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Exam 3: Tax Formula and Tax Determination an Overview of Property Transactions

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Question 91

Multiple Choice

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

A) Parking expenses incurred in connection with jury duty-taxpayer is a dentist.
B) Substantiated gambling losses (not in excess of gambling winnings) from state lottery.
C) Contributions to mayor's reelection campaign.
D) Speeding ticket incurred while on business.
E) Premiums paid on personal life insurance policy.

F) A) and B)
G) B) and D)

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Question 92

Multiple Choice

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Perry is in the 33% tax bracket.During 2016,he had the following capital asset transactions: Gain from the sale of a stamp collection (held for 10 years) $30,000 Gain from the sale of an investment in land (held for 4 years) 10,000 Gain from the sale of stock investment (held for 8 months) 4,000 Perry's tax consequences from these gains are as follows:

A) (15% × $30,000) + (33% × $4,000) .
B) (15% × $10,000) + (28% × $30,000) + (33% × $4,000) .
C) (0% × $10,000) + (28% × $30,000) + (33% × $4,000) .
D) (15% × $40,000) + (33% × $4,000) .
E) None of these.

F) A) and D)
G) C) and D)

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Question 93

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Regarding dependency exemptions, 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 granddaughter,who lives with taxpayer,is 19 years old,earns $5,000,and is not a full-time student.

Arnold is married to Sybil,who abandoned him in 2015.He has not seen or communicated with her since April of that year.He maintains a household in which their son,Evans,lives.Evans is age 25 and earns over $6,000 each year.For tax year 2016,Arnold's filing status is:

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.

Taylor had the following transactions for 2016: Salary $ 85,000 Moving expenses incurred to change jobs (12,000) Inheritance received from deceased uncle 300,000 Life insurance proceeds from policy on uncle's life (Taylor was named the beneficiary) 200,000 Cash prize from church raffle 3,000 Payment of church pledge (4,500) What is Taylor's AGI for 2016?

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?

Regarding the rules applicable to filing of income tax returns,which,if any,of the following is an incorrect statement:

Match the statements that relate to each other. Note: Choice l. 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 exemption 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. -Multiple support agreement

Regarding dependency exemptions, 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 nephew who lives with taxpayer.

Which of the following characteristics correctly describes the procedure for the phaseout of exemptions?

In 2016,Cindy had the following transactions: Salary $90,000 Short-term capital gain from a stock investment 4,000 Moving expense to change jobs (11,000) Received repayment of $20,000 loan she made to her sister in 2012 (includes no interest) 20,000 State income taxes (5,000) Cindy's AGI is:

Regarding dependency exemptions, 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 family friend who is supported by and lives with the taxpayer.

Katelyn is divorced and maintains a household in which she and her daughter,Crissa,live.Crissa,age 22,earns $11,000 during 2016 as a model.Katelyn does not qualify for head of household filing status.

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 39.6%. i.Applicable rate could be as low as 0%. j.Maximum rate is 28%. k.Income from foreign sources is not subject to tax. l.No correct match provided. -Tax Rate Schedule

Buddy and Hazel are ages 72 and 71 and file a joint return.If they have itemized deductions of $14,600 for 2016,they should not claim the standard deduction.

Howard,age 82,dies on January 2,2016.On Howard's final income tax return,the full amount of the basic and additional standard deductions will be allowed even though Howard lived for only 2 days during the year.

Regarding dependency exemptions, 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 stepdaughter who does not live with taxpayer.

Sylvia,age 17,is claimed by her parents as a dependent.During 2016,she had interest income from a bank savings account of $2,000 and income from a part-time job of $4,200.Sylvia's taxable income is:

Match the statements that relate to each other. Note: Choice l. 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 exemption 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 does not apply