118 test bank for income tax fundamentals 2012 30th edition

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118 Test Bank for Income Tax Fundamentals 2012 30th Edition

Multiple Choice Questions-Page 1

During 2011, Murray, who is 60 years old and unmarried, provided all of the support of his aged mother His mother was a resident of a home for the aged for the entire year and had no income What is Murray's filing status for 2011, and how many exemptions should he claim on his tax return?

1 Head of household and 2 exemptions

2 Single and 2 exemptions

3 Head of household and 1 exemption

4 Single and 1 exemption

5 None of the above.

Eugene and Velma are married For 2011, Eugene earned $25,000 and Velma earned $30,000 They have decided to file separate returns and are each

entitled to claim one personal exemption They have no deductions for

adjusted gross income Eugene's itemized deductions are $9,400 and Velma's are $1,700 Assuming Eugene and Velma do not live in a community property state, what is Eugene's taxable income?

1 $25,000

2 $15,600

3 $19,300

4 $11,900

5 None of the above.

Electronic filing (e-filing)

1 Reduces the chances that the IRS will make mistakes when inputting tax return information

2 Generally results in a slower refund

3 Can be done only by telephone

4 Requires the services of a professional.

Irma, widowed in 2009, 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 2011?

1 Single

2 Married, filing separate

3 Head of household

4 Qualifying widow or widower

5 None of the above.

Which one of the following provisions was passed by Congress to meet a social goal of the tax law?

1 The deduction for job hunting expenses

2 The charitable deduction

3 The moving expense deduction for adjusted gross income

4 The deduction for soil and water conservation costs available to farmers

5 None of the above.

Which of the following relatives will not satisfy the relationship test for the dependency exemption?

1 Sister

2 Adopted child

3 Aunt

4 Parent

5 All of the above satisfy the test.

All of the following factors are important in determining whether an individual

is required to file an income tax return, except:

1 The taxpayer's filing status

2 The taxpayer's gross income

3 The taxpayer's total itemized deductions

4 The availability of the additional standard deduction for taxpayers who are elderly

5 None of the above.

Which of the following is not a goal of the tax law?

1 Encouraging certain social goals such as contributions to charity.

2 Encouraging certain economic goals such as a thriving business community.

3 Encouraging smaller families.

4 Raising revenue to operate the government.

5 None of the above are goals of the tax law.

During 2011, Anita was entirely supported by her three sons, Dudley, Carlton, and Isidore, who provided support for her in the following percentages:

Dudley 8 percent; Carlton 45 percent; Isidore 47 percent Which of the

brothers may be allowed to claim his mother as a dependent, assuming a multiple support agreement exists?

1 Dudley

2 Dudley or Carlton

3 Carlton or Isidore

4 Dudley, Carlton, or Isidore

5 None of the above.

Which of the following is a true statement with respect to the gross income test for the qualifying relative dependency exemption?

1 The relative must receive less than $3,700 of gross income in order to qualify.

2 The gross income test does not have to be met provided the relative is under age 19 at the end of the tax year.

3 The gross income test does not have to be met provided the relative is under age 24 at the end of the tax year.

4 The gross income test does not have to be met provided the relative is a student.

5 All of the above statements are true.

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 2011?

1 $1,200

2 $950

3 $3,700

4 $5,800

5 None of the above.

Wesley owns and operates the Cheshire Chicken Ranch in Turpid, Nevada The income from this ranch is $49,000 Wesley wishes to use the easiest possible tax form He may file:

1 Form 1040EZ

2 Form 1040A

3 Form 1040

4 Form 1065

5 None of the above.

Mr and Mrs Vonce, both age 62, file a joint return for 2011 They provided all the support for their daughter who is 19, legally blind, and who earns no income Their son, age 21 and a full-time student at a university, had $4,200 of income and provided 70 percent of his own support during 2011 How many exemptions may Mr and Mrs Vonce claim on their 2011 tax return?

1 2

2 3

3 4

4 5

5 None of the above.

Form 1040 allows a taxpayer to report which of the following items that are not allowed for taxpayers who file form 1040A

1 Are not taxable entities

2 Are taxed in the same manner as individuals

3 File tax returns on Form 1120

4 File tax returns on Form 1041.

Clay purchased Elm Corporation stock 20 years ago for $10,000 In 2011, he sells the stock for $29,000 What is Clay's gain or loss?

5 No gain or loss is recognized on this transaction.

John, 45 years old and unmarried, contributed $1,000 monthly in 2011 to the support of his parents' household The parents lived alone and their income for 2011 consisted of $500 from dividends and interest What is John's filing status and how many exemptions should he claim on his 2011 tax return?

1 Single and 1 exemption

2 Head of household and 1 exemption

3 Single and 3 exemptions

4 Head of household and 3 exemptions

5 None of the above.

Eugene and Velma are married For 2011, Eugene earned $25,000 and Velma earned $30,000 They have decided to file separate returns and are each

entitled to claim one personal exemption They have no deductions for

adjusted gross income Eugene's itemized deductions are $9,400 and Velma's are $1,700 Assuming Eugene and Velma do not live in a community property state, what is Velma's taxable income?

Oscar and Mary have no dependents and file a joint income tax return for

2011 They have adjusted gross income of $145,000 itemized deductions of

$32,000 What is the amount of taxable income that Oscar and Mary must report on their 2011 income tax return?

1 Single

2 Head of household

3 Married, filing separately

4 Qualifying widow or widower

5 None of the above.

Which of the following is correct?

1 An individual is a reporting entity but not a taxable entity

2 A partnership is a taxable entity and a reporting entity

3 A corporation is a reporting entity but not a taxable entity

4 A partnership is a reporting entity but not a taxable entity.

Taxpayers who are blind get the benefit of:

1 An extra exemption

2 An additional amount added to their standard deduction

3 Two standard deductions

4 None of the above.

An unmarried taxpayer who maintains a household for a dependent child and whose spouse died in the prior year should file as:

1 Single

2 Head of household

3 Qualifying widow or widower

4 Married, filing separately

5 None of the above.

Albert and Louise, ages 66 and 64 respectively, filed a joint return for 2011 They provided all of the support for their blind 19-year-old son, who had no gross income They also provided the total support of Louise's father, who is

a citizen and life-long resident of Peru How many exemptions may they claim

on their 2011 tax return?

1 2

2 3

3 4

4 5

5 None of the above.

Amended returns are filed on:

1 Form 1040X

2 Form 1120S

3 Form 1041

4 Form 1040Amend.

Which of the following taxpayers does not have to file a tax return for 2011?

1 A single taxpayer who is under age 65, with income of $10,000.

2 Married taxpayers (ages 45 and 50 years), filing jointly, with income of $19,500.

3 A student, age 22, with unearned income of $1,200 who is claimed as a dependent by her parents.

4 A qualifying widow (age 67) with a dependent child and income of $14,500.

5 All of the above taxpayers must file a return.

Alexis has a long-term capital loss of $13,000 on the sale of stock in 2011 Her taxable income without this transaction is $60,000 What is her taxable income considering this capital loss?

1 $60,000

2 $57,000

3 $54,000

4 $47,000

5 Some other amount.

Alan, whose wife died in 2010, filed a joint tax return for 2010 During 2011, he did not remarry and continued to maintain his home in which his four

dependent children lived In the preparation of his tax return for 2011, Alan should file as:

1 A single individual

2 Qualifying widow(er)

3 Head of household

4 Married, filing separately

5 None of the above.

John, age 25, is a full-time student at a state university John lives with his sister, Ann, who provides over half of his support His only income is $4,000

of wages from a part-time job at the college book store What is Ann's filing status for 2011?

1 Single

2 Head of household

3 Married, filing separately

4 Qualifying widow(er)

5 None of the above.

Ronald is 92 years old and in poor health Clever investing earlier in his life has left him with a sizeable income He is able to support his son Ed Ed is 67 years old and a bit "confused," so he lives in a home for the aged Ed’s

income is less than $2,000 How many exemptions should Ronald claim on his tax return?

1 1

2 2

3 3

4 4

5 None of the above.

Which of the following is not a capital asset?

Which of the following forms may be filed by individual taxpayers?

1 Form 1040

2 Form 1041

3 Form 1065

4 Form 1120

5 None of the above.

William is a divorced taxpayer who provides a home for his dependent child, Edward What filing status should William indicate on his tax return?

1 Head of household

2 Married, filing separately

3 Single

4 Qualifying widow(er)

5 None of the above.

Internet users can sign on to http://www.irs.gov/ and

1 Download tax forms and publications

2 Find links to other useful IRS pages

3 Use a search function to find forms and publications

4 All of the above.

Brian (60 years old) is 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 2011 tax return?

1 $7,250

2 $13,050

3 $9,950

4 $12,050

5 None of the above.

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 2011?

1 $5,800

2 $8,500

3 $9,950

4 $10,600

5 None of the above.

66 Free Test Bank for Income Tax Fundamentals 2012 30th Edition by Whittenburg Multiple Choice Questions- Page 2

An exemption can be claimed for a taxpayer’s child:

1 In the year of birth not in the year of death.

2 But the exemption must be prorated in the year of birth or death, based on the number

of months the dependent was alive in those years.

3 Who works and pays more than half of his or her own support.

4 If the child is a premature baby kept in the hospital until after the end of the year.

5 Even though the taxpayer has not obtained a Social Security number for the child.

Which of the following is not a test that must be met for a child to be

The tax formula for individuals contains the following:

1 Gross Income minus Adjusted Gross Income equals Taxable Income.

2 Gross Income minus Deductions and minus Exemptions is equal to the amount of Adjusted Gross Income.

3 Exemptions, Credits, and Deductions are subtracted from Adjusted Gross Income to calculate Income.

4 Adjusted Gross Income minus Deductions and minus Exemptions is equal to Taxable Income.

5 The amount of the Refund Due is the Gross Tax Liability added to Credits.

Electronically filed tax returns:

1 May not be transmitted from a taxpayer’s home computer

2 Constitute more than 90 percent of the returns filed with the IRS

3 Have error rates similar to paper returns

4 Offer faster refunds than paper returns.

Heads of households:

1 Have the same tax rates as married taxpayers filing separately.

2 Cannot be married as of December 31 of the tax year.

3 Can only qualify if they have a dependent child living with them.

4 Can have half of the cost of keeping a home paid by the dependent and still be classified as head of household.

5 Can have dependent parents living in a separate residence, and still qualify as head of household.

In determining whether a person is a dependent of a taxpayer:

1 A child cannot be considered a dependent after becoming 21 years old.

2 A dependent must be a United States citizen and living in the United States.

3 A child who provides more than one-half of his or her own support cannot be claimed

as a dependent of someone else.

4 A child may not satisfy the requirements of dependency for more than one taxpayer.

5 A 20-year-old child who is not a student and earns $15,000 during the year may qualify

as a dependent.

Persons who are neither directly nor indirectly related to the taxpayer:

1 Cannot qualify as dependents of the taxpayer.

2 Must live with the taxpayer at least half a year to qualify as dependents under the member-of-household test.

3 Must be supported 100 percent by the taxpayer to qualify as dependents.

4 May qualify as dependents if they reside with the taxpayer for the full year and if all other qualifying relative tests are met.

5 May qualify as dependents even though they file a joint tax return on which a small amount of tax is due.

In which of the following situations is the taxpayer not required to file an income tax return?

1 When an individual has a 2011 income tax refund and would like to obtain it.

2 When the taxpayer is a single 67-year-old who made $9,800 in 2011.

3 When the taxpayer is a 35-year-old head of household who made $15,800 in 2011.

4 When the taxpayer is a 79-year-old widow who made $16,500 in 2011.

5 When the taxpayers are a married couple with both spouses under 65 years old who made $19,800 in 2011.

Robert is a single taxpayer who has AGI of $145,000 in 2011; his taxable income is $122,000 What is his federal tax liability for 2011?

5 None of the above.

On the tax return of a dependent:

1 The standard deduction may not exceed $950

2 The deduction is not increased for old age and blindness.

3 The dependent can claim a personal exemption.

4 If the dependent has earned $1,800 in wages and $900 in interest, the standard deduction is $2,100.

5 If the dependent has $6,000 in wages and $300 of interest income, the standard deduction is $6,300.

Which of the following statements is not correct with respect to the taxation of capital gains?

1 Long-term capital gains are taxed at a lower rate than ordinary income.

2 Long-term gains have preferential tax rates of zero percent and 15 percent.

3 In any year, only $3,000 of net capital losses can be deducted against ordinary income.

4 Short-term capital gains have preferential tax rates.

5 All of the above are correct statements.

Which of the following taxpayers does not have to file a tax return for 2011?

1 A student, age 25, with unearned income of $1,400 who is claimed as a dependent by his parents

2 A qualifying widow (age 67) with a dependent child and income of $14,950

3 A single taxpayer who is under age 65, with income of $10,000

4 Married taxpayers (ages 45 and 50 years), filing jointly, with income of $20,000

5 All of the above taxpayers must file a return