Chapter 4

Question 1

Which of the following is an example of something excluded from taxable income?
A. Salary
B. Unemployment compensation
C. Municipal bond interest income

Answer 1

C. Municiple bond interest income

Question 2

Which of the following series is generally most accurate?

A. Gross income > adjusted gross income > taxable income
B Gross income > taxable income > adjusted gross income
C Adjusted gross income > taxable income > gross income
D Adjusted gross income > gross income > taxable income

Answer 2

A. Gross income > adjusted gross income > taxable income

Question 3

Which of the following regarding tax deductions is false?
A. Deductions can be labeled as deductions above the line or deductions below the line.

B. From AGI deductions tend to be associated with business activities while for AGI deductions tend to be associated with personal activities.

C. Taxpayers are not entitled any deductions unless specific provisions in the tax code allow the deductions.

Answer 3

B. From AGI deductions tend to be associated with business activities while for AGI deductions tend to be associated with personal activities.

Question 4

The income tax base for an individual tax return is:

A. Adjusted gross income minus from AGI deductions
B. Gross income
C. Realized income from whatever source derived
D. Adjusted gross income

Answer 4

A. Adjusted gross income minus from AGI deductions

Question 5

A couple filed a joint return in prior tax years. During the current tax year, one spouse died. The couple has no dependent children. What is the filing status available to the surviving spouse for the first subsequent tax year?

A. Qualifying surviving spouse.
B. Single
C. Head of household
D. Married filing separately

Answer 5

B. Single

Question 6

Janet and Ted have two children, Mary (age 10) and Seth (age 12). Janet’s Aunt Martha resides with the family in an apartment over the garage. Martha’s only income is $1,500 a month in Social Security benefits. Janet and Ted receive no rent payments from Martha and provide all remaining support for her living arrangements. How many of these individuals qualify as dependents of Janet and Ted?
A. 4
B. 1
C. 3
D. 2

Answer 6

D. 2

Question 7

A taxpayer’s spouse dies in August of the current year. Which of the following is the taxpayer’s filing status for the current year?

A. Head of household
B. Qualifying surviving spouse.
C. Single
D. Married filing jointly

Answer 7

D. Married filing jointly

Question 8

Marital Status is determined as of?

a. Jan 1st
b. april 15th
c. december 31st

Answer 8

c. december 31st

Question 9

You could file with head of household status if your cousin lived with you for more than half the year.

True or False

Answer 9

False

Question 10

The only from AGI deductions are the standard deduction and itemized deductions.

True or False

Question 11

Taxpayers need not include an income item in gross income unless there is a specific tax provision requiring the taxpayer to include the income item in gross income.

Question 12

The standard deduction amount for married filing separately taxpayers (MFS) is less than the standard deduction amount for married filing jointly taxpayers.

Question 13

Taxpayers are generally allowed to claim deductions for expenditures unless a specific tax provision indicates the expenditure is not deductible.

Question 14

From AGI deductions are generally more valuable to taxpayers than for AGI deductions.

Question 15

The standard deduction amount varies by filing status.

Question 16

Taxpayers are allowed to deduct a specific amount for each of their dependents.

Question 17

Tax credits reduce taxable income dollar for dollar.

Question 18

The relationship test for qualifying relative requires the potential qualifying relative to have a family relationship with the taxpayer.

Question 19

Which of the following statements regarding dependents is false?

Multiple Choice

A taxpayer may be allowed to claim another as a dependent even if the taxpayer has no family relationship with the other person.

To qualify as a dependent of another, an individual must be a resident of the United States.

An individual who qualifies as a dependent of another taxpayer may not claim any dependents.

An individual cannot qualify as a dependent of another as a qualifying relative taxpayer if the individual’s gross income exceeds a certain amount.

Question 20

Which of the following statements regarding dependents is true?

Multiple Choice

To qualify as a dependent of another, an individual must be a resident of the United States.

To qualify as a dependent of another, an individual may not file a joint return with the individual’s spouse under any circumstance.

To qualify as a dependent of another, an individual must have a family relationship with the other person.

To qualify as a dependent of another, an individual must be either a qualifying child or a qualifying relative of the other person.

Question 21

All of the following are tests for determining qualifying child status except the _________blank.

Multiple Choice

gross income test

age test

support test

residence test

Question 22

Which of the following relationships does NOT pass the relationship test for a qualifying child?

Multiple Choice

Stepsister’s daughter

Half-brother

Cousin

Stepsister

Question 23

In June of Year 1, Edgar’s spouse died, and Edgar did not remarry during the year. What is Edgar’s filing status for Year 1 (assuming they did not have any dependents)?

Multiple Choice

Married filing jointly

Single

Qualifying surviving spouse

Head of household

Question 24

In June of Year 1, Eric’s wife, Savannah, died. Eric did not remarry during Year 1, Year 2, or Year 3. Eric maintains the household for his dependent daughter, Catherine, in Year 1, Year 2, and Year 3. Which is the most advantageous filing status for Eric in Year 2?

Multiple Choice

Head of household

Qualifying surviving spouse

Single

Married filing separately

Question 25

In Year 1, Weston’s spouse died. Since his spouse’s death, Weston has maintained a household for their son, Frank (age 3), his qualifying child. Which is the most advantageous filing status available to Weston in Year 4?

Multiple Choice

Married filing jointly

Single

Qualifying surviving spouse

Head of household

Question 26

Mason and his wife, Madison, have been married for five years. Jaxon, who is 18 years old and unrelated to Mason and Madison, has been living with Mason and Madison for the last two years. In May of Year 1, Mason and Madison divorced. Mason and Jaxon stayed in the home and Madison moved out. During Year 2, Mason provided all of Jaxon’s support, and Jaxon lived in the home for all of Year 2. Jaxon did not earn any income during Year 2. What is Mason’s most favorable filing status for Year 2?

Multiple Choice

Single

Married filing separately

Surviving spouse