2017 income tax fundamentals chapters 1 thru 6 quizzes

2017 – INCOME TAX FUNDAMENTALS CHAPTER 1 - QUIZ QUESTION 1 1. Clay purchased Elm Corporation stock 20 years ago for $10,000. In 2015, he sells the stock for $29,000.

What is Clay's gain or loss? a. $19,000 long-term b. $3,000, with the excess carried forward c. $19,000 short-term d. $19,000 ordinary e. No gain or loss is recognized on this transaction

QUESTION 2 1. Taxpayers who are blind get the benefit of: a. An extra exemption. b. An additional amount added to their standard deduction. c. Two standard deductions. d. None of the above.

QUESTION 3 1. An item is not included in gross income unless the tax law specifies that the item is subject to taxation.

True False

QUESTION 4 1. A corporation is a reporting entity but not a tax-paying entity.

True False

QUESTION 5 1. Which one of the following provisions was passed by Congress to meet a social goal of the tax law? a. The deduction for job hunting expenses. b. The charitable deduction. c. The moving expense deduction for adjusted gross income. d. The deduction for soil and water conservation costs available to farmers. e. None of the above.

QUESTION 6 1. Most states are community property states.

True False

QUESTION 7 1. A dependency exemption may be claimed by the supporting taxpayer in the year of death of a dependent.

True False

QUESTION 8 1. For 2015, personal and dependency exemptions are $3,950 each.

True False

QUESTION 9 1. John, age 25, is a full-time student at a state university. John lives with his unmarried sister, Ann, who provides over half of his support. His only income is $4,200 of wages from a part-time job at the college book store. What is Ann's filing status for 2015? a. Single b. Head of household c. Married, filing separately d. Qualifying widow(er) e. None of the above

QUESTION 11 1. If an unmarried taxpayer paid more than half the cost of keeping a home which is the principal place of residence of a nephew, who is not her dependent, she may use the head of household filing status.

True False

QUESTION 12 1. The US federal tax law's sole purpose is to raise revenue.

True False

QUESTION 13 1. A taxpayer who maintains a household with an unmarried child may qualify to file as head of household even if the child is not the taxpayer's dependent.

True False

QUESTION 14 1. If a taxpayer's adjusted gross income exceeds certain threshold amounts, he or she may be required to reduce the amount of the otherwise allowable deductions for itemized deductions and personal and dependency exemptions in 2015.

True False

QUESTION 15 1. Alan, whose wife died in 2013, filed a joint tax return for 2013. He did not remarry and continues to maintain his home in which his four dependent children live. In the preparation of his tax return for 2015, Alan should file as: a. Single b. Qualifying widow(er) c. Head of household d. Married, filing separately e. None of the above

QUESTION 16 1. Amended individual returns are filed on: a. Form 1040X b. Form 1041 c. Form 1120S d. Form 1040Amend

QUESTION 17 1. Brian is 60 years old, single and legally blind. Brian supports his father, who is 88 years old and blind, by paying the rent and other costs of his father’s residence. What is the total standard deduction amount that Brian should claim on his 2015 tax return? a. $9,250 b. $10,500 c. $10,800 d. $13,250 e. None of the above

QUESTION 18 1. Martin, a 50 year-old single taxpayer, paid the full cost of maintaining his dependent mother in a home for the aged for the entire year. What is the amount of Martin's standard deduction for 2015? a. $6,300 b. $9,250 c. $10,150 d. $12,600 e. None of the above

QUESTION 19 1. Which of the following is not a goal of the tax law? a. Economic goals such as reduction in unemployment. b. Social goals such as lowering the cost of adoption. c. Ensuring that all persons pay the same amount of tax. d. Raise adequate revenue to operate the government.

QUESTION 20 1. Jill is a 16-year-old child who is claimed as a dependent by her parents. Jill's only income is $1,400 from her bank savings account. What is the amount of Jill's standard deduction for 2015? a. $1,200 b. $1,050 c. $4,000 d. $6,300 e. None of the above

QUESTION 1 1. If an unmarried taxpayer paid more than half the cost of keeping a home which is the principal place of residence of a nephew, who is not her dependent, she may use the head of household filing status.

True False

QUESTION 2 1. Which one of the following provisions was passed by Congress to meet a social goal of the tax law? a. The deduction for job hunting expenses. b. The charitable deduction. c. The moving expense deduction for adjusted gross income. d. The deduction for soil and water conservation costs available to farmers. e. None of the above.

QUESTION 3 1. Partnership capital gains and losses are allocated separately to each of the partners.

True False

QUESTION 4 1. The two types of exemptions are the personal exemption and the dependency exemption.

True False

QUESTION 5 1. The US federal tax law's sole purpose is to raise revenue.

True False

QUESTION 6 1. A taxpayer who maintains a household with an unmarried child may qualify to file as head of household even if the child is not the taxpayer's dependent.

True False

QUESTION 7 1. Which of the following forms may be filed by individual taxpayers? a. Form 1040 b. Form 1041 c. Form 1065 d. Form 1120 e. None of the above

QUESTION 8 1. Which of the following relatives will not satisfy the relationship test for the dependency exemption? a. Sister b. Adopted child c. Aunt d. Parent e. All of the above satisfy the test

QUESTION 9 1. The 0.9 percent ACA Medicare surtax applies to: a. Tax exempt income b. Gain on the sale of a principal residence c. Earned income d. IRA distributions

QUESTION 10 1. An individual taxpayer with a net capital loss may deduct up to $3,000 per year against ordinary income.

True False

QUESTION 11 1. Taxpayers with self-employment income of $400 or more must file a tax return.

True False

QUESTION 12 1. If a taxpayer's adjusted gross income exceeds certain threshold amounts, he or she may be required to reduce the amount of the otherwise allowable deductions for itemized deductions and personal and dependency exemptions in 2015.

True False

QUESTION 13 1. Irma, widowed in 2014, pays all costs related to the home in which she and her unmarried son live. Her son does not qualify as her dependent. What is her filing status for 2015? a. Single b. Married, filing separate c. Head of household d. Qualifying widow(er) e. None of the above

QUESTION 14 1. Martin, a 50 year-old single taxpayer, paid the full cost of maintaining his dependent mother in a home for the aged for the entire year. What is the amount of Martin's standard deduction for 2015? a. $6,300 b. $9,250 c. $10,150 d. $12,600 e. None of the above

QUESTION 15 1. In which of the following situations is the taxpayer not required to file a 2015 income tax return? a. When the taxpayer is a 79-year-old widow with wages of $16,500. b. When the taxpayers are a married couple with both spouses under 65 years old with wages of

$23,000. c. When the taxpayer is a 35-year-old head of household with wages of $16,800. d. When an individual has a current year income tax refund and would like to obtain it. e. When the taxpayer is a single 67-year-old with wages of $9,800.

QUESTION 16 1. A dependency exemption may be claimed by the supporting taxpayer in the year of death of a dependent.

True False

QUESTION 17 1. Electronic filing (e-filing): a. Can be done only by telephone. b. Reduces the chances that the IRS will make mistakes when inputting tax return information. c. Generally results in a slower refund. d. Requires the services of a professional.

QUESTION 18 1. Which of the following is not a test that must be met for a child to be considered a dependent? a. Domicile test b. Relationship test c. Citizenship test d. Age test e. Blood test

QUESTION 19 1. Which of the following taxpayers does not have to file a tax return for 2015? a. A single taxpayer who is under age 65, with income of $10,500. b. Married taxpayers (ages 45 and 50 years), filing jointly, with income of $21,000. c. A student, age 22, with unearned income of $1,200 who is claimed as a dependent by her parents. d. A qualifying widow (age 67) with a dependent child and income of $14,500. e. All of the above.

QUESTION 20 1. Jill is a 16-year-old child who is claimed as a dependent by her parents. Jill's only income is $1,400 from her bank savings account. What is the amount of Jill's standard deduction for 2015? a. $1,200 b. $1,050 c. $4,000 d. $6,300 e. None of the above

2017 INCOME TAX FUNDATMENTALS CHAPTER 2 – QUIZ

QUESTION 1 1. Laura and Leon were granted a divorce in 2006. In accordance with the decree, Leon made the following payments to Laura in 2015:

Child support payments contingent on the age of the child Indefinite periodic payments terminating on Laura’s death 2. How much of the payments can he deduct as alimony in 2015?

$4,000 $6,000

a. $0 b. $6,000 c. $10,000 d. $4,000 e. None of the above

QUESTION 3 1. Unemployment compensation is fully taxable to the individual receiving the compensation.

True False

QUESTION 4 1. Susie received unemployment benefits in the current year. a. All of the unemployment benefits are non-taxable. b. The taxability of the unemployment benefits depends upon other income received for the year. c. Half of the unemployment benefits are taxable and half are non-taxable. d. All of the unemployment benefits are taxable.

QUESTION 5 Arthur, age 19, is a full-time student at Gordon College and is a candidate for a bachelor's degree. During 2015, he received the following amounts:

$2,400 Tuition scholarship Loan from college financial aid office Cash support from parents Ordinary cash dividend

$1,000 $2,000 $ 200

Cash prize awarded in contest

$ 300

1. What is his adjusted gross income for 2015? a. $300 b. $500 c. $2,300 d. $2,500 e. None of the above

QUESTION 7 1. Employer-provided spending accounts: a. Allow qualifying expenses to be treated as tax-free reductions in the employees’ salaries b. Are not allowed for dependent care c. May be set up for tax-free vacation savings d. Do not require that the employee provide receipts for the expenses incurred

QUESTION 8 1. Elsie received the following distributions from Virginiana Mutual Fund for the calendar year 2015:

Ordinary dividends (nonqualifying) Capital gain distributions Nontaxable distributions

$250 $170 $ 80

2. Elmer, Elsie's husband, did not own any of the Virginiana Mutual Fund shares, but he did receive $1,600 in interest on a savings account at the Moss National Bank. Elmer and Elsie filed a joint income tax return for 2015. What portion of the distributions from Virginiana Mutual Fund is taxable as ordinary income on their 2015 individual income tax return? a. $0 b. $250 c. $420 d. $500 e. None of the above

QUESTION 9 1. Dr. J's outstanding player award is not includible in income, since the award is in recognition of his outstanding performance.

True False

QUESTION 10 1. If a divorce agreement executed in the current year specifies that a portion of the amount of an alimony payment is contingent upon the status of a child, that portion is considered to be a child support payment.

True False

QUESTION 11 1. As a Christmas thank you for being a good employee, Ed's TV Repair gave 62-year-old Edwina three shares of its stock worth $20 per share. Edwina then received dividends of $1 per share related to the stock. How much should be included in Edwina's gross income? a. $0 b. $3 c. $60 d. $63 e. None of the above

QUESTION 12 1. Interest earned on bonds issued by a state government is fully taxable.

True False

QUESTION 13 1. If an annuitant, whose annuity starting date was January 1, 2001, dies before recovering his or her investment in the annuity, any unrecovered investment is recognized as a loss on the annuitant's tax return for the year of death.

True False

QUESTION 14 1. For divorces after 1984, which of the following statements about alimony payments is not correct? a. The payor must have no liability to make payments for any period following the death of the

spouse receiving the payments b. The payments must be in cash and must be received by the spouse (or former spouse) c. The payments must not be designated in the written agreement as anything other than alimony d. Divorced or legally separated parties can be members of the same household at the time the

payments are made

QUESTION 17 1. Payments made by an employer for health insurance on behalf of an employee are considered income to the employee at the time the payments are made.

True False

QUESTION 18 1. Marie had a good year. She received the following prizes and awards: - an iPad from The Oprah Show with a fair market value of $500 - lottery winnings of $1,000 received in cash - a plaque worth $25 plus $100 of Godiva chocolate in recognition for 100 days on the job without an accident - a $10,000 cash prize from American Idol

How much of her prizes and awards should Marie report on her tax return? a. $11,725; everything is included at the highest amount b. $11,000; only cash prizes and awards are included c. $11,500; the award from her job is excluded d. None, they are all excluded from income e. $11,700; the plaque may be excluded

QUESTION 19 1. Richard, who retired on April 30, 2015, receives a monthly employee annuity benefit of $1,400 payable for life, beginning May 1, 2015. During his years of employment, Richard contributed $29,400 to the company's plan. Richard's age on May 1 is 66. Using the simplified method, how much of the annuity payment amounts received during 2015 ($11,200) may Richard exclude from gross income? a. $427 b. $1,120 c. $1,680 d. $11,200 e. None of the above

QUESTION 20 1. Which of the following may be excluded from income? a. All of the above are excluded from gross income b. None of the above are excluded from gross income c. Reimbursement from the insurance company for a physical examination d. Premiums for health insurance paid by the employer e. Payment for the loss of an arm

QUESTION 1 1. All of the following amounts must be included in gross income, except: a. Accident insurance proceeds b. Dividends c. Jury duty fees d. Gambling winnings e. Partnership income

QUESTION 2 1. Steve and Laura were divorced in 2009. Laura pays Steve alimony of $1,200 a month. The payment amount was agreed upon in the decree of divorce. To save money, Steve and Laura still live together. Are the alimony payments that Steve receives in 2015 includable in his income? Can Laura take a deduction for alimony paid? a. Yes, the payments meet all alimony payment requirements. b. Yes, alimony payments are not tax-exempt. c. Yes, alimony is always taxable. d. No, since Steve and Laura still live together, the payments are not considered alimony. e. No, only some of it is tax-exempt because Laura pays Steve too much alimony.

QUESTION 3 1. When calculating the exclusion ratio for an annuity, the ratio should be revised when there is a significant change in the taxpayer's status or health.

True False

QUESTION 4 1. If an annuitant, whose annuity starting date was January 1, 2001, dies before recovering his or her investment in the annuity, any unrecovered investment is recognized as a loss on the annuitant's tax return for the year of death.

True False

QUESTION 5 1. In some cases, Social Security benefits may be partially taxable.

True False

QUESTION 6 1. Disability benefits are generally taxable to the individual receiving the amounts.

True False

QUESTION 7 1. To promote business activity, the tax rules generally are very liberal in treating business gifts as tax-free income to the recipient.

True False

QUESTION 8 1. In regards to Social Security benefits: a. The Social Security inclusion formula is the same amount for each filing status. b. Social Security benefits are always excluded because wages are subject to Social Security tax

when earned. c. Tax-free interest income must be included in the formula used to determine if Social Security is

included in taxable income. d. Up to 100 percent of Social Security benefits received may be included in taxable income.

QUESTION 9 1. A "no-additional-cost" service includes only those services in the major line of business in which the employee is employed.

True False

QUESTION 10 1. Under a divorce agreement executed in the current year, periodic payments of either cash or property must be made at regular intervals to be deductible as alimony.

True False

QUESTION 11 1. Steve worked as a tech supervisor for a computer company. In September of 2015, he was laid off. He was paid unemployment compensation for the rest of the year totaling $7,000. Which of the following is true? a. Steve will have to report all $7,000 of the unemployment compensation as income. b. Steve will have to report $4,600 of the unemployment compensation as income. c. Unemployment compensation is never taxable. d. As long as the unemployment compensation payments are less than the taxpayer’s previous salary,

they are not taxable.

e. None of the above is true.

QUESTION 12 1. Interest income received by a cash basis taxpayer is generally reported in the tax year it is received.

True False

QUESTION 13 1. In 2015, Uriah received the following interest payments:

Interest of $300 on an overpayment of 2014 Federal income taxes Interest of $400 from his bank certificate of deposit.

Interest of $1,000 on municipal bonds Interest of $1,500 on United States savings bonds (Series HH) What amount, if any, should Uriah report as taxable interest income on his 2015 individual income tax return? a. $0 b. $700 c. $2,200 d. $3,200 e. None of the above

QUESTION 14 1. Taxpayers must report interest income on Series EE savings bonds as the interest accrues.

True False

QUESTION 15 1. Payments made by an employer for health insurance on behalf of an employee are considered income to the employee at the time the payments are made.

True False

QUESTION 16 1. An investor is comparing the following two bonds: a bond from ABC Corp which pays an interest rate of 9 percent per year and a municipal bond which pays an interest rate of 7.9 percent per year. The investor is in the 15 percent tax bracket. Which bond will give the investor a higher after-tax interest rate and for which reason? a. The ABC bond because it pays a 9 percent interest rate, while the municipal bond only pays 7.9 percent . b. The ABC bond because it pays an equivalent after-tax rate of 10.6 percent, while the municipal bond pays out an equivalent after-tax rate of 9.3 percent. c. The municipal bond because it pays an equivalent after-tax rate of 9.3 percent, while the ABC bond pays out a 9 percent interest rate. d. The municipal bond because it pays an equivalent after-tax rate of 7.9 percent, while the ABC bond pays out an equivalent after-tax rate of 7.65 percent. e. None of the above is correct.

QUESTION 17 1. Which of the following is excluded from gross income? a. Prizes b. Scholarships for tuition c. Hobby income d. Rental income e. All of the above are included in gross income

QUESTION 18 1. For 2015, the maximum percentage of Social Security benefits which must be included in a taxpayer's gross income is? a. 100% b. 0% c. 50% d. 85% e. 65%

QUESTION 19 1. Roger is required under a 2005 divorce decree to pay $500 of alimony and $200 of child support per month for 12 years. In addition, Roger makes a voluntary payment of $100 per month. How much of the total monthly payment is deductible by Roger? a. $0 b. $200 c. $500 d. $600 e. None of the above

QUESTION 20 1. Robert works for American Motors. American Motors pays a $1,200 premium on Robert’s health insurance in 2015. Robert has an operation on his big toe in 2015 that cost $7,200. The insurance company paid for $6,800 of it. Which one of the following is true for 2015? a. Robert must claim the $1,200 premium paid by his employer as income. b. Robert must claim the $6,800 paid by the insurance company for the operation as income. c. Robert must claim the $1,200 premium and the $6,800 insurance payment as income. d. None of these events are taxable on his 2015 return.

2017 INCOME TAX FUNDATMENTALS CHAPTER 3 – QUIZ

QUESTION 1 1. The expense of travel as a form of education is not deductible.

True False

QUESTION 2 1. If a per diem method is not used, which of the following items is not required as substantiation for the deduction of a travel expense? a. Amount spent b. Destination c. Business reason for the trip d. Departure and return dates e. All of the above must be substantiated

QUESTION 3 1. If a taxpayer takes a trip within the United States which is primarily for business, the cost of travel to and from the destination need not be prorated between the business and personal portion of the trip.

True False

QUESTION 4 1. Linda is self-employed and spends $600 for business meals and $900 for business entertainment in 2015.

What is Linda allowed to deduct in 2015 for these expenses? a. $600 b. $750 c. $800 d. $1,000 e. None of the above

QUESTION 5 1. Tim loaned a friend $4,000 to buy a used car. In the current year, Tim’s friend declares bankruptcy and the debt is considered totally worthless. What amount may Tim deduct on his individual income tax return for the current year as a result of the worthless debt, assuming he has no other capital gains or losses for the year? a. $4,000 short-term capital loss b. $4,000 ordinary loss c. $3,000 short-term capital loss d. $3,000 ordinary loss e. $2,000 short-term capital loss

QUESTION 6 1. The net operating loss (NOL) provisions of the Internal Revenue Code a. Apply only to individuals with wages, itemized deductions, and personal exemptions. b. Require the use of a 2-year carryback in all cases. c. Are primarily designed to provide relief for trade or business losses. d. Allow the deduction for home mortgage interest to create an NOL. e. Would not be necessary if tax rates were progressive.

QUESTION 7 1. Which of the following is not a test to deduct business expenses: a. The expense must have a legitimate business purpose b. The expense must be reasonable c. The expense must be lavish and extravagant d. The expense must be ordinary and necessary

QUESTION 8 1. The cost of transportation from New York to London for a trip that is for both business and pleasure may be deducted in full as a travel expense.

True False

QUESTION 9 1. If a taxpayer works at two or more jobs during the same day, he or she may deduct the cost of transportation from one job to the other.

True False

QUESTION 10 1. For an expense to qualify as a travel expense, the taxpayer must be away from home for at least 24 hours.

True False

QUESTION 11 1. If an employee is transferred to a distant location for an indefinite period of time, the new location typically will be considered the employee's new tax home.

True False

QUESTION 12 1. Taxpayers who use their country club more than 50 percent for business may deduct the total amount of their membership dues.

True False

QUESTION 13 1. If the taxpayer does not maintain adequate records of the car expenses (i.e., gas, tires, car insurance, etc.), the standard mileage rate cannot be used.

True False

QUESTION 14 1. Once a taxpayer uses the standard mileage method to determine the deduction for automobile expenses for the tax year, the standard mileage method must be used in all subsequent years.

True False

QUESTION 15 1. Ellen loans Nicole $45,000 to start a hair salon. Unfortunately, the business fails in 2015 and she is unable to pay back Ellen. In 2015, Ellen also had $20,000 of income from her part-time job and $15,000 of capital gain from the sale of stock. How much of the $45,000 bad debt can Ellen claim as a capital loss in 2015? a. $15,000, with $30,000 carried forward to 2016 b. $18,000, with $27,000 carried forward to 2016 c. $35,000 d. $0 e. $12,000, with $33,000 carried forward to 2016

QUESTION 16 1. When a taxpayer uses the FIFO inventory valuation method, the assumption on which the method is based is that the inventory on hand at the end of the year consists of the most recently acquired items.

True False

QUESTION 17 1. Deductible transportation expenses: a. Include meals and lodging. b. Do not include daily expenses for transportation between the taxpayer’s home and temporary work

locations if the taxpayer has a regular place of business. c. Do not include the normal costs of commuting. d. Include only costs incurred while away from home.

QUESTION 18 1. Bobby is an accountant who uses a portion of his home as his office. His home is 2,500 square feet and his office space occupies 1,500 square feet. Rent expense is $18,000 a year; utilities expense is $2,000 a year; and maintenance expense is $3,000 a year. What is the total amount of these expenses that can be allocated to his home office? a. $9,280 b. $5,800 c. $13,800 d. $23,000 e. $9,200

QUESTION 19 1. Greg, a self-employed plumber, commutes from his home to his office which is 10 miles away. He loads his truck for the day with the parts that he needs. Then he is off to see his first customer of the day, Mr. Smith. Mr. Smith is 5 miles away from the office. After Mr. Smith’s job, Greg goes to his next plumbing client, Martin’s Dry Cleaning, which is 21 miles away from Mr. Smith. Greg spends the rest of the day at Martin’s Dry Cleaning. From Martin’s Dry Cleaning, Greg goes home which is now only 7 miles away.

How much can Greg count as deductible transportation miles? a. 26 miles b. None of it c. 21 miles d. 43 miles

QUESTION 20 1. Splashy Fish Store allows qualified customers to purchase items on credit. During 2015, Lisa, the owner of the store, determines that $3,500 of accounts receivable are not collectible. Which of the following statements is true with respect to Splashy Fish Store’s deduction for the uncollectible accounts receivable? a. Two of the above statements are true. b. All of the above statements are true. c. Splashy is not allowed a deduction for the uncollectible accounts if the income arising from the

accounts has not been previously included in taxable income. d. Any deduction for the uncollectible accounts receivable will be treated as a short-term capital loss. e. Only $3,000 of the uncollectible accounts receivable

may be deducted in the current year.

QUESTION 1 1. Jasper owns a small retail store as a sole proprietor. The business records show that the cost of the store’s inventory items has been steadily increasing. The cost of the end of the year inventory is $200,000 and the cost of the beginning of the year inventory was $250,000. Jasper uses the FIFO method of inventory valuation. Which of the following statements is true? a. Jasper has apparently decreased the volume of items in his ending inventory as compared to the

number of items in his beginning inventory. b. Jasper purchased more inventory during the year than he sold during the same one-year period. c. None of the above. d. Since the cost of the store’s inventory items is increasing, Jasper will have a greater cost of goods

sold figure under FIFO than LIFO. e. Jasper would have a higher net income if he used the LIFO method of inventory valuation instead

of the FIFO method.

QUESTION 2 1. Patrick has a business net operating loss of $70,000 in 2015. Patrick’s business generated significant taxable profits in 2013 and in 2014. Which of the following is true? a. Patrick may use the net operating loss to offset income from any year he chooses. b. Patrick may elect to offset the income he generated in 2014 with 2015’s net operating loss. The

remaining net operating loss (if any) can be used to offset future taxable income. c. Net operating losses can offset only future income. d. None of the above. e. Patrick may offset income he generated in 2013 and 2014 with 2015’s net operating loss by

carrying the net operating loss back to each of those tax years. The remaining net operating loss (if any) can be carried forward and used to offset future taxable income.

QUESTION 3 1. A taxpayer who adopts the LIFO method of inventory valuation for tax purposes may use the FIFO method for preparing financial statements.

True False

QUESTION 4 1. If a taxpayer takes a trip within the United States which is primarily for business, the cost of travel to and from the destination need not be prorated between the business and personal portion of the trip.

True False

QUESTION 5 1. Patricia is a business owner who is trying to determine her cost of goods sold for 2015. She bought 20 units of inventory at $11, then 26 units at $10, and finally 18 units at $14. She sold 30 units at an average price of $16 per unit in 2015 and uses FIFO for her inventory valuation. What was her cost of goods sold in 2015, assuming that there was no inventory at the beginning of the year? a. $480 b. None of the above c. $330 d. $732 e. $320

QUESTION 6 1. Splashy Fish Store allows qualified customers to purchase items on credit. During 2015, Lisa, the owner of the store, determines that $3,500 of accounts receivable are not collectible. Which of the following statements is true with respect to Splashy Fish Store’s deduction for the uncollectible accounts receivable? a. All of the above statements are true. b. Only $3,000 of the uncollectible accounts receivable may be deducted in the current year. c. Two of the above statements are true. d. Any deduction for the uncollectible accounts receivable will be treated as a short-term capital loss. e. Splashy is not allowed a deduction for the uncollectible accounts if the income arising from the

accounts has not been previously included in taxable income.

QUESTION 7 1. Generally, for an activity to be treated as a trade or business, which of the following is required: a. No more than intermittment effort toward the activity b. Always generate a profit c. Organization as a corporation or partnership d. Regular and continual effort designed to seek profit

QUESTION 8 1. Which of the following does not give rise to a business expense for uniforms or special clothing? a. A lawyer buys a business suit. b. A mascot buys his costume. c. A baseball player buys his team uniform. d. A scientist buys his hazmat suit. e. All of the above are deductible.

QUESTION 9 1. Once a taxpayer uses the standard mileage method to determine the deduction for automobile expenses for the tax year, the standard mileage method must be used in all subsequent years.

True False

QUESTION 10 1. Nancy owns a small dress store. During 2015, Nancy gives business gifts having the indicated cost to the following individuals:

Mrs. Johns (a customer) Mr. Johns (nonclient husband of Mrs. Johns) Ms. Brown (a customer) 2. What is the amount of Nancy's deduction for business gifts?

$37 plus $3 shipping $10 $22

a. $0 b. $50 c. $53 d. $62 e. None of the above

QUESTION 11 1. The IRS has approved only two per diem methods to substantiate travel expenses, the high-low method and the meals and incidental expenses method.

True False

QUESTION 12 1. Which of the following would be a business bad debt if it were uncollectible? a. A taxpayer loans his father $1,000 to start a business. b. A taxpayer loans his brother $3,000 to purchase a truck for use in his brother’s business. c. None of the above. d. A taxpayer loans his son $10,000 to purchase a rental house. e. A dentist, using the accrual basis of accounting, records income when it is earned and extends

credit to a patient for services provided.

QUESTION 13 1. Jack is a lawyer who is a member at Ocean Spray Country Club where he spends $7,200 in dues, $4,000 in meals, and $2,000 in green fees to entertain clients. He is also a member of the local Rotary club where he meets potential clients. The dues for the Rotary club are $1,200 a year. How much of the above expenses can Jack deduct as business expenses? a. $4,200 b. $6,000 c. $7,200 d. $14,400 e. None of the above

QUESTION 14 1. A business gift with a value of $35 presented to a client and his nonclient spouse is fully deductible by the donor.

True False

QUESTION 15 1. If an employer chooses a per diem method of substantiation for travel expenses, a. Actual expense records substantiating the business reason for the trip and the dates of arrival and

departure are not required. b. The meals and incidental expenses method requires actual cost records to substantiate lodging

expenses. c. The high-low method averages the high-cost locality and low-cost locality per diem rates to arrive at an average rate. d. The Regular Federal Rate method allows employees the same per diem rate no matter where they travel in the United States. e. The employer need not use an accountable plan for reimbursing employees for travel expenses.

QUESTION 16 1. Bobby is an accountant who uses a portion of his home as his office. His home is 2,500 square feet and his office space occupies 1,500 square feet. Rent expense is $18,000 a year; utilities expense is $2,000 a year; and maintenance expense is $3,000 a year. What is the total amount of these expenses that can be allocated to his home office? a. $9,200 b. $13,800 c. $23,000 d. $5,800 e. $9,280

QUESTION 17 1. Which of the following expenses, incurred while on travel, does not qualify as a travel expense? a. Tips b. Dry cleaning of suit c. Dinner at a steak house d. Gift purchased for a prospective customer ($20) e. None of the above

QUESTION 18 1. Ellen loans Nicole $45,000 to start a hair salon. Unfortunately, the business fails in 2015 and she is unable to pay back Ellen. In 2015, Ellen also had $20,000 of income from her part-time job and $15,000 of capital gain from the sale of stock. How much of the $45,000 bad debt can Ellen claim as a capital loss in 2015? a. $35,000 b. $0 c. $18,000, with $27,000 carried forward to 2016 d. $12,000, with $33,000 carried forward to 2016 e. $15,000, with $30,000 carried forward to 2016

QUESTION 19 1. Which of the following taxpayers may not use the standard mileage method of calculating transportation costs? a. A self-employed CPA who drives a computer-equipped minivan to visit clients. b. A taxpayer who has a fleet of 10 business automobiles. c. A real estate salesperson who drives a $70,000 Mercedes while showing houses. d. An attorney who uses his Yaris for calling on clients. e. All of the above taxpayers may use the standard mileage method.

QUESTION 20 1. Taxpayers who make a combined business and pleasure trip: a. Can deduct the cost of meals, lodging, local transportation, and incidental expenses in full. b. Must allocate the travel cost between the business and pleasure parts of the trip if the travel is

outside the United States. c. Can take a tax deduction only for the personal part of the trip. d. Must allocate the travel cost between the business and pleasure parts of the trip if the travel is

within the United States.

2017 INCOME TAX FUNDAMENTALS CHAPTER 4 – QUIZ

QUESTION 1 1. Selma owns a beach cottage that she rents to tourists. In 2015 she rented the cottage for 90 days. What is the maximum number of days Selma can use the cottage before her expense deduction will be limited to her gross rental income? a. 18 days b. 14 days c. 9 days d. 0 days

QUESTION 2 1. Since a contribution to an IRA is a voluntary action, a taxpayer may withdraw amounts from an IRA at any time without penalty.

True False

QUESTION 3 1. Thelma works at a liquor store in 2015 and makes $44,000. She also has dividend income of $12,000 and interest income of $1,000. She owns a beach house that gives her $11,000 in net rental income and she owns a stake in a limited partnership that generates a $15,000 loss. What is her adjusted gross income in 2015? a. $45,000 b. $58,000 c. $57,000 d. $53,000 e. $69,000

QUESTION 4 1. Arnold purchased two rental properties 6 years ago. He actively participates in their management. During 2015, Arnold had income of $22,000 from one of the rentals. He had a loss from the other rental of $32,000, as well as salary income of $35,000, and dividend income of $2,000. What is Arnold's net passive income or loss deduction? a. $8,000 net loss b. $10,000 net loss c. $22,000 net loss d. $32,000 net loss e. None of the above

QUESTION 5 1. Which of the following is true about the self-employed health insurance deduction? a. The cost of insurance for dependent children is not allowed. b. Medical insurance is allowed as a deduction, subject to a dollar limitation. c. Long-term care insurance is allowed as a deduction, subject to a dollar limitation. d. Dental insurance is not part of the allowable deduction. e. Life insurance is allowed as a deduction.

QUESTION 6 1. What percentage of medical insurance payments can self-employed taxpayers deduct for adjusted gross income on their 2015 tax returns, assuming their self-employment income exceeds their medical insurance payments? a. 90 percent b. 60 percent c. 70 percent d. 100 percent e. 50 percent

QUESTION 7 1. Net losses on the rental of vacation homes are limited to 15 percent of total gross income.

True False

QUESTION 8 1. Lester rents his vacation home for 6 months and lives in the home during the other 6 months of 2015. The gross rental income from the home is $4,500. For the entire year, real estate taxes are $800, interest is $3,000, utilities and maintenance expenses are $2,200, and depreciation expense on the entire home would be $4,000. What is Lester's allowable net loss from renting his vacation home? a. $5,500 loss b. $3,000 loss c. $500 loss d. $250 loss e. None of the above

QUESTION 9 1. To qualify for the moving expense deduction, an employee must change job sites, move a required distance, and change employers.

True False

QUESTION 10 1. Which of the following statements is true of a distribution rollover (not a trustee-to-trustee transfer) from a retirement plan? a. The taxpayer must instruct the trustee of the retirement plan to transfer assets to the trustee of

another plan. b. No withholding is required. c. In one year, there is no limit to the number of times a taxpayer can request a distribution rollover

from one IRA to another IRA. d. Assuming there are no unusual events, the taxpayer has a maximum of 60 days in which to

transfer funds to a new plan to avoid current taxes and penalties. e. All of the above are true.

QUESTION 11 1. In order for a pension plan to be considered a "qualified" retirement plan, the plan must satisfy certain minimum vesting requirements.

True False

QUESTION 12 1. Ned has active modified adjusted gross income before passive losses of $160,000. He has a loss of $15,000 on rental property he actively manages. How much of the loss is he allowed to deduct against his other income? a. None b. $15,000 c. $5,000 d. $10,000

QUESTION 13 1. A 42-year-old single taxpayer earning a salary of $132,000 a year can make which of the following IRA contributions if he is not covered by a plan at work? a. $5,500 to either a traditional IRA or a nondeductible IRA, but no contribution is allowed to a Roth

IRA b. $5,500 to a Roth IRA only c. $5,500 to either a traditional IRA, a Roth IRA, or a nondeductible IRA d. $4,500 to either a traditional IRA, a Roth IRA, or a nondeductible IRA

QUESTION 14 1. Which of the following statements is false about health savings acounts (HSAs)? a. Distributions from HSAs which are not used for medical expenses are generally subject to a 20

percent penalty and income taxes. b. HSAs must be paired with qualifying high-deductible health insurance. c. Distributions from HSAs which are used for qualifying medical expenses are not subject to tax or

penalty.

d. Contributions to HSAs are deductible as itemized medical deductions. e. Taxpayers qualifying for Medicare do not qualify to make HSA contributions.

QUESTION 15 1. In 2015, all taxpayers may make a deductible or nondeductible contribution to an IRA. True False

QUESTION 16 1. Monica has a Roth IRA to which she contributed $15,000. The IRA has a current value of $37,500. She is 54 years old and takes a distribution of $25,000. How much of the distribution will be taxable to Monica? a. $25,000 b. $37,500 c. $0 d. $10,000 e. $15,000

QUESTION 17 1. Donald owns a two-family home. He rents out the first floor and resides on the second floor. The following expenses attributable to the total building were incurred by Donald for the year ended December 31, 2015:

Real estate taxes Mortgage interest Utilities Repairs (first floor) Painting (second floor)

$ 1,800 1,600 1,200 1,400 400

2. In addition, the depreciation attributable to the entire building would be $2,000. What is the total amount of the expenses that Donald can deduct on Schedule E of Form 1040 (before any limitations)? a. $3,300 b. $3,850 c. $4,000 d. $4,700 e. None of the above

QUESTION 18 1. Which of the following statements is correct? a. Contributions to SEP plans by self-employed taxpayers are generally limited to the lesser of 15

percent of their net earned income (before the SEP deduction) or $45,000. b. Employees may elect to make annual contributions to 401(k) plans up to the lesser of 15 percent of

their net earned income (before the 401(k) deduction) or $45,000. c. The contribution limits for SEPs are a maximum of $17,500 ($23,000 for taxpayers 50 or older). d. The contribution limits for SEPs are the lesser of 25 percent of net self-employment income or

$53,000 for a self-employed taxpayer.

QUESTION 19 1. Wages are considered "active income."

True False

QUESTION 20 1. Without regard to their involvement in the management of the rental property, individual taxpayers may deduct up to $25,000 of rental real estate losses against other income, provided their income does not exceed certain limits.

True False

QUESTION 1 1. Paul earns $55,000 during the current year. His employer contributes $3,000 during the year to a qualified retirement plan on behalf of Paul. The amount of the contribution for the year is based on Paul's desire to have a monthly retirement benefit of $3,500. What type of retirement plan is this? a. Defined benefit plan b. Defined contribution plan c. Employee earnings plan d. Profit sharing plan e. None of the above

QUESTION 2 1. Earnings on nondeductible IRA contributions are allowed to accumulate tax-free until they are withdrawn.

True False

QUESTION 3 1. Subject to the annual dollar limitation and the earned income limitation, deductible IRA contributions are allowed for all taxpayers who do not participate in a qualified retirement plan.

True False

QUESTION 4 1. Arnold purchased interests in two limited partnerships 6 years ago. During 2015, Arnold had income of $22,000 from one of the partnerships. He had a loss from the other partnership of $32,000, salary income of $35,000, and dividend income of $2,000. What is the amount of net passive losses that Arnold may deduct for 2015? a. $0 b. $2,000 c. $8,000 d. $10,000 e. None of the above

QUESTION 5 1. Passive losses of one activity may not be used to offset passive income from another activity.

True False

QUESTION 6 1. In most cases, an individual taxpayer reports rental income and the related expenses on Schedule E. True False

QUESTION 7 1. When a residence is rented for less than 15 days during the year, the rental income is excluded from gross income.

True False

QUESTION 8 1. Selma owns a beach cottage that she rents to tourists. In 2015 she rented the cottage for 180 days. What is the maximum number of days Selma can use the cottage before her expense deduction will be limited to her gross rental income? a. 0 days b. 18 days c. 9 days d. 14 days

QUESTION 9 1. Under the passive loss rules, real estate rental activities are specifically defined as passive, even if the taxpayer actively manages the property.

True False

QUESTION 10 1. What percentage of medical insurance payments can self-employed taxpayers deduct for adjusted gross income on their 2015 tax returns, assuming their self-employment income exceeds their medical insurance payments? a. 60 percent b. 50 percent c. 90 percent d. 70 percent e. 100 percent

QUESTION 11 1. Dividend income is considered "passive income."

True False

QUESTION 12 1. Ellen supports her family as a self-employed attorney. She reports $90,000 of income on her Schedule C and pays $8,000 for health insurance for her family, $2,500 for dental insurance, $4,000 for health insurance for her 23-year-old daughter who is no longer a dependent, and $3,000 for disability insurance for herself. What is Ellen’s self-employed health insurance deduction? a. $12,000 b. $8,000 c. $10,500 d. $13,500 e. $14,500

QUESTION 13 1. Choose the correct statement. Passive losses a. May not be used to offset passive income. b. If unused, are lost forever. c. Often result from the rental of real estate. d. May be used to offset portfolio income.

QUESTION 14 1. If a residence is rented for 15 days or more and is used for personal purposes for not more than 14 days or 10 percent of the days rented, whichever is greater, no allocation of expenses is required and the taxpayer may claim a deduction for the full amount of the expenses.

True False

QUESTION 15 1. Which of the following statements is true about health savings accounts (HSAs)? a. Distributions from HSAs are tax and penalty free when used for qualified medical expenses. b. Taxpayers may take tax and penalty free distributions from HSAs to purchase automobiles after

age 65. c. There is no restriction on the kind of health insurance taxpayers must carry in order to qualify for

an HSA. d. Contributions to HSAs are not deductible for adjusted gross income (AGI), but are treated as an

itemized deduction. e. Individuals taking distributions from HSAs which are not for medical expenses are subject to a 50

percent penalty.

QUESTION 16 1. If a Section 401(k) plan allows an employee to choose between a direct payment of compensation in cash or a contribution to the retirement plan, the plan is not a "qualified" plan.

True False

QUESTION 17 1. Which of the following statements is true of a distribution rollover (not a trustee-to-trustee transfer) from a retirement plan? a. The taxpayer must instruct the trustee of the retirement plan to transfer assets to the trustee of

another plan. b. No withholding is required. c. In one year, there is no limit to the number of times a taxpayer can request a distribution rollover

from one IRA to another IRA. d. Assuming there are no unusual events, the taxpayer has a maximum of 60 days in which to

transfer funds to a new plan to avoid current taxes and penalties. e. All of the above are true.

QUESTION 18 1. Since a contribution to an IRA is a voluntary action, a taxpayer may withdraw amounts from an IRA at any time without penalty.

True False

QUESTION 19 1. Donald owns a two-family home. He rents out the first floor and resides on the second floor. The following expenses attributable to the total building were incurred by Donald for the year ended December 31, 2015:

Real estate taxes Mortgage interest Utilities Repairs (first floor) Painting (second floor)

$ 1,800 1,600 1,200 1,400 400

2. In addition, the depreciation attributable to the entire building would be $2,000. What is the total amount of the expenses that Donald can deduct on Schedule E of Form 1040 (before any limitations)? a. $3,300 b. $3,850 c. $4,000 d. $4,700 e. None of the above

QUESTION 20 1. Donald, a 40-year-old married taxpayer, has a salary of $55,000 and interest income of $6,000. He is an active participant in his employer's pension plan. What is the maximum amount Donald can contribute to a Roth IRA? a. $610 b. $1,220 c. $5,500 d. $550 e. $3,000

2017 INCOME TAX FUNDAMENTALS CHAPTER 5 - QUIZ QUESTION 1 1. If business property is fully destroyed as a result of a casualty, the loss is equal to the decrease in the fair market value of the property.

True False

QUESTION 2 1. April and Wilson are married and file a joint tax return. Wilson is a police officer, and in the current tax year he spends $400 on uniforms and $160 for dry cleaning the uniforms. April is in the National Guard and military regulations restrict her from wearing her uniforms when she is off duty. The cost of uniforms for the year was $220 and the cost of dry cleaning them amounted to $80. April was granted a uniform allowance of $180 for the year. She also purchased a pair of standard black shoes to wear while on duty that cost $75. How much may they deduct on Schedule A for special clothing and uniforms, before considering the 2 percent of adjusted gross income limitation? a. $440 b. $620 c. $680 d. $860 e. None of the above

QUESTION 3 1. Unreimbursed employee business expenses are miscellaneous itemized deductions, subject to the 2 percent of adjusted gross income limitation.

True False

QUESTION 4 1. Which of the following interest expense amounts is not deductible 2015? a. Points of $2,000 paid on a mortgage loan for the purchase of a new principal residence. b. Investment interest expense of $10,000, assuming the taxpayer has $15,000 of investment income. c. Education loan interest of $2,000, assuming the taxpayer is single and has income of $150,000. d. Home equity loan interest of $9,000 on a loan of $100,000, the proceeds of which were used to

purchase a vacation home.

QUESTION 5 1. An employee may deduct the cost of welder’s safety goggles used at work as a miscellaneous itemized deduction.

True False

QUESTION 6 1. Which of the following charitable contributions is not tax deductible? a. Cash donated to a qualified church. b. Clothing donated to a qualified veterans’ organization. c. Time donated to a qualified veterans’ organization. d. Donation of a car to a qualified non-profit organization. e. All of the above are tax deductible.

QUESTION 7 1. Alice purchases a new personal auto and finances the purchase through the dealer. The interest of $760 she pays on the car loan during the current tax year is deductible.

True False

QUESTION 8 1. Dr. Wheeler donates her time and services to Doctors with No Limits, a qualified charity. Dr. Wheeler can take a tax deduction for the $3,400 market value of her time donated.

True False

QUESTION 9 1. Peter is a plumber employed by a major contracting firm. During the current year, he paid the following miscellaneous expenses:

Unreimbursed employee business expenses Union dues Tax return preparation fee Safe deposit box rental fee (used only for personal effects)

$450 $600 $100 $ 20

2. If Peter were to itemize his deductions for the current year, what amount could he claim as miscellaneous itemized deductions (before applying the 2 percent of adjusted gross income limitation)? a. $100 b. $550

c. $1,070 d. $1,150 e. None of the above

QUESTION 10 1. Harvey itemized deductions on his 2014 income tax return. Harvey plans to itemize deductions again in 2015 and the following information is available regarding state and local income taxes:

Taxes withheld in 2015 Refund received in 2015 of 2014 tax Assessment paid in 2015 of 2013 tax

$2,500 $ 500 $ 300

2. Assuming he elects to deduct state and local income taxes, the above information should be reported by Harvey in his 2015 tax return as: a. Itemized deduction for state and local income taxes of $2,500, and income from state and local tax

refund of $200 b. Itemized deduction for state and local income taxes of $2,300 c. Itemized deduction for state and local income taxes of $2,800 d. Itemized deduction for state and local income taxes of $2,800 and income from state and local tax

refund of $500 e. None of the above

QUESTION 11 1. Roberto, age 50, has AGI of $110,000 for 2015. He has medical expenses of $13,200. How much of the medical expenses can Roberto deduct on his Schedule A for 2015? a. $0 b. $4,950 c. $11,000 d. None of the above e. $13,200

QUESTION 12 1. A taxpayer may donate the free use of property to a charitable organization and deduct the value as an itemized deduction.

True False

QUESTION 13 1. Which of the following is correct for Qualified Tuition Programs for 2015? a. Contributions are deductible and qualified educational expense distributions are tax-free. b. Contributions are deductible and qualified educational expense distributions are taxable. c. Contributions are not deductible and qualified educational expense distributions are tax-free. d. Contributions are not deductible and qualified educational expense distributions are taxable.

QUESTION 14 1. Amy paid the following interest expense during the current year:

Qualified home mortgage interest Credit card interest Personal bank loan interest

$5,000 $ 1,000 $ 3,000

2. What is the amount of Amy's interest deduction for the current year? a. $1,000 b. $6,000 c. $3,000 d. $4,000 e. $5,000

QUESTION 15 1. Taxpayers are permitted to take an itemized deduction for the lesser of state income taxes paid or state sales taxes paid.

True False

QUESTION 16 1. Carla is a high school teacher who is required by her school district to take continuing education courses which are offered at the local college. She is also in the process of taking classes at a different university where she is pursuing her Ph.D. to become a research specialist. She pays the tuition for both schools.

Which of the following is true? a. She may deduct the continuing education tuition from the local college because it meets her

employer’s requirement to maintain her current job skills. b. She may not deduct the continuing education tuition because it is required by her job. c. None of the above is correct. d. She may deduct all of the tuition from each school because they are education expenses related to

job skill improvement. e. She may not deduct tuition from either school.

QUESTION 17 1. If business property is completely destroyed, the casualty or theft loss is the lesser of the decrease in market value or the adjusted basis of the property.

True False

QUESTION 18 1. If an employee receives a reimbursement for employee business expenses, the amount of the reimbursement is always excluded from gross income and the expenses are deductible as deductions for adjusted gross income.

True False

QUESTION 19 1. Mortgage interest on a taxpayer's personal residence is not deductible on Schedule A. True False

QUESTION 20 1. Which of the following is not considered a deductible medical expense? a. Medical insurance b. Eye exams c. Prescription drugs d. A face lift

QUESTION 1 1. Stewart had adjusted gross income of $22,000 in 2015. During the year, he made the following contributions to qualified charities:

$7,000 cash 1,000 shares of Able Corporation common stock, acquired in 1980 (cost and fair market value of $5,000) Considering the charitable contribution deduction limitation, what amount can Stewart claim as a deduction for charitable contributions in 2015? a. $5,000 b. $7,000 c. $11,000 d. $12,000 e. None of the above

QUESTION 2 1. The cost of uniforms is deductible only by self-employed taxpayers.

True False

QUESTION 3 1. For 2015, Eugene and Linda had adjusted gross income of $30,000. Additional information for 2015 is as follows:

Cash contribution to church Tuition paid to a parochial school Contribution to a qualified charity Cash contribution to a needy family

$1,600 $1,200 $ 400 $ 100

2. What is the maximum amount that they can use as a deduction for charitable contributions for 2015? a. $500 b. $1,600 c. $1,700 d. $2,000 e. None of the above

QUESTION 4 1. Expenses of education to improve or maintain existing skills are deductible as a miscellaneous itemized deduction even if the education incidentally leads to qualification in a new job or business.

True False

QUESTION 5 1. All taxpayers may deduct up to $4,000 of higher education tuition expenses.

True False

QUESTION 6 1. The interest paid on a loan used to acquire municipal bonds is not deductible.

True False

QUESTION 7 1. Foreign income taxes paid are deductible.

True False

QUESTION 8 1. During the current year, Mr. and Mrs. West paid the following taxes:

Property taxes on residence Special assessment for installation of a sewer system in their neighborhood State personal property tax on their automobile (based on value) Property taxes on land held for long-term appreciation

$1,900 $1,000 $ 400 $ 600

2. What amount can the Wests deduct as property taxes in calculating itemized deductions for the current year? a. $0 b. $1,900 c. $2,300 d. $2,900 e. None of the above

QUESTION 9 1. In 2015, state income taxes may be deducted as an itemized deduction on Schedule A. True False

QUESTION 10 1. Matthew purchases a new principal residence in the current year and pays points of $2,000 to obtain a mortgage loan. What is the proper tax treatment for the points paid? a. The points are a nondeductible personal expense. b. The points must be amortized over the life of the loan. c. The points must be amortized over 5 years. d. The points are fully deductible in the current year. e. The points must be capitalized into the cost of the residence.

QUESTION 11 1. If business property is fully destroyed as a result of a casualty, the loss is equal to the decrease in the fair market value of the property.

True False

QUESTION 12 1. Pat has a dependent daughter and files as head of household. She has AGI of $375,000. What percentage of the $4,000 personal exemption and $4,000 dependency exemption may she deduct on her 2014 income tax return? a. 100 percent b. 0 percent c. 26 percent d. 37 percent e. 74 percent

QUESTION 13 1. If real property is sold during the year, the property taxes must be allocated between the buyer and seller based on the number of days the property was held by each party.

True False

QUESTION 14 1. Peter is a plumber employed by a major contracting firm. During the current year, he paid the following miscellaneous expenses:

Unreimbursed employee business expenses Union dues Tax return preparation fee Safe deposit box rental fee (used only for personal effects)

$450 $600 $100 $ 20

2. If Peter were to itemize his deductions for the current year, what amount could he claim as miscellaneous itemized deductions (before applying the 2 percent of adjusted gross income limitation)? a. $100 b. $550 c. $1,070 d. $1,150 e. None of the above

QUESTION 15 1. The cost of over-the-counter aspirin and decongestants is a deductible medical expense even though they are non-prescription drugs.

True False

QUESTION 16 1. The cost of a chiropractor's services qualifies as a medical deduction.

True False

QUESTION 17 1. Which of the following is not considered a deductible medical expense? a. A face lift b. Eye exams c. Medical insurance d. Prescription drugs

QUESTION 18 1. Christine saw a television advertisement asking for donations of used vehicles to a charitable foundation and decided to donate her old car. Which of the following statements is correct? a. She can take a tax deduction large enough on an after-tax basis to equal the amount she would

have received if she sold the car directly. b. The charity is not required to provide her with any information about what they do with the auto. c. She can claim an estimated value for the auto if the charity uses it rather than selling it.

d. She can take a deduction greater than the amount for which the charity actually sells the vehicle.

QUESTION 19 1. Jon, age 45, had adjusted gross income of $26,000 in 2015. During the year, he incurred and paid the following medical expenses:

Drugs and medicines prescribed by doctors Health insurance premiums Doctors' fees Eyeglasses

$ 300 $ 750 $2,250 $ 75

2. Jon received $900 in 2015 as a reimbursement for a portion of the doctors' fees. If Jon were to itemize his deductions, what would be his allowable medical expense deduction after the adjusted gross income limitation is taken into account? a. $0 b. $425 c. $600 d. $1,000 e. None of the above

QUESTION 20 1. Which of the following is not deductible as an itemized deduction? a. State income taxes b. Personal property taxes c. Charitable contributions d. Local income taxes e. All of the above may be deductible as itemized deductions

2017 INCOME TAX FUNDAMENTALS CHAPTER 6 – QUIZ

QUESTION 1 1. In the case of the adoption of a child who is not a U.S. citizen or resident of the U.S., the credit for qualified adoption expenses is available: a. In the last year expenses are paid. b. In the year the adoption becomes final. c. In the first year the expenses are paid. d. Each year expenses are paid.

QUESTION 2 1. Glen and Mary have two children, Chad, age 12, and Linda, age 8. For 2015, Chad has $4,000 in net unearned income and Linda has net unearned income of $1,000. If the total parental tax for 2015 is $1,500, how would the tax be allocated between Chad and Linda? a. $1,500 to Chad and $0 to Linda b. $1,200 to Chad and $300 to Linda c. $1,120 to Chad and $280 to Linda d. $750 to Chad and $750 to Linda e. None of the above

QUESTION 4 1. An individual may claim both a credit and an exclusion from income in connection with the adoption of an eligible child, but may not claim both a credit and an exclusion for the same expense.

True False

QUESTION 5 1. Salary earned by minors may be taxed at their parents' tax rate.

True False

QUESTION 6 1. To be eligible for the earned income credit for 2015, a taxpayer must have a "qualifying child."

True False

QUESTION 7 1. Taxpayer Q has net taxable income of $30,000 from Country Y which imposes a 40 percent income tax.

In addition to the income from Country Y, taxpayer Q has net taxable income from U.S. sources of $120,000, and U.S. tax liability, before the foreign tax credit, of $41,750. What is the amount of Q's foreign tax credit? a. $2,400 b. $8,350 c. $12,000 d. $30,000 e. None of the above

QUESTION 8 1. For all taxpayers, except those married filing separately, the individual alternative minimum tax rate for 2015 is 26 percent on the first $185,400 of income and 28 percent on income above $185,400.

True False

QUESTION 9 1. Alice is a single taxpayer with no dependents that has AGI of $9,000 in 2015. Alice is required to carry minimum essential coverage in 2015.

True False

QUESTION 10 1. Clark, a widower, maintains a household for himself and his two dependent preschool children. For the year ended December 31, 2015, Clark earned a salary of $32,000. He paid $3,600 to a housekeeper to care for his children in his home, and also paid $1,500 to a kiddie play camp for child care. He had no other income or expenses during 2015. How much can Clark claim as a child and dependent care credit in 2015? a. $910 b. $1,300 c. $1,326 d. $5,100 e. None of the above d. $9,500

QUESTION 12 1. Which of the common deductions below are allowed for both regular tax purposes and for AMT purposes? a. State income taxes, property taxes, and all other taxes deducted on Schedule A b. Personal and dependency exemptions c. Mortgage interest from the acquisition of a residence costing less than $1 million d. The standard deduction e. Miscellaneous itemized deductions taken on Schedule A

QUESTION 13 1. The child tax credit is not available for children ages 17 and older.

True False

QUESTION 14 1. In 2015, the child tax credit available to married taxpayers filing jointly is phased out, beginning at: a. $55,000 b. $110,000 c. $95,000 d. $75,000

QUESTION 15 1. Jessica and Robert have two young children. They have $7,000 of qualified child care expenses and an AGI of $22,000 in 2015. What is their allowable child and dependent care credit? a. $2,000 b. $1,920 c. $1,860 d. $6,000 e. $7,000

QUESTION 17 1. The total expenses that can be taken as a credit for all tax years for adoption of a child without "special needs" is $10,000.

True False

QUESTION 18 1. Robert and Mary file a joint tax return for 2015 with adjusted gross income of $34,000. Robert and Mary earned income of $20,000 and $14,000, respectively, during 2015. In order for Mary to be gainfully employed, they pay the following child care expenses for their 4-year-old son, John:

Union Day Care Center Wilma, baby sitter (Robert's mother)

$1,700 $1,000

2. What is the amount of the child and dependent care credit they should report on their tax return for 2015? a. $270 b. $459 c. $675 d. $729 e. None of the above

QUESTION 19 1. For 2015, which of the following is a tax adjustment or tax preference item for the individual AMT computation? a. Deduction of charitable contribution of tangible personal property b. IRA contribution deduction c. Miscellaneous itemized deductions d. Moving expense deduction e. None of the above

QUESTION 20 1. Which of the following is not an adjustment or tax preference item for 2015 for purposes of the individual alternative minimum tax (AMT)? a. State income tax refunds b. Certain passive losses c. Miscellaneous itemized deductions d. Cash charitable contributions e. All of the above are adjustment or tax preference items for AMT.

QUESTION 1 1. Phillip and Naydeen Rivers are married with two dependent children. The family has household income of $38,160 in 2015. They paid $11,000 for health care for the year. A designated silver plan would have cost $9,800. What is the Rivers' premium tax credit? a. $9,800 b. $8,387 c. $0 d. $8,098 e. $1,413

QUESTION 2 1. A parent may elect to include a child’s income in the parent’s return if: a. The child’s income is only from interest and dividend distributions. b. The child is under age 18. c. The child’s gross income is more than $1,050 and less than $10,500. d. All of the above must be met for a parent to elect to include a child’s income in the parent’s return.

QUESTION 3 1. After raising two children, Anh, a single 48 year old, decided to go to college to get a degree. She spent two years in community college and earned an Associates degree. In 2015, she is enrolled half-time at State University to earn a Bachelor’s degree in Accounting and also works part-time. Anh is eligible for the American Opportunities tax credit.

True False

QUESTION 4 1. A taxpayer with earned income of $50,000 is not eligible to claim the credit for child and dependent care expenses.

True False

1. Q U E S T I O N 5 2. Margo and her spouse have health insurance for the entire year through the state health care exchange. Margo will need to pay her spouse’s individual shared responsibility.

True False

QUESTION 6 1. For 2015, which of the following is a tax adjustment or tax preference item for the individual AMT computation? a. Deduction of charitable contribution of tangible personal property b. IRA contribution deduction c. Miscellaneous itemized deductions d. Moving expense deduction e. None of the above

QUESTION 7 1. Taxpayers are required to wait until they file their tax return to receive the premium tax credit.

True False

QUESTION 8 1. Which of the following is not a true statement regarding community property law? a. Colorado, Ohio, and Florida are community property states. b. Property acquired before marriage in a community property state continues to be separate

property. c. For a married couple living in California, income derived from separate property is taxable to the

owner of the property. d. For a married couple living in Texas, income derived from separate property produces community

income. e. In all community property states, the salary of married spouses is allocated one-half to each

spouse.

QUESTION 9 1. Which of the following types of income is not subject to the “kiddie tax?” a. Interest income b. Dividend income c. Salary income d. Capital gains on stock sales e. All of the above are subject to the “kiddie tax”

QUESTION 10 1. The total expenses that can be taken as a credit for all tax years for adoption of a child without "special needs" is $10,000.

True False

QUESTION 11 1. Amounts paid to a relative generally do not qualify as child care expenses.

True False

QUESTION 12 1. Keith has a 2015 tax liability of $2,250 before taking into account his American Opportunity tax credit.

He paid $2,600 in qualifying expenses, was a full-time student, was not claimed as a dependent on his parents’ return, and his American Opportunity tax credit was not subject to phase-out. What is the amount of his American Opportunity tax credit allowed? a. $2,150 b. $0 c. $2,250 d. $4,000 e. $2,600

QUESTION 13 1. Most states are community property states.

True False

QUESTION 14 1. Which of the common deductions below are allowed for both regular tax purposes and for AMT purposes? a. Mortgage interest from the acquisition of a residence costing less than $1 million b. The standard deduction c. State income taxes, property taxes, and all other taxes deducted on Schedule A d. Personal and dependency exemptions e. Miscellaneous itemized deductions taken on Schedule A

QUESTION 15 1. Taxpayer Q has net taxable income of $30,000 from Country Y which imposes a 40 percent income tax.

In addition to the income from Country Y, taxpayer Q has net taxable income from U.S. sources of $120,000, and U.S. tax liability, before the foreign tax credit, of $41,750. What is the amount of Q's foreign tax credit? a. $2,400 b. $8,350 c. $12,000 d. $30,000

e. None of the above

QUESTION 16 1. The foreign tax credit applies only to foreign corporations.

True False

QUESTION 17 1. Which of the common deductions below are allowed for regular tax purposes but not for AMT purposes? a. IRAs b. The interest deduction for up to $100,000 of home equity debt which is not used to purchase or

improve part of a principal residence c. Cash charitable contributions d. Moving expenses

QUESTION 18 1. In determining the amount of the child and dependent care credit, there is a limit of $2,000 on the amount of qualified expenses for one dependent.

True False

QUESTION 19 1. Molly and Steve are married and live in Texas. Molly earns a salary of $50,000 and Steve owns a rental property that gives him $35,000 of income. If they filed separate tax returns, what amount of income would Steve report? a. $35,000 b. $85,000 c. $42,500 d. $60,000 e. None of the above

QUESTION 20 1. Net unearned income of certain minor children is taxed at their parents' tax rates.

True False