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Exam 3: Computing the Tax

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Question 61

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In terms of the tax formula applicable to individual taxpayers, which, if any, of the following statements is correct?

A) In arriving at AGI, a taxpayer must elect between claiming deductions for AGI and deductions from AGI.
B) In arriving at taxable income, a taxpayer must elect between claiming deductions for AGI and deductions ???? ???.
C) If a taxpayer has deductions for AGI, the standard deduction is not available.
D) In arriving at taxable income, a taxpayer must elect between deductions for AGI and the standard deduction.
E) None of these.

F) All of the above
G) A) and C)

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Question 62

True/False

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The additional standard deduction for age and blindness is greater for married taxpayers than for single taxpayers.

A) True
B) False

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Question 63

Multiple Choice

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Kirby is in the 12% tax bracket and had the following capital asset transactions during 2018: Kirby's tax consequences from these gains are as follows:

Benjamin, age 16, is claimed as a dependent by his parents. During 2018, he earned $850 at a car wash. Benjamin's standard deduction is $1,400 ($1,050 + $350).

The Dargers have itemized deductions that exceed the standard deduction. However, when they file their joint return, they choose the standard deduction option. a. Is this proper procedure? b. Aside from a possible misunderstanding as to the tax law, what might be the reason for the Darger's choice?

Once they reach age 65, many taxpayers will switch from itemizing their deductions from AGI and start claiming the standard deduction.

During 2018, Madison had salary income of $80,000 and the following capital transactions: How are these transactions handled for income tax purposes?

When married persons file a joint return, joint and several liability results. What does this mean?

After paying down the mortgage on their personal residence, the Hills have found that their itemized deductions for each year are always slightly less than the standard deduction option. a. Explain what has happened. b. What remedy do you suggest?

Butch and Minerva are divorced in December of 2018. Since they were married for more than one-half of the year, they are considered as married for 2018.

Match the statements that relate to each other. Note: Some choices may be used more than once. a. Not available to 65-year old taxpayer who itemizes. b. Exception for U.S. citizenship or residency test (for dependency exemption purposes). c. Largest basic standard deduction available to a dependent who has no earned income. d. Considered for dependency purposes. e. Qualifies for head of household filing status. f. A child (age 15) who is a dependent and has only earned income. g. Considered in applying gross income test (for dependency exemption purposes). h. Not considered in applying the gross income test (for dependency exemption purposes). i. Unmarried taxpayer who can use the same tax rates as married persons filing jointly. j. Exception to the support test (for dependency exemption purposes). k. A child (age 16) who is a dependent and has only unearned income of $4,500. l. No correct match provided. -Kiddie tax applies

In applying the gross income test in the case of dependents that are married, could the application of community property laws have any effect? Explain.

Match the statements that relate to each other. Note: Choice l. may be used more than once. a. Available to a 70-year-old father claimed as a dependent by his son. b. Equal to tax liability divided by taxable income. c. The highest income tax rate applicable to a taxpayer. d. Not eligible for the standard deduction. e. No one qualified taxpayer meets the support test. f. Taxpayer's ex-husband does not qualify. g. A dependent child (age 18) who has only unearned income. h. Highest applicable rate is 37%. i. Applicable rate could be as low as 0%. j. Maximum rate is 28%. k. No correct match provided. -Multiple support agreement

An individual taxpayer uses a fiscal year of March 1 to February 28. The due date of this taxpayer's Federal income tax return is May 15 of each tax year.

Under the income tax formula, a taxpayer must choose between deductions for AGI and the standard deduction.

Under the Federal income tax formula for individuals, the determination of adjusted gross income (AGI) precedes that of taxable income (TI).

Which of the following items, if any, is deductible?

A decrease in a taxpayer's AGI could increase the amount of medical expenses that can be deducted.

Match the statements that relate to each other. Note: Choice l. may be used more than once. a. Available to a 70-year-old father claimed as a dependent by his son. b. Equal to tax liability divided by taxable income. c. The highest income tax rate applicable to a taxpayer. d. Not eligible for the standard deduction. e. No one qualified taxpayer meets the support test. f. Taxpayer's ex-husband does not qualify. g. A dependent child (age 18) who has only unearned income. h. Highest applicable rate is 37%. i. Applicable rate could be as low as 0%. j. Maximum rate is 28%. k. No correct match provided. -Gain on collectibles (held more than one year)

Regarding classification as a dependent, classify each statement in one of the four categories: a. Could be a qualifying child. b. Could be a qualifying relative. c. Could be either a qualifying child or a qualifying relative. d. Could be neither a qualifying child nor a qualifying relative. -A cousin who does not live with taxpayer.