS status may be useful when one spouse does NOT want to be liable for the tax liability of the other spouse. -Tax-related items for MFS taxpayers (i.e. tax rate schedules, standard deduction amounts), are half the amounts for married filing jointly taxpayers.

In order for an individual to be a qualifying relative, rather than a qualifying child, which of the following criteria must be met? -The individual must meet a "gross income 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. -The taxpayer must provide over half of the individual's support. -The individual must meet a "residence test." -The individual must meet an "age test."

-The individual must meet a "gross income test." -The taxpayer must provide over half of the individual's support.

Which of the following statements are true regarding the qualifying widow or widower filing status? -The surviving spouse must have dependents. -The surviving spouse can NOT use this status if he or she has dependents. -The status may be used for up to two years after the year the other spouse died. -The status is used in the year that one spouse died. -The surviving spouse must NOT have remarried during the year.

-The surviving spouse must have dependents. -The status may be used for up to two years after the year the other spouse died. -The surviving spouse must NOT have remarried during the year.

Under a multiple support agreement, taxpayers who DON'T pay over half of an individual's support may still be allowed to claim an exemption if which of the following rules apply? -The taxpayer and a least one other person provided over one-half of the support of the individual. -All other individuals contributing more than 10 percent support provides statements to taxpayer agreeing NOT to claim the individual as a dependent. -No one taxpayer paid over one-half of the individual's support. -The individual earns more than the exemption amount, but NOT enough to provide half of his support. -The taxpayer contributed over 5 percent of the individual's support for the year.

-The taxpayer and a least one other person provided over one-half of the support of the individual. -All other individuals contributing more than 10 percent support provides statements to taxpayer agreeing NOT to claim the individual as a dependent. -No one taxpayer paid over one-half of the individual's support.

Which of the following are requirements that must be met to qualify as an abandoned spouse? -The taxpayer pays more than half the costs of maintaining his or her home for the entire year. -The taxpayer must have lived apart from the other spouse for the entire year. -The taxpayer is still married at the end of the year. -The taxpayer's home is the principal residence of a dependent child for over half the year.

-The taxpayer pays more than half the costs of maintaining his or her home for the entire year. -The taxpayer is still married at the end of the year. -The taxpayer's home is the principal residence of a dependent child for over half the year.

When can the married filing jointly or married filing separately filing status be used? -When the taxpayers are unmarried, but have a dependent child living with them -When one spouse died during the year and the surviving spouse has not remarried -When the taxpayers are married as of the last day of the tax year -When the taxpayers have been married for any part of the tax year -When the taxpayers are unmarried, but have lived together for the entire year

-When one spouse died during the year and the surviving spouse has not remarried -When the taxpayers are married as of the last day of the tax year

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.

-abandoned -spouse

The four tests that must be met to qualify as a qualifying child are: _____, _____, _____, _____ and .

-age or age test -relationship or relationship test -residence, residency, residency test, abode, or residence test -support or support test

In addition to the individual income tax, individuals may be required to pay other taxes. Taxpayers with a large amount of tax preference items and itemized deductions may be subject to _____ _____ the tax.

-alternative -minimum

Sharon Jones is single. During 2020, she had gross income of $159,800, deductions for AGI of $5,500, itemized deductions of $14,000 and tax credits of $2,000. Sharon had $22,000 withheld by their employer for federal income tax. She has a tax __ (due/refund) of $__.

-due -$3752

Realized income items that taxpayers permanently omit from income are referred to as _____, while items that are taxed in a subsequent year are called _____.

-exclusions -deferrals

Deductions _____ (for/from) AGI cause a reduction in AGI, which increases the deductibility of _____ (for/from) AGI deductions subject to AGI limitations.

-for -from

The all-inclusive concept means that _____ _____ generally includes all realized income from whatever source derived.

-gross -income

A taxpayer's filing status depends on his or her _____ status at the end of the year and whether the taxpayer has any _____.

-marital or marriage -dependents

Taxpayers pay the same ____ tax rates on qualified dividends and long term capital gains, but the amount of the dividends and long term capital are not ____ together.

-preferential, preferred, or lower -netted or net

Sheila and Joe Wells are married with no dependent children. During 2020, they have gross income of $159,800, deductions for AGI of $5,500, and itemized deductions of $10,000. The Wells' had $22,000 withheld by their employer for federal income tax. They have a tax ___ (due/refund) of $___.

-refund -$1930

Sheila and Joe Wells are married with one dependent child. During 2020, they have gross income of $159,800, deductions for AGI of $5,500, itemized deductions of $25,000 and a dependent tax credit of $2,000. The Wells' had $22,000 withheld by their employer for federal income tax. They have a tax ____ (due/refund) of $____.

-refund -$3,974

In addition to the individual income tax, individuals may be required to pay other taxes. Owners of unincorporated businesses may have to pay ___-___ tax.

-self -employment

The three tests that must be met to qualify as a qualifying relative are: ____, _____, _____ and

-support or support test -relationship or relationship test -gross income or gross income test

Put the following items in the order in which they are found in the individual income tax formula. -Gross income -Minus from AGI deductions -Minus for AGI deductions -Equals adjusted gross income -Equals taxable income

1. Gross income 2. Minus for AGI deductions 3. Equals adjusted gross income 4. Minus from AGI deductions 5. Equals taxable income

Rank the filing statuses according to which is the most favorable for taxpayers -head of household -single -married filing jointly

1. married filing jointly 2. head of household 3. single

Yolanda is your client. With her current level of taxable income, she is paying tax at a 24% marginal rate. She received $2,000 in qualified dividends this year. What rate of tax do you expect that Yolanda will pay on her dividends? -24% -20% -0% -15%

15% Yolanda's 24% marginal tax rate is means her taxable income is more than $85,525 but less than $163,300, and for all values in that range, the long term capital gains rate applied to qualified dividends is 15%.

Which one of the following assets is classified as a capital asset? -A building used in a business -A car used personally -Inventory in a business -Accounts receivable from the sale of goods

A car used personally

Which of the following would most likely NOT qualify as support for meeting the support test? -A wedding dress -Medical and dental care -A riding lawnmower used by a child to mow the family yard -Summer camp with horseback riding, swimming, and other activities

A riding lawnmower used by a child to mow the family yard

Which of the following statements is TRUE regarding the individual income tax formula? -A taxpayer may deduct the greater of his standard deduction or his personal exemption for AGI to arrive at adjusted gross income. -A taxpayer may deduct the greater of his standard deduction or his itemized deductions for AGI to arrive at adjusted gross income. -A taxpayer may deduct the greater of his standard deduction or his personal exemption from AGI to arrive at taxable income. -A taxpayer may deduct the greater of his standard deduction or his itemized deductions from AGI to arrive at taxable income.

A taxpayer may deduct the greater of his standard deduction or his itemized deductions from AGI to arrive at taxable income.

Which one of the following individuals CANNOT meet the residence test for being a qualifying child of another taxpayer? -Steven graduated from college in May and moved back in with his parents for two months. He moved out on July 15. -Justin attends college in a different state than where his parents live. -Cathy was injured in a car accident in February. She remained in the hospital until September. -Amy lived with her parents until the end of April. She moved into an apartment on May 1.

Amy lived with her parents until the end of April. She moved into an apartment on May 1.

Andrew is trying to determine if Annie will qualify as his dependent. She will NOT meet the criteria for a qualifying child, so Andrew is checking to see if she is a qualifying relative. Assuming there is NOT a multiple support agreement involved, which one of the following criteria for the support test must be met in order for Annie to be considered a qualifying relative for Andrew? -Annie must live with the Andrew for over half of the year in order to meet the support test. -Andrew must provide over half of Annie's support for the year. -Annie must NOT provide over half of her own support, but it doesn't matter who is providing the support. -Annie must be related to the Andrew in order to meet the support test.

Andrew must provide over half of Annie's support for the year.

Ashley and Roland were married and had two dependent children. Roland died last year. What filing status will Ashley use for the year Roland died and for the current year (assuming she does not remarry)? -Ashley must use married filing separately in the prior year and head of household in the current year. -Ashley will use qualifying widower in the prior year and head of household in the current year. -Ashley will use qualifying widower for both years. -Ashley will use married filing jointly in the prior year and qualifying widow in the current year.

Ashley will use married filing jointly in the prior year and qualifying widow in the current year.

Which filing status is best for a married couple that lives together, but one spouse does NOT want to be liable for the other spouse's tax liability? -One individual should file "head of household" and the other individual should file "single." -Both individuals should file "married filing separately." -Both individuals will be liable for the tax liability if they are married. Filing status is irrelevant. -Both individuals should file "single."

Both individuals should file "married filing separately."

True or false: An individual will qualify as a qualifying child if he satisfies at least one of the following tests: age, support, relationship, and residence.

False

True or false: Depreciable assets used in a trade or business are classified as capital assets.

False Capital assets do not include accounts receivable from the sale of goods and services, inventory, or assets used in a trade or business.

True or false: A taxpayer may deduct both his standard deduction and his itemized deductions from AGI in order to calculate taxable income.

False He can only deduct the one of these amounts and should usually choose the larger of the two.

How many filing statuses are available to taxpayers? -Two -Four -Five -Three

Five Married filing jointly, married filing separately, qualifying widow/er, single, head of household

Why are for AGI deductions preferable to from AGI deductions? -For AGI deductions reduce AGI thus increasing deductibility of from AGI deductions based on AGI. -For AGI deductions are only taken if itemized deduction exceeds standard deduction. -For AGI deductions cause a dollar for dollar drop in tax liability.

For AGI deductions reduce AGI thus increasing deductibility of from AGI deductions based on AGI.

Which one of the following choices is the definition of realized income? -Income that must be reported on the current year's tax return -Income consisting of cash receipts only - not bartering or credit transactions -Income that is subject to federal income tax -Income from a transaction with a second party where there is a measurable change in property rights between parties

Income from a transaction with a second party where there is a measurable change in property rights between parties

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 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 by his uncle because he would need to meet the qualifying relative requirements, rather than the qualifying child.

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

Melina's daughter, Linda, is considered permanently and totally disabled. Linda is 30 years old and still lives with Melina. Which of the following statements is accurate regarding the age test for a qualifying child as it applies to Linda? -Linda does NOT meet the age test because she is not under the age of 19. -Linda does NOT meet the age test because she is not a full-time student. -Linda is deemed to meet the age test because she is permanently and totally disabled.

Linda is deemed to meet the age test because she is permanently and totally disabled.

Which of the following statements is INCORRECT when referring to capital gains and losses? -Losses on personal use assets are fully deductible against ordinary income. -Capital gains on assets that were held more than one year are taxed at 0%, 15%, or 20%, depending on the taxpayer's taxable income for the year. -Deductible capital losses that exceed capital gains are limited to $3,000 against ordinary income in one year. -Capital gains on assets that were held one year or less are taxed at ordinary income rates.

Losses on personal use assets are fully deductible against ordinary income.

Which filing status is allowed the highest standard deduction amount? -Head of household -Single -Married filing separately -Married filing jointly

Married filing jointly

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? -Head of household -Married filing jointly (or separately) -Single -Qualifying widow or widower

Married filing jointly (or separately)

Which two filing statuses have the same standard deduction amount? -Head of household and married filing separately -Married filing separately and married filing jointly -Married filing separately and single -Qualifying widow/widower and single

Married filing separately and single

Which one of the following individuals meet the requirements to be a a qualifying relative (not a qualifying child) for Owen? -Owen provides over half of his son, Vinnie's (age 20) support. Vinnie, a part-time college student, earned $3,800 and lived with Owen. -Owen provides over half of his niece, Rani's (age 21) support. Rani is a full-time college student, earned $6,000, and lived with Owen. -Sandy (age 23) does not provide half of her own support. She is a full-time college student, earned $7,000 this year, and lives with her uncle, Owen. -Ron (age 22) provides over half of his own support. He is a full-time student, earned $12,000, and lived with his cousin, Owen the entire year.

Owen provides over half of his son, Vinnie's (age 20) support. Vinnie, a part-time college student, earned $3,800 and lived with Owen. Vinnie is not a qualifying child because he is over 18 and does not attend college full-time. He fails the "age" test for qualifying child. He does, however, meet the criteria for qualifying relative.

Which of the following items does NOT constitute support when determining who provided the support for a child of the taxpayer who is a full-time student? -Allowances and gifts -Food and clothing -Recreational activities and camps -Scholarships

Scholarships

Select the statement you believe is INCORRECT when comparing the rules for determining who qualifies as a dependent as a qualifying child and who qualifies as a dependent as a qualifying relative. -Qualifying children are subject to age restrictions while qualifying relatives are not. -Qualifying relatives are subject to a gross income restriction while qualifying children are not. -Taxpayers need NOT provide more than half a qualifying child's support, but they must provide more than half the support of a qualifying relative. -The relationship requirement is more broadly defined for qualifying children than for qualifying relatives.

The relationship requirement is more broadly defined for qualifying children than for qualifying relatives.

Which of the following individuals meet the requirements of a qualifying person for determining head of household filing status? -The taxpayer's child who resides with his other parent for over half the year, but where the taxpayer gets the dependency exemption -The taxpayer's mother who is a dependent of the taxpayer, but lives in her own home which is maintained by the taxpayer -An unmarried son who is NOT a dependent but lives with his father for most of the year -A friend of the taxpayer who is a qualifying relative because he lives with the taxpayer for the entire year

The taxpayer's mother who is a dependent of the taxpayer, but lives in her own home which is maintained by the taxpayer

When can a single taxpayer's mother or father be a qualifying person for determining head of household filing status? -Never; only a qualifying child can cause a taxpayer to qualify for head of household status -When the parent lives with the taxpayer regardless of whether he or she is a dependent of the taxpayer -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 the taxpayer can claim a dependency exemption for the parent and the taxpayer pays over half the cost of maintaining the parent's home

Chasity is 20, has a full-time job, and supports herself. Her brother, William, age 22, has decided to go back to college. He moved in with Chasity and is attending college full-time. Which of the following statements is accurate regarding the age test for a qualifying child and how it applies to William? -William does NOT meet the age test because he is older than Chasity. -William does NOT meet the age test because he is not Chasity's child. -William does NOT meet the age test because he is not under the age of 19. -William meets the age test because he is full-time student under age 24.

William does NOT meet the age test because he is older than Chasity.

Which one of the following individuals would NOT meet the relationship test for being a qualifying relative of the taxpayer through a qualifying family relationship? -Cousin -Sister-in-law -Aunt -Grandmother -Mother -Nephew

cousin

All sources of income are taxable unless specifically excluded through a tax provision. However, _____ are NOT permitted unless a specific tax provision allows them.

deductions

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, payment, payments, or prepayments

Dividends from corporations that meet certain requirements may be taxed at a favorable rate. These dividends are referred to as: -qualified dividends. -capital dividends. -favorable dividends. -special dividends.

qualified dividends.