CH6- MC

Question 1

. Denice is divorced and files a single tax return claiming her two children, ages 7 and 9, as dependents. Her adjusted gross income for 2012 is $79,500. Denice’s Child Credit for 2012 is:

Answer 1

(79500-75000)/1000=5
5*50=250
2000-250=$1,750

Question 2

Curly and Rita are married, file a joint return, and have two dependent children, ages 11 and 13. Their combined income is $116,000. By how much is their child credit reduced in 2012?

Answer 2

(116000-11000)/1000*50=300

Question 3

In 2012, the child tax credit available to married taxpayers filing jointly is phased out, beginning at:

Answer 3

110,000

Question 4

. Bob and Carol file their tax returns using the married filing jointly status. Their AGI is $131,000. They have two children, ages 11 and 7. How much child tax credit can Bob and Carol claim for their two children?

Answer 4

950

Question 5

The earned income credit:

Answer 5

Must be calculated on adjusted gross income as well as earned income in some cases

Question 6

In 2012, Alex has income from wages of $16,000, adjusted gross income of $18,000, and tax liability of $300 before the earned income credit. What is the amount of Alex’s earned income credit for 2012, assuming his 5-year old dependent son lived with him for the full year?

Answer 6

see appendix B: 3019

Question 7

Which one of the following taxpayers qualify for the earned income credit?

Answer 7

A 31-year-old construction worker with $22,000 of AGI and two children.

Question 8

For the 2012 tax year, Sally, who is divorced, reported the following items of income:

Interest income $ 600
Wages 4,000
Earnings from self-employment 3,000

She maintains a household for herself and her 1-year-old son who qualifies as her dependent. What is the earned income credit available to her for 2012, using the tables?
For the 2012 tax year, Sally, who is divorced, reported the following items of income:

Interest income $ 600
Wages 4,000
Earnings from self-employment 3,000

She maintains a household for herself and her 1-year-old son who qualifies as her dependent. What is the earned income credit available to her for 2012, using the tables?

Answer 8

2389

Question 9

. Which of the following tax credits is not available for the 2012 tax year?

Answer 9

A. Foreign tax credits
B. Earned income credit
C. Adoption credit
D. Child and dependent care credit
E. All of the above are available credits!!

Question 10

Clark, a widower, maintains a household for himself and his two dependent preschool children. For the year ended December 31, 2012, Clark earned a salary of $36,000. He paid $3,500 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 2012. How much can Clark claim as a child care credit in 2012?

Answer 10

3500+1500 =5000

Question 11

Jessica and Robert have two young children. They have $7,000 of qualified child care expenses and an AGI of $24,000 in 2012. What is their allowable child care credit?

Answer 11

maximum qualified expense: 6000

6000*30%=1800

Question 12

. The child and dependent care provisions:

Answer 12

Are available for spouses incapable of self-care

Question 13

Robert and Mary file a joint tax return for 2012, with adjusted gross income of $33,000. Robert and Mary earned income of $20,000 and $12,000 respectively, during 2012. 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 $1,500
Wilma, baby sitter (Robert’s mother) 1,000

What is the amount of the child and dependent care credit they should report on their tax return for 2012?

Answer 13

(1000+1500)*26%=650

33000 not over—26%

Question 14

The American Opportunity credit

Answer 14

Is available for qualifying expenses paid on behalf of the taxpayer and his or her spouse, in addition to those paid for dependents

Question 15

Hal is enrolled for one class at a local community college; tuition cost him $250. Hal’s AGI is $20,000. Hal can take a lifetime learning credit of:

Answer 15

250*20%=50

Question 16

Keith has a 2012 tax liability of $2,250 before taking into account his American Opportunity credit. He paid $2,700 in qualifying expenses, was a full-time student, was not claimed as a dependent on his parents’ return, and his American Opportunity credit was not subject to phase out. What is the amount of his American Opportunity credit allowed?

Answer 16

100% first 2000=2000
25% second 2000: 700*.25=175
= 2175

Question 17

Steve goes to Tri-State University and pays $40,000 in tuition. Steve works a part-time job to pay for his schooling and has an AGI of $17,000. How much is his American Opportunity Credit?

Answer 17

2500

Question 18

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?

Answer 18

30/(30+120)*41750=8350

Question 19

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:

Answer 19

In the year the adoption becomes final

Question 20

Jim has foreign income. He earns $25,000 from Country A which taxes the income at a 20 percent rate. He also has income from Country B of $15,000. Country B taxes the $15,000 at a 10 percent rate. His U.S. taxable income is $90,000, which includes the foreign income. His U.S. income tax on all sources of income before credits is $19,000. What is his foreign tax credit?

Answer 20

Country A: 2500020%=5000
Country B: 1500010%-1500
Total 6500
Not use formula since it less than the limit.

Question 21

Carla and Bob finalized an adoption in 2012. Their adoption fees totaled $9,500. They have AGI of $205,000 for 2012. What is their adoption credit?

Answer 21

(205000-189710)/40000*9500=3631

9500-3631=5869

Question 22

A tax credit is allowed for qualified adoption expenses paid by taxpayers

Answer 22

And an income exclusion is allowed for qualified adoption expenses paid for by taxpayers’ employers

Question 23

Taxpayers are allowed two tax breaks for adoption expenses. They are allowed:

Qualified Expenses
Paid personally Paid by employer

Answer 23

Credit Exclusion

Question 24

Choose the correct statement:

Answer 24

A taxpayer may receive a 30 percent credit for installing a windmill at his vacation home.

Question 25

Which of the following is not an adjustment or tax preference item for 2012 for purposes of the individual alternative minimum tax?

Answer 25

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 26

Which of the following itemized deductions may not be deducted in computing the individual alternative minimum tax?

Answer 26

A. Qualified home mortgage interest
B.## State income taxes##
C. Medical expenses (limited to 10 percent of AGI)
D. Charitable deductions
E. All of the above

Question 27

Which of the common deductions below are allowed for both regular tax purposes and for Alternative Minimum Tax (AMT) purposes?

Answer 27

A. The standard deduction
B. Personal and dependency exemptions
C. State income taxes, property taxes, and all other taxes deducted on Schedule A
D. ##Mortgage interest from the acquisition of a residence costing less than $1 million##
E. Miscellaneous itemized deductions taken on Schedule A

Question 28

Which of the common deductions below are allowed for regular tax purposes but not for Alternative Minimum Tax (AMT) purposes?

Answer 28

A.## 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##
B. Cash charitable contributions
C. Moving expenses
D. IRAs

Question 29

Which of the following is true of the alternative minimum tax?

Answer 29

A. The alternative minimum tax is designed to ensure that high income taxpayers do not pay excessive amounts of income tax
B. For 2012, the alternative minimum tax rates are 20 percent and 30 percent, depending on the taxpayer’s income
C. ##The amount of a taxpayer’s state income tax may not be deducted for the purpose of computing the alternative minimum tax##
D. All tax-exempt interest is a tax preference item for the alternative minimum tax
E. None of the above are true

Question 30

For 2012, which of the following is a tax adjustment or tax preference item for the individual alternative minimum tax computation?

Answer 30

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 31

A parent may elect to include a child’s income in the parent’s return if:

Answer 31

A. The child is under age 18
B. The child’s income is only from interest and dividend distributions
C. The child’s gross income is more than $950 and less than $9,500
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 32

54. In 2012, which of the following children would have income taxed at their parents’ rates?

Answer 32

A. A child with salary income of $12,000 (age 13)
B.## A child with net unearned income of $2,000 (age 12)##
C. A non-student child with net unearned income of $12,000 (age 19)
D. A child with salary income of $1,000 (age 9)
E. All of the above

Question 33

William and Irma have two children, Tom (age 13) and Sara (age 8). For 2012, Tom and Sara have a total parental tax of $5,600. Tom’s net unearned income is $15,000, while Sara’s net unearned income is $5,000. How much of the parental tax would be allocated to Sara on her 2012 tax return?

Answer 33

5000/(5000+15000)*5600=1400

Question 34

Assume Karen is 12 years old and her only income is $2,500 of interest income from a bank account with money her parents have given her to save for college. What are the options Karen has for filing her tax return

Answer 34

C. Karen can file a separate tax return or her parents can elect to include her in their tax return, paying tax on $600 of her interest income at their rate of tax.

Question 35

Which of the following types of income is not subject to the “kiddie tax?”

Answer 35

Salary income

Question 36

Glen and Mary have two children, Chad (12-years-old) and Linda (8-years-old). For 2012, Chad has $4,000 in net unearned income and Linda has net unearned income of $1,000. If the total parental tax for 2012 is $1,400, how would the tax be allocated between Chad and Linda?

Answer 36

$1,120 to Chad and $280 to Linda

Question 37

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?

Answer 37

(50000+35000)/2= $42,500

Question 38

Which one of the following conditions must be satisfied in order for a married taxpayer to be taxed on only his income if he resides in a community property state?

Answer 38

The husband and wife must live apart for the entire year.

Question 39

Which of the following is not a true statement regarding community property law?

Answer 39

Colorado, Ohio, and Florida are community property states

Question 40

H and W are married taxpayers living in Louisiana. H earns wages of $40,000 and has $5,000 of dividend income from separate property. H and W have interest income from community property of $10,000. If H and W file separate income tax returns, what amount of income must be included on H’s separate tax return?

Answer 40

(40000+10000+5000)/2=$27,500