ch 6

Question 1

The child tax credit is not available for children age 17 and older.

Answer 1

TRUE

Question 2

The child credit is $1,000 per qualifying child unless it is phased out due to higher levels of parental income

Answer 2

TRUE

Question 3

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.

Answer 3

TRUE

Question 4

To be eligible for the earned income credit for 2012, a taxpayer must have a “qualifying child”.

Answer 4

FALSE

Question 5

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

Answer 5

FALSE

Question 6

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.

Answer 6

TRUE

Question 7

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

Answer 7

FALSE

Question 8

Married taxpayers must file a joint tax return to claim the child and dependent care credit

Answer 8

TRUE

Question 9

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.

Answer 9

FALSE

Question 10

The foreign tax credit applies only to foreign corporations.

Answer 10

FALSE

Question 11

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

Answer 11

FALSE $12650

Question 12

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.

Answer 12

TRUE

Question 13

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.

Answer 13

TRUE

Question 14

The individual alternative minimum tax liability may not exceed the regular tax liability of the taxpayer.

Answer 14

FALSE

Question 15

The alternative minimum tax must be paid only if the tentative minimum tax exceeds a taxpayer’s regular tax liability.

Answer 15

TRUE

Question 16

Salary earned by minors may be taxed at their parents’ tax rate.

Answer 16

FALSE

Question 17

Net unearned income of certain minor children is taxed at their parents’ tax rates.

Answer 17

TRUE

Question 18

Unearned income of a 16-year-old child may be taxed at his or her parents’ income tax rate.

Answer 18

TRUE

Question 19

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.

Answer 19

TRUE

Question 20

In all community property states, income from community property is community income.

Answer 20

TRUE

Question 21

Most states are community property states.

Answer 21

FALSE

Question 22

New York is a community property state.

Answer 22

FALSE

Question 23

The adjusted gross income limitation on medical expenses is 10 percent

Answer 23

false 7.5%

Question 24

Premiums paid for life insurance policies are deductible as medical expenses

Answer 24

false

Question 25

The cost of a chiropractor’s services qualifies as a medical deduction.

Answer 25

true

Question 26

The cost of aspirin and decongestants is a deductible medical expense even though they are non-prescription drugs.

Answer 26

false

Question 27

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.

Answer 27

true

Question 28

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.

Answer 28

true

Question 29

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

Answer 29

false

Question 30

The cost of a fishing license is considered a personal property tax and is deductible as an itemized deduction.

Answer 30

false

Question 31

In 2012, state income taxes may be deducted as an itemized deduction on Schedule A.

Answer 31

true

Question 32

Mortgage interest on a taxpayer’s personal residence is not deductible on Schedule A

Answer 32

false

Question 33

To deduct interest paid with respect to indebtedness, the taxpayer must be legally liable for the debt.

Answer 33

true

Question 34

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

Answer 34

true

Question 35

For 2012, the investment interest expense deduction is limited to the taxpayer’s net investment income.

Answer 35

true

Question 36

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

Answer 36

false

Question 37

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.

Answer 37

true

Question 38

Taxpayers must itemize their deductions to be allowed a charitable contribution deduction.

Answer 38

true

Question 39

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.

Answer 39

false

Question 40

Casualty and theft losses must be reduced by amounts recovered from insurance coverage.

Answer 40

true

Question 41

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

Answer 41

Adjusted basis

FALSE

Question 42

If personal property is completely destroyed, the casualty loss deduction is still reduced by a floor amount.

Answer 42

true

Question 43

All personal casualty losses incurred during the year are added together and only one $100 floor amount is used to reduce the casualty deduction.

Answer 43

false

Question 44

A theft loss is deductible in the year the theft is discovered, even if the theft occurred in a prior year.

Answer 44

true

Question 45

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.

Answer 45

true

Question 46

If a ballet dancer seeks work as a ditch digger, the expenses of job hunting may be deductible.

Answer 46

false

Question 47

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.

Answer 47

false

Question 48

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

Answer 48

false

Question 49

If the taxpayer fails to locate a job, job hunting expenses are not deductible

Answer 49

false

Question 50

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

Answer 50

true

Question 51

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.

Answer 51

false

Question 52

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.

Answer 52

false

Question 53

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

Answer 53

true

Question 54

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.

Answer 54

false