Topic 2- Individual Income Tax Formula Chapter 4 Flashcards
For purposes of determining filing status, a taxpayer’s marital status is determined on the last day of the tax year in question.
T/F
True
Tax credits are generally more valuable than tax deductions because tax credits reduce a taxpayer’s gross tax liability dollar for dollar while tax deductions do not.
T/F
True
Joanna received $60,000 compensation from her employer, the value of her stock in ABC company appreciated by $5,000 during the year (but she did not sell any of the stock), she received $30,000 of life insurance proceeds from the death of her husband. What is the amount of Joanna’s gross income from these items?
Multiple Choice $60,000. $65,000. $95,000. $90,000.
$60,000 compensation is included in gross income, the increase in the value of her stock is not realized income so it is not included in gross income, and the life insurance proceeds are excluded from gross income.
Madison’s gross tax liability is $9,000. Madison had $3,000 of tax credits available and she had $8,000 of taxes withheld by her employer. What is Madison’s taxes due (or taxes refunded) with her tax return?
Multiple Choice $0 taxes due and $0 tax refund. $6,000 taxes due. $2,000 tax refund. $1,000 taxes due.
Gross tax liability minus credits minus payments equals tax refund ($9,000 − 3,000 − 8,000 = $2,000 tax refund).
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.
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 must be a resident of the United States, Canada, or Mexico. Also, there is no gross income test for a qualifying child but there is for a qualifying relative.
Sheri and Jake Woodhouse have one daughter, Emma, who is 16 years old. They also have taken in Emma’s friend, Harriet, who has lived with them since February of the current year and is also 16 years of age. The Woodhouses have not legally adopted Harriet but Emma often refers to Harriet as “her sister.” The Woodhouses provide all of the support for both girls, and both girls live at the Woodhouse residence. Which of the following statements is true regarding whom Sheri and Jake may claim as dependents for the current year?
Multiple Choice
They may claim Emma as a dependent qualifying child but may not claim Harriet as a dependent qualifying relative.
They may claim Emma as a dependent qualifying child and they may claim Harriet as a dependent qualifying child.
They may claim Emma as a dependent qualifying child and they may claim Harriet as a dependent qualifying relative.
None of these statements is true.
They may claim Emma as a dependent qualifying child but may not claim Harriet as a dependent qualifying relative.
Emma passes all tests of a qualifying child. Harriet, however, must be tested as a qualifying relative because she does not meet the relationship test of a qualifying child. In order to be considered a qualifying relative, she would have had to live at the Woodhouse residence for the entire year, and not just 11 of 12 months.
でも教科書ではqualifying relativeのresidence testはN/Aって書いてあったから謎。教授にこのことに関してメール送った。
Lydia and John Wickham filed jointly in year 1. They divorced in year 2. Late in year 2, the IRS discovered that the Wickham’s underpaid their year 1 taxes by $2,000. Both Lydia and John worked in year 1 and received equal income but John had $2,000 less tax withheld than did Lydia. Who is legally liable for the tax underpayment?
Multiple Choice Lydia. John. Both Lydia and John. Neither Lydia nor John.
Both Lydia and John.
Because the couple filed a joint return both parties are responsible for paying the tax.
