Module 8 Quiz Flashcards
Which of the following taxes is NOT allowed as an itemized deduction?
FICA taxes
Which of the following circumstances would require most taxpayers to file a federal income tax return?
The taxpayer’s gross income exceeds the standard deduction
Which of the following is NOT a filing status for federal income tax purposes?
Qualified disabled
What is the significance of a taxpayer supporting a minor child as a dependent for federal income tax purposes?
The taxpayer may claim a tax credit for each dependent child under the age of 17
Gross income includes all of the following types of income except _____.
Child support received
Which of these would be included in calculating a client’s gross income?
Lottery prize money
Which of these is an above-the-line deduction?
Deductible IRA contributions
Which of the following is NOT allowed as an itemized deduction?
Rent paid for an apartment
Bergen and Chris, a married couple filing jointly, are planning to buy a home in 2022. What is the maximum mortgage amount they can have and fully deduct the mortgage interest?
$750,000
Which of these shows the progression through the individual income tax return (Form 1040) in the CORRECT order?
Gross income, adjusted gross income, standard or itemized deduction, taxable income, tax credits
Which of the following is a type of additional tax that applies only to higher income taxpayers?
Medicare contribution tax
What is the maximum amount of Social Security benefits that may be subject to taxation?
85%
Which of the following statements correctly describes an asset’s adjusted basis?
Adjusted basis is the original cost basis of an asset, plus or minus certain adjustments
Which of these statements regarding the basis of a gift received by a taxpayer is CORRECT?
A taxpayer’s basis in property received as a gift is generally the same basis as that of the person who gave the taxpayer the gift
Under which of the following scenarios would a 55-year-old individual NOT be subject to the 10% penalty tax regarding an annuity?
If the individual begins receiving annuity payments for life
Which of the following is a common nonrecognition transaction?
Gain from the sale of a principal residence
Which of the following is NOT one of the three main types of income?
Deducted
A tax planning strategy that shifts taxes to other individuals would include all of the following except _____.
Nontaxable property exchanges
Which of the following statements regarding the filing process is true?
The first step in the filing process is determining a taxpayer’s proper filing status
Which of the following statements is CORRECT?
A standard deduction may be taken from adjust gross income (AGI)
All of these are potential long-term capital gain tax rates except _____.
35%
In January 2019, Phan purchased Alpha stock for $3,000, which included a broker’s commission. In October 2021, he sold the position and netted $7,400 after deducting the broker’s commission. In January 2021, Phan bought a position in Gamma stock for $4,900. In September 2021, he sold the position and netted $4,500. Which of these describes Phan’s net capital gain or loss?
A net long-term capital gain of $4,000
On which of the following schedules are itemized deductions reported?
Schedule A
Which of these statements about the Lifetime Learning and American Opportunity education tax credits is CORRECT?
Both the Lifetime Learning and American Opportunity tax credits are phased out at higher income levels
Which of the following correctly describes the tax consequences of tax credits?
Tax credits reduce a taxpayer’s actual tax liability on a dollar-for-dollar basis
Assuming the client has only $2,500 of discretionary income available to divert to employee benefits, which of these employer-offered benefits would result in the greatest amount of tax savings from current income?
Ability to make contributions to a flexible spending account (FSA)
Which of these taxpayer scenarios is possible?
Marginal tax rate of 32% and effective tax rate of 23%
Which of these correctly describes the holding period for a capital gain or loss to be classified as long term?
The property must be held for more than 12 months
Which of the following statements regarding the taxation of annuities is CORRECT?
If annuitized, both fixed-rate and variable annuities will be partially taxable
Which of the following is a characteristic of Section 529 plans?
Account beneficiary can be charged
