Chapter 3 Quiz Review Flashcards
An increase in a taxpayer’s AGI could decrease the amount of charitable contribution that can be claimed. True or False?
False. An increase in AGI increases the allowable charitable contribution that can be claimed due to the 50% ceiling (60% for cash contributions) imposed.
Jason and Peg are married and file a joint return. Both are over 65 years of age and Jason is blind. Their standard deduction for 2023 is $30,700. True or False?
False. Their standard deduction is $32,000 [$27,700 (MFJ standard deduction) + $1,500 (age; Jason) + $1,500 (blindness; Jason) + $1,500 (age; Peg)].
Derek, age 46, is a surviving spouse. If he has itemized deductions of $28,250 for 2023, Derek should not claim the standard deduction. True or False?
True. The standard deduction would only provide $27,700.
Debby, age 18, is claimed as a dependent by her mother. During 2023, Debby earned $1,200 in interest income on a savings account. Her standard deduction is $1,650 ($1,250 + $400). True or False?
False. The interest income is unearned income. Debby’s standard deduction is $1,250. The greater of $1,250 or $400 (earned income plus $400).
For the year a spouse dies, the surviving spouse is considered married for the entire year for income tax purposes. True or False?
True
Surviving spouse filing status begins in the year in which the deceased spouse died. True or False?
False. Surviving spouse filing status begins in the year following the year of death.
Katelyn is divorced and maintains a household in which she and her daughter, Crissa, live. Crissa, age 22, earns $11,000 during 2023 as a model. Katelyn does not qualify for head of household filing status. True or False?
True. Crissa is not Katelyn’s’ dependent. She fails the age test for qualifying child purposes and the gross income test for the qualifying relative category.
Which of the following statements relating to the standard deduction is correct?
A) If a taxpayer dies during the year, the standard deduction must be prorated.
B) If a taxpayer is claimed as a dependent of another, the additional standard deduction is allowed in full (i.e., no adjustment is necessary).
C) If spouses file separate returns, both must claim the standard deduction (rather than itemize their deductions from AGI).
D) If a taxpayer is claimed as a dependent of another, no basic standard deduction is allowed.
If a taxpayer is claimed as a dependent of another, the additional standard deduction is allowed in full (i.e., no adjustment is necessary).
Rationale: In the case of death, no apportionment is required and the full standard deduction is allowed (choice a.). If married taxpayers file separate returns and one spouse itemizes, the other spouse must also itemize. However, there is no requirement that they each claim the standard deduction- although she or he may do so (choice c). A basic standard deduction is allowed for dependents although its determination is subject to special rules (choice d).
During 2023, Enrique had the following transactions:
Salary of $70,000
Interest income on Xerox bonds of $3,000
Inheritance from uncle of $40,000
Contributions to traditional IRA of $6,500
Capital losses of $2,500
Enrique’s AGI is:
A) $66,500
B) $70,500
C) $104,000
D) $64,000
$64,000
A qualifying child cannot include:
A) A grandmother.
B) A daughter who is away at college.
C) A married son who files a joint return.
D) A brother who is 28 years of age and disabled.
A grandmother.
Rationale: A grandmother does not meet the relationship test (choice d). The filing of a joint return is not fatal if filing is not required and its purpose is to obtain a tax refund (choice a). A temporary absence is permissible under the domicile test (choice b). A brother meets the relationship test, and disability waives the age test (choice c).
Jeremy is married to Amy, who abandoned him in 2022. He has not seen or communicated with her since April of that year. He maintains a household in which their son, Evan, lives. Evan is age 25 and earns over $6,000 each year. For tax year 2023, Jeremy’s filing status is:
A) Head of Household
B) Married, filing separately.
C) Married, filing jointly.
D) Surviving Spouse
Married, filing separately.
Rationale: Because Jeremy is still treated as being married, his only option is married, filing separately (choice c). He cannot file jointly without Amy’s consent (choice a). He is not an abandoned spouse since Evan is not a dependent child. Evan cannot be claimed as a qualifying child (age test) and is not a qualifying relative (gross income test).
Kirby, a single taxpayer, has taxable income of $40,000 and is in the 12% tax bracket. During 2023, she had the following capital asset transactions:
Long-term gain from the sale of coin collection for $11,000
Long-term gain from the sale of a land investment for $10,000
Short-term gain from the sale of a stock investment for $2,000.
Kirby’s tax consequences from these gains are as follows:
A) (0% x $10,000) + (12% x $13,000)
B) (5% x $10,000) + (12% x $13,000)
C) (12% x $23,000)
D) (12% x $13,000) x (28% x $11,000)
(0% x $10,000) + (12% x $13,000).
Rationale: Collectibles and short-term capital gains are taxed at Kirby’s regular 12% tax bracket; long-term capital gains are subject to a tax rate of 0%.
