ch 6 Flashcards
T/F
The child tax credit is not available for children age 17 and older.
TRUE
The child credit is $1,000 per qualifying child unless it is phased out due to higher levels of parental income
TRUE
The use of the earned income credit could result in a taxpayer receiving a refund even though he or she has not paid any taxes.
TRUE
To be eligible for the earned income credit for 2012, a taxpayer must have a “qualifying child”.
FALSE
Amounts paid to a relative generally do not qualify as child care expenses.
FALSE
For 2012, the maximum amount of expenses that qualify for the child and dependent care credit is the same for three dependents as it is for two dependents.
TRUE
A taxpayer with earned income of $50,000 is not eligible to claim the credit for child and dependent care expenses.
FALSE
Married taxpayers must file a joint tax return to claim the child and dependent care credit
TRUE
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.
FALSE
The foreign tax credit applies only to foreign corporations.
FALSE
The total expenses that can be taken as a credit for all tax years for adoption of a child without “special needs” is $6,000
FALSE $12650
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
The individual alternative minimum tax rate for 2012 is 26 percent on the first $175,000 of income and 28 percent on income above $175,000.
TRUE
The individual alternative minimum tax liability may not exceed the regular tax liability of the taxpayer.
FALSE
The alternative minimum tax must be paid only if the tentative minimum tax exceeds a taxpayer’s regular tax liability.
TRUE
Salary earned by minors may be taxed at their parents’ tax rate.
FALSE
Net unearned income of certain minor children is taxed at their parents’ tax rates.
TRUE
Unearned income of a 16-year-old child may be taxed at his or her parents’ income tax rate.
TRUE
If the net unearned income of a minor child is to be taxed at the parents’ tax rate, the parents may elect, under certain conditions, to include the child’s gross income on their tax return.
TRUE
In all community property states, income from community property is community income.
TRUE
Most states are community property states.
FALSE
New York is a community property state.
FALSE
The adjusted gross income limitation on medical expenses is 10 percent
false 7.5%
Premiums paid for life insurance policies are deductible as medical expenses
false
The cost of a chiropractor’s services qualifies as a medical deduction.
true
The cost of aspirin and decongestants is a deductible medical expense even though they are non-prescription drugs.
false
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
The amount of a special assessment charged to residents for the installation of sidewalks on their street is not deductible on Schedule A as property taxes.
true
To calculate the amount of state and local income taxes which may be deducted as an itemized deduction, state income taxes paid during the year must be reduced by state income tax refunds received during the year
false
The cost of a fishing license is considered a personal property tax and is deductible as an itemized deduction.
false
In 2012, state income taxes may be deducted as an itemized deduction on Schedule A.
true
Mortgage interest on a taxpayer’s personal residence is not deductible on Schedule A
false
To deduct interest paid with respect to indebtedness, the taxpayer must be legally liable for the debt.
true
The interest paid on a loan used to acquire municipal bonds is not deductible.
true
For 2012, the investment interest expense deduction is limited to the taxpayer’s net investment income.
true
A taxpayer may donate the free use of property to a charitable organization and deduct the value as an itemized deduction.
false
If a taxpayer contributes a painting to a museum but reserves the right to use the painting for parties, he may not be allowed a deduction for the charitable contribution.
true
Taxpayers must itemize their deductions to be allowed a charitable contribution deduction.
true
Individual taxpayers may carry forward indefinitely charitable contributions that are not allowed as a deduction in the current year due to the adjusted gross income limitation.
false
Casualty and theft losses must be reduced by amounts recovered from insurance coverage.
true
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
Adjusted basis
FALSE
If personal property is completely destroyed, the casualty loss deduction is still reduced by a floor amount.
true
All personal casualty losses incurred during the year are added together and only one $100 floor amount is used to reduce the casualty deduction.
false
A theft loss is deductible in the year the theft is discovered, even if the theft occurred in a prior year.
true
The cost of an appraisal of a painting may be deducted if the purpose of the appraisal is related to the preparation of an income tax return.
true
If a ballet dancer seeks work as a ditch digger, the expenses of job hunting may be deductible.
false
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.
false
The cost of uniforms is deductible only by self-employed taxpayers.
false
If the taxpayer fails to locate a job, job hunting expenses are not deductible
false
An employee may deduct the cost of welder’s safety goggles used at work as a miscellaneous itemized deduction.
true
The expense of a review course for a state real estate agent’s exam is deductible as a miscellaneous itemized deduction by a taxpayer attempting to become an agent.
false
Educational expenses are deductible as a miscellaneous itemized deduction even if the education is required to meet the minimum requirements for the taxpayer’s current job.
false
Unreimbursed employee business expenses are miscellaneous itemized deductions, subject to the 2 percent of adjusted gross income limitation.
true
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.
false
