The Individual Tax Formula Exam Prep Chapter 14

Principles of Taxation for Business and Investment Planning, 23e (Jones)

Chapter 14 The Individual Tax Formula

1) Harry and Sally were married on December 23, 2019. Should they choose to file jointly, their income for the entire year is reported on a joint return.

Difficulty: 2 Medium

Topic: Filing Status for Individuals

Learning Objective: 14-01 Determine an individual's filing status.

Accessibility: Keyboard Navigation

Type: Static

2) A taxpayer who knowingly signs a joint return on which his spouse has failed to report her income is liable for any tax assessments made by the IRS on that income.

Difficulty: 1 Easy

Topic: Filing Status for Individuals

Learning Objective: 14-01 Determine an individual's filing status.

Accessibility: Keyboard Navigation

Type: Static

3) Mrs. Paley died on July 14, 2018. Her husband has not remarried. The Paleys' two children, ages 34 and 36, are financially independent. Mr. Paley may file as a surviving spouse in 2018 and 2019.

Difficulty: 2 Medium

Topic: Filing Status for Individuals

Learning Objective: 14-01 Determine an individual's filing status.

Accessibility: Keyboard Navigation

Type: Static

4) Charlie is single and provides 100% of the financial support for his dependent mother, Angela, who lives with Charlie. Charlie's filing status is head of household.

Difficulty: 3 Hard

Topic: Filing Status for Individuals

Learning Objective: 14-01 Determine an individual's filing status.

Accessibility: Keyboard Navigation

Type: Static

5) For the taxable year in which a married person dies, the widow or widower can file a joint return with the deceased.

Difficulty: 1 Easy

Topic: Filing Status for Individuals

Learning Objective: 14-01 Determine an individual's filing status.

Accessibility: Keyboard Navigation

Type: Static

6) Mr. Lenz died on May 4, 2018. His widow, Mrs. Lenz, maintains a home for her three children, ages 4, 6, and 11. Mrs. Lenz must file as a head of household in 2019.

Explanation: Mrs. Lenz may file as a surviving spouse and use the married filing jointly tax rates in 2019 and 2020.

Difficulty: 2 Medium

Topic: Filing Status for Individuals

Learning Objective: 14-01 Determine an individual's filing status.

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7) In order to be considered a dependent, an individual must be either a qualifying child or a qualifying relative.

Difficulty: 1 Easy

Topic: Filing Status for Individuals

Learning Objective: 14-01 Determine an individual's filing status.

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8) Only natural children, adopted children, and stepchildren can be a qualified dependent for tax purposes.

Difficulty: 2 Medium

Topic: Filing Status for Individuals

Learning Objective: 14-01 Determine an individual's filing status.

Accessibility: Keyboard Navigation

Type: Static

9) Mr. and Mrs. Queen provide 90% of the financial support for Mrs. Queen's mother, Doreen, who lives in the couple's home. Doreen's only income this year is a $7,500 taxable pension from her former employer. Doreen is not considered a dependent of Mr. and Mrs. Queen this year for tax purposes.

Difficulty: 2 Medium

Topic: Filing Status for Individuals

Learning Objective: 14-01 Determine an individual's filing status.

Accessibility: Keyboard Navigation

Type: Static

10) Jay Blount, 26-years old and a full-time student, lives in his parents' home. Although Jay earned $8,400 from a part-time job, his parents provide at least 75% of his financial support. For tax purposes, this year Jay is considered a dependent of his parents.

Difficulty: 2 Medium

Topic: Filing Status for Individuals

Learning Objective: 14-01 Determine an individual's filing status.

Accessibility: Keyboard Navigation

Type: Static

11) An individual's taxable income equals adjusted gross income less the greater of the standard deduction or itemized deductions less the QBI deduction.

Difficulty: 1 Easy

Topic: Overview of the Taxable Income Computation

Learning Objective: 14-02 List the four steps for computing individual taxable income.

Accessibility: Keyboard Navigation

Type: Static

12) An individual's taxable income equals adjusted gross income less the QBI deduction.

Difficulty: 1 Easy

Topic: Overview of the Taxable Income Computation

Learning Objective: 14-02 List the four steps for computing individual taxable income.

Accessibility: Keyboard Navigation

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13) Adjusted gross income equals total income less itemized deductions.

Difficulty: 1 Easy

Topic: Overview of the Taxable Income Computation

Learning Objective: 14-02 List the four steps for computing individual taxable income.

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14) In computing taxable income, an individual will deduct the lesser of itemized deductions or the standard deduction.

Difficulty: 1 Easy

Topic: Standard Deduction or Itemized Deductions

Learning Objective: 14-03 Explain the relationship between the standard deduction and itemized deductions.

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15) In computing taxable income, an individual is allowed to deduct both the standard deduction and any itemized deduction for the year.

Difficulty: 1 Easy

Topic: Standard Deduction or Itemized Deductions

Learning Objective: 14-03 Explain the relationship between the standard deduction and itemized deductions.

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Type: Static

16) Mr. Thomas is age 69, has perfect vision, and files as a single taxpayer. His standard deduction for 2019 is $13,850.

Explanation: $12,200 + $1,650 = $13,850

Difficulty: 1 Easy

Topic: Standard Deduction or Itemized Deductions

Learning Objective: 14-03 Explain the relationship between the standard deduction and itemized deductions.

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17) Mr. Andrews is age 58, legally blind, and files as a single taxpayer. His standard deduction for 2019 is $12,200.

Explanation: $12,200 + $1,650 (because he is blind) = $13,850

Difficulty: 2 Medium

Topic: Standard Deduction or Itemized Deductions

Learning Objective: 14-03 Explain the relationship between the standard deduction and itemized deductions.

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18) Bill and Afton are married and file a joint tax return. Bill is 67 and Afton is 66, and neither is legally blind. Their standard deduction for 2019 is $27,000.

Explanation: $24,400 + $1,300 + $1,300 = $27,000

Difficulty: 2 Medium

Topic: Standard Deduction or Itemized Deductions

Learning Objective: 14-03 Explain the relationship between the standard deduction and itemized deductions.

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19) The majority of individual taxpayers take the standard deduction rather than itemizing their deductions.

Difficulty: 1 Easy

Topic: Standard Deduction or Itemized Deductions

Learning Objective: 14-03 Explain the relationship between the standard deduction and itemized deductions.

Accessibility: Keyboard Navigation

Type: Static

20) The standard deduction for single individuals equals one-half of the standard deduction for married individuals filing jointly.

Difficulty: 2 Medium

Topic: Standard Deduction or Itemized Deductions

Learning Objective: 14-03 Explain the relationship between the standard deduction and itemized deductions.

Accessibility: Keyboard Navigation

Type: Static

21) An above-the-line deduction reduces both adjusted gross income and taxable income.

Difficulty: 1 Easy

Topic: Standard Deduction or Itemized Deductions

Learning Objective: 14-02 List the four steps for computing individual taxable income.; 14-03 Explain the relationship between the standard deduction and itemized deductions.

Accessibility: Keyboard Navigation

Type: Static

22) An itemized deduction doesn't result in any tax savings in a year in which an individual taxpayer takes the standard deduction.

Difficulty: 1 Easy

Topic: Standard Deduction or Itemized Deductions

Learning Objective: 14-03 Explain the relationship between the standard deduction and itemized deductions.

Accessibility: Keyboard Navigation

Type: Static

23) An individual who files his own tax return but is claimed as a dependent on another individual's return is not allowed any standard deduction.

Difficulty: 1 Easy

Topic: Standard Deduction or Itemized Deductions; Exemption Amount

Learning Objective: 14-01 Determine an individual's filing status.; 14-03 Explain the relationship between the standard deduction and itemized deductions.

Accessibility: Keyboard Navigation

Type: Static

24) The goal of the QBI deduction is to lower the effective tax rate on business profit earned by pass through entities.  

Difficulty: 1 Easy

Topic: QBI Deduction

Learning Objective: 14-04 Identify the impact of the QBI deduction on taxable income.

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25) Mr. Jackson has $100,000 of qualified business income, he is entitled to a QBI deduction of $25,000.

Explanation: The QBI deduction is 20% of qualified business income of $20,000 and subject to certain limitations.

Difficulty: 1 Easy

Topic: QBI Deduction

Learning Objective: 14-04 Identify the impact of the QBI deduction on taxable income.

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26) The QBI deduction always has the impact of lowering AGI.

Explanation: The QBI deduction is below-the-line. Therefore, it does not impact AGI.

Difficulty: 2 Medium

Topic: QBI Deduction

Learning Objective: 14-02 List the four steps for computing individual taxable income.; 14-04 Identify the impact of the QBI deduction on taxable income.

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27) The QBI deduction always has the impact of lowering taxable income. 

Difficulty: 2 Medium

Topic: QBI Deduction

Learning Objective: 14-02 List the four steps for computing individual taxable income.; 14-04 Identify the impact of the QBI deduction on taxable income.

Accessibility: Keyboard Navigation

Type: Static

28) Because a QBI deduction affects AGI, it may impact the ability to claim a deduction for unreimbursed medical expenses.

Explanation: The QBI deduction does not impact AGI. Therefore, it does not impact the availability of the deduction for medical expenses.

Difficulty: 2 Medium

Topic: QBI Deduction

Learning Objective: 14-02 List the four steps for computing individual taxable income.; 14-04 Identify the impact of the QBI deduction on taxable income.

Accessibility: Keyboard Navigation

Type: Static

29) The tax rates for individuals who qualify as a head-of-household are lower than the tax rates for single individuals.

Difficulty: 1 Easy

Topic: Computing Individual Tax

Learning Objective: 14-05 Compute the regular tax on ordinary income.

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30) Based on the 2017 tax rates, an individual is indifferent between filing as a single taxpayer or a head of household if he has $8,700 or less of taxable income.

Difficulty: 3 Hard

Topic: Computing Individual Tax

Learning Objective: 14-05 Compute the regular tax on ordinary income.

Accessibility: Keyboard Navigation

Type: Static

31) Married individuals who elect to file separate tax returns may use the single rates to compute their tax.

Difficulty: 1 Easy

Topic: Computing Individual Tax

Learning Objective: 14-05 Compute the regular tax on ordinary income.

Accessibility: Keyboard Navigation

Type: Static

32) An individual with $700,000 taxable income has the same marginal rate as a single taxpayer or as a head of household.

Difficulty: 2 Medium

Topic: Computing Individual Tax

Learning Objective: 14-05 Compute the regular tax on ordinary income.

Accessibility: Keyboard Navigation

Type: Static

33) It is impossible for a progressive income tax system to be both marriage neutral and horizontally equitable.

Difficulty: 3 Hard

Topic: The Marriage Penalty Dilemma

Learning Objective: 14-06 Explain why a marriage penalty exists in the federal income tax system.

Accessibility: Keyboard Navigation

Type: Static

34) Mr. and Mrs. Kline file a joint return on which they claim the standard deduction. If the taxable income on their return is $35,000, they are not paying a marriage penalty.

Difficulty: 2 Medium

Topic: The Marriage Penalty Dilemma

Learning Objective: 14-06 Explain why a marriage penalty exists in the federal income tax system.

Accessibility: Keyboard Navigation

Type: Static

35) Mr. and Mrs. Toliver's AGI on their jointly filed return is $339,000. Regardless of the number of their children, the Tolivers are not eligible for a child credit.

Difficulty: 1 Easy

Topic: Individual Tax Credits

Learning Objective: 14-07 Describe four important individual tax credits.

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36) Mr. and Mrs. Casey have two dependent children, ages 3 and 6. The Caseys spent $10,300 for child care this year. Mrs. Casey is employed full-time as an attorney. Mr. Casey is an unpublished novelist who has yet to earn any money from his writing. The Caseys are eligible for a dependent care credit.

Explanation: The child care cost on which the credit is based is limited to the lesser of either spouse's earned income.

Difficulty: 1 Easy

Topic: Individual Tax Credits

Learning Objective: 14-07 Describe four important individual tax credits.

Accessibility: Keyboard Navigation

Type: Static

37) A taxpayer with a non-child dependent may be eligible for the full $2,000 child tax credit provided the taxpayer's AGI does not exceed the phase-out thresholds.

Explanation: The child tax credit for non-child dependents is limited to $500.

Difficulty: 2 Medium

Topic: Individual Tax Credits

Learning Objective: 14-07 Describe four important individual tax credits.

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38) The earned income credit is available only to low-income taxpayers with dependent children.

Difficulty: 1 Easy

Topic: Individual Tax Credits

Learning Objective: 14-07 Describe four important individual tax credits.

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Type: Static

39) The earned income credit offsets the burden of the federal payroll tax on low-income families and encourages individuals to seek employment rather than to depend on welfare.

Difficulty: 1 Easy

Topic: Individual Tax Credits

Learning Objective: 14-07 Describe four important individual tax credits.

Accessibility: Keyboard Navigation

Type: Static

40) Mrs. Starling worked for Abbot Inc. from January 1 through September 19. Her salary from Abbot for this period totaled $150,000. Mrs. Starling worked for JJT Inc. from October 1 through December 31. Her salary from JJT for this period totaled $38,000. JJT is not required to withhold Social Security tax from Mrs. Starling's salary because Abbot Inc. already withheld the maximum tax for the year.

Difficulty: 2 Medium

Topic: Individual Tax Credits

Learning Objective: 14-07 Describe four important individual tax credits.

Accessibility: Keyboard Navigation

Type: Static

41) An individual must pay the greater of her regular income tax or her alternative minimum tax (AMT) for the year.

Difficulty: 1 Easy

Topic: Alternative Minimum Tax

Learning Objective: 14-08 Compute the individual alternative minimum tax (AMT).

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42) The standard deduction is not deductible in the computation of alternative minimum taxable income.

Difficulty: 2 Medium

Topic: Alternative Minimum Tax

Learning Objective: 14-08 Compute the individual alternative minimum tax (AMT).

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43) Every individual taxpayer is entitled to an AMT exemption, the amount of which varies with filing status.

Explanation: The AMT exemption is reduced to zero for high-income taxpayers.

Difficulty: 2 Medium

Topic: Alternative Minimum Tax

Learning Objective: 14-08 Compute the individual alternative minimum tax (AMT).

Accessibility: Keyboard Navigation

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44) The highest individual marginal rate for regular tax purposes is 37%, while the highest individual marginal rate for alternative minimum tax (AMT) purposes is only 28%.

Difficulty: 2 Medium

Topic: Alternative Minimum Tax

Learning Objective: 14-08 Compute the individual alternative minimum tax (AMT).

Accessibility: Keyboard Navigation

Type: Static

45) Miss Blixen's regular income tax is $77,390, and her tentative minimum tax is $74,100. Consequently, Miss Blixen's alternative minimum tax (AMT) is zero.

Difficulty: 2 Medium

Topic: Alternative Minimum Tax

Learning Objective: 14-08 Compute the individual alternative minimum tax (AMT).

Accessibility: Keyboard Navigation

Type: Static

46) The unextended due date for the individual tax return (Form 1040) is the 15th day of the third month following the close of the taxable year.

Explanation: The due date is the 15th day of the fourth month following the close of the taxable year.

Difficulty: 2 Medium

Topic: Payment and Filing Requirements

Learning Objective: 14-09 Describe the individual tax payment and return filing requirements.

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47) Mr. Pearl's total income and self-employment tax on this year's Form 1040 is $72,610. If Mr. Pearl paid at least $65,349 of this tax in the form of withholding or quarterly estimated payments, he will not incur an underpayment penalty.

Explanation: $65,349 equals 90% of $72,610.

Difficulty: 3 Hard

Topic: Payment and Filing Requirements

Learning Objective: 14-09 Describe the individual tax payment and return filing requirements.

Accessibility: Keyboard Navigation

Type: Static

48) Individual taxpayers can obtain an automatic extension of time to file a calendar year Form 1040 until October 15 of the following year.

Difficulty: 2 Medium

Topic: Payment and Filing Requirements

Learning Objective: 14-09 Describe the individual tax payment and return filing requirements.

Accessibility: Keyboard Navigation

Type: Static

49) An extension of the time to file an individual tax return also extends the time to pay any balance of tax due with the return.

Difficulty: 1 Easy

Topic: Payment and Filing Requirements

Learning Objective: 14-09 Describe the individual tax payment and return filing requirements.

Accessibility: Keyboard Navigation

Type: Static

50) Mr. and Mrs. Eller's AGI last year was $287,300, and their total tax was $70,268. The couple's safe-harbor estimate of current year tax is $77,295.

Explanation: The safe-harbor estimate equals 110% of last year's tax.

Difficulty: 3 Hard

Topic: Payment and Filing Requirements

Learning Objective: 14-09 Describe the individual tax payment and return filing requirements.

Accessibility: Keyboard Navigation

Type: Static

51) Mr. and Mrs. Warren's AGI last year was $90,300, and their total tax was $13,988. This year, the couple's total tax is $14,700. Unless the Warrens paid at least $13,988 in the form of withholding and quarterly estimated payments, they will incur an underpayment penalty this year.

Explanation: The Warrens will not incur a penalty if they paid at least $13,230 (90% of current year tax).

Difficulty: 3 Hard

Topic: Payment and Filing Requirements

Learning Objective: 14-09 Describe the individual tax payment and return filing requirements.

Accessibility: Keyboard Navigation

Type: Static

52) Samantha died on January 18, 2018. Her husband Dave lived by himself until he remarried in 2019. What was Dave's filing status in 2018 and 2019?

A) Married filing jointly in 2018; surviving spouse in 2019.

B) Married filing jointly in 2018; single in 2019.

C) Surviving spouse in 2018 and 2019.

D) Surviving spouse in 2018; single in 2019.

Explanation: Dave can file jointly with his wife in the year of her death. Because he lives alone (not maintaining a home for a dependent child) he can't file as a surviving spouse but must file as a single taxpayer.

Difficulty: 2 Medium

Topic: Filing Status for Individuals

Learning Objective: 14-01 Determine an individual's filing status.

Accessibility: Keyboard Navigation

Type: Static

53) Leon died on August 23, 2016, and his wife Mary has not remarried. Since her husband's death, Mary has maintained a home for her two dependent children, who were ages 7 and 4 when their father died. Which of the following describes Mary's filing status for 2017, 2018, and 2019?

A) Surviving spouse for 2017, 2018, and 2019.

B) Surviving spouse for 2017 and 2018; head of household for 2019.

C) Head of household for 2017, 2018, and 2019.

D) Surviving spouse for 2017; head of household for 2018 and 2019.

Explanation: Mary qualifies as a surviving spouse for two years following the year of her husband's death.

Difficulty: 2 Medium

Topic: Filing Status for Individuals

Learning Objective: 14-01 Determine an individual's filing status.

Accessibility: Keyboard Navigation

Type: Static

54) Mr. Jones and his first wife were legally divorced on February 19, 2019. Mr. Jones remarried the second Mrs. Jones on December 20, 2019. Which of the following describes Mr. Jones' filing status in 2019?

A) Married filing jointly with the second Mrs. Jones

B) Married filing jointly with the first Mrs. Jones

C) Married filing separately (can't file jointly with either spouse)

D) None of the above

Difficulty: 2 Medium

Topic: Filing Status for Individuals

Learning Objective: 14-01 Determine an individual's filing status.

Accessibility: Keyboard Navigation

Type: Static

55) Which of the following statements regarding filing status is false?

A) A widow or widower maintaining a home for a dependent child qualifies as surviving spouse for two tax years following the year of the spouse's death.

B) Marital status for tax purposes is determined on the last day of the year.

C) Any unmarried individual with a dependent child qualifies as head of household.

D) An unmarried individual without children or other dependents files as a single taxpayer.

Explanation: A head of household must maintain a home that is the principal place of abode for a child or dependent family member.

Difficulty: 3 Hard

Topic: Filing Status for Individuals

Learning Objective: 14-01 Determine an individual's filing status.

Accessibility: Keyboard Navigation

Type: Static

56) Mrs. Raines died on June 2, 2018. Mr. Raines has not remarried and has no children or other dependents. What is his filing status for 2018 and 2019?

A) Surviving spouse for 2018 and 2019.

B) Surviving spouse for 2018; single for 2019.

C) Married filing jointly for 2018; surviving spouse for 2019.

D) Married filing jointly for 2018; single for 2019.

Explanation: Mr. Raines is not a surviving spouse in 2019 because he does not maintain a home for a dependent child.

Difficulty: 2 Medium

Topic: Filing Status for Individuals

Learning Objective: 14-01 Determine an individual's filing status.

Accessibility: Keyboard Navigation

Type: Static

57) Which of the following taxpayers can't use the tax rates for married filing jointly in 2019?

A) Mr. Lane died on August 10, 2019. Mrs. Lane has not remarried and has no dependent children.

B) Mrs. Holden died on January 15, 2018. Mr. Holden has not remarried and maintains a home for two dependent children.

C) Mr. and Mrs. West were legally divorced on December 21, 2019. Mrs. West has not remarried and maintains a home for three dependent children.

D) All of the above taxpayers qualify for married filing jointly filing status.

Explanation: Mrs. West is a head of household for 2019.

Difficulty: 3 Hard

Topic: Filing Status for Individuals

Learning Objective: 14-01 Determine an individual's filing status.

Accessibility: Keyboard Navigation

Type: Static

58) Marie, an unmarried taxpayer, is 26 years old. This year, Marie earned $50,000 gross income. Her itemized deductions totaled $5,100. Marie maintained a home for her 12-year-old sister who qualifies as Marie's dependent. Compute Marie's taxable income.

A) $40,900

B) $31,650

C) $26,550

D) None of the above

Explanation: $50,000 AGI – $18,350 standard deduction (HH) = $31,650.

Difficulty: 1 Easy

Topic: Overview of the Taxable Income Computation

Learning Objective: 14-01 Determine an individual's filing status.; 14-02 List the four steps for computing individual taxable income.

Accessibility: Keyboard Navigation

Type: Static

59) Kent, an unmarried individual, invited his widowed father, Martin, to move into his home in January of this year. Martin's only income item was a $14,000 taxable pension from his former employer. Kent provides about 75% of his father's financial support. What is Kent's filing status for the year?

A) Single

B) Head of household

C) Married filing separately

D) None of the above

Explanation: Martin is not a qualifying relative because his gross income exceeds $4,150. Therefore, Kent doesn't qualify as a head of household. Therefore, he will file as single.

Difficulty: 3 Hard

Topic: Filing Status for Individuals

Learning Objective: 14-01 Determine an individual's filing status.

Accessibility: Keyboard Navigation

Type: Static

60) Ms. Dolan, a divorced individual, invited her elderly uncle, Martin, to move into her home in January of this year. Martin's only income item was $2,390 of taxable interest on a savings account. Ms. Dolan provides over 90% of her uncle's financial support. What is Ms. Dolan's filing status for the year?

A) Single

B) Head of household

C) Married filing separately

D) None of the above

Explanation: Martin meets all the requirements for a qualifying relative. Ms. Dolan qualifies as a head of household because she maintains a home that is Martin's principal place of abode.

Difficulty: 3 Hard

Topic: Filing Status for Individuals

Learning Objective: 14-01 Determine an individual's filing status.

Accessibility: Keyboard Navigation

Type: Static

61) Mr. and Mrs. Anderson file a joint return. They provide more than 50% of the financial support of their two children, Dana, age 26, and John, age 17. Both children live in the Andersons' home. Dana earned $7,100 from a part-time job, while John earned no income this year. Which of the following statements is true?

A) Both Dana and John are qualifying children of the Andersons.

B) Dana is a qualifying relative and John is a qualifying child of the Andersons.

C) John is a qualifying child of the Andersons.

D) Neither Dana nor John is a qualifying child of the Andersons.

Explanation: Dana is too old to be a qualifying child, and she earns too much income to be a qualifying relative.

Difficulty: 3 Hard

Topic: Filing Status for Individuals

Learning Objective: 14-01 Determine an individual's filing status.

Accessibility: Keyboard Navigation

Type: Static

62) Ms. Lewis maintains a household which is the principal place of residence for Kathy. Ms. Lewis provides more than 50% of Kathy's financial support. In which of the following cases can Ms. Lewis claim Kathy as a qualifying child? 

A) Kathy is age 8 and the child of Ms. Lewis' best friend, who died three years ago.

B) Kathy is Ms. Lewis' 15-year-old niece.

C) Kathy is Ms. Lewis' 30-year-old unmarried sister.

D) Both B. and C.

Explanation: In case B., Kathy is a qualifying relative. In case C. Kathy is too old to be a qualifying child.

Difficulty: 3 Hard

Topic: Filing Status for Individuals

Learning Objective: 14-01 Determine an individual's filing status.

Accessibility: Keyboard Navigation

Type: Static

63) Mr. and Mrs. Jelk file a joint return. They provide 65% of the financial support for David, the 14-year old son of a friend who died three years ago. David lives in the home of his aunt Sarah, who provides 35% of his financial support. Which of the following statements is true? 

A) David is a qualifying child of the Jelks.

B) If David earns less than $4,150 gross income this year, he is a qualifying child of the Jelks.

C) If David earns less than $4,150 gross income this year, he is a qualifying relative of the Jelks.

D) David is neither a qualifying child nor a qualifying relative of the Jelks.

Explanation: David is not a qualifying relative because he is not a member of the Jelks' household for the year.

Difficulty: 3 Hard

Topic: Filing Status for Individuals

Learning Objective: 14-01 Determine an individual's filing status.

Accessibility: Keyboard Navigation

Type: Static

64) Which of the following statements is false?  

A) The determination that an individual is a qualifying child of the taxpayer has the potential to impact the availability of certain credits for the taxpayer.

B) A qualifying child must be the natural child, the adopted child, or the stepchild of the taxpayer.

C) A qualifying relative may include an unrelated individual who is a member of the taxpayer's household for the year.

D) There is no limit on the amount of gross income that a qualifying child may earn in a year.

Difficulty: 2 Medium

Topic: Filing Status for Individuals

Learning Objective: 14-01 Determine an individual's filing status.

Accessibility: Keyboard Navigation

Type: Static

65) Which of the following statements regarding a qualifying child is false?  

A) The child must have been alive at least 180 days during the tax year.

B) The child must be a U.S. citizen or resident of the United States, Canada, or Mexico.

C) The child must not have provided more than 50% of his or her own financial support during the year.

D) The child must not have filed a joint return with a spouse unless the return was filed only as a refund claim.

Difficulty: 2 Medium

Topic: Filing Status for Individuals

Learning Objective: 14-01 Determine an individual's filing status.

Accessibility: Keyboard Navigation

Type: Static

66) Mr. and Mrs. Liddy, ages 39 and 41, file a joint return and have no dependents for the year. Here is their relevant information: Standard Deduction Table.

Compute their adjusted gross income (AGI) and taxable income.

A) AGI $50,200; taxable income $25,800.

B) AGI $52,000; taxable income $35,750.

C) AGI $52,000; taxable income $33,550.

D) AGI $50,200; taxable income $9,950.

Explanation: $52,000 total income − $1,800 = $50,200 AGI − $24,400 standard deduction = $25,800 taxable income.

Difficulty: 2 Medium

Topic: Overview of the Taxable Income Computation

Learning Objective: 14-02 List the four steps for computing individual taxable income.

Accessibility: Keyboard Navigation

Type: Static

67) Mr. and Mrs. Dell, ages 29 and 26, file a joint return and have no dependents for the year. Here is their relevant information: Standard Deduction Table.

Compute their adjusted gross income (AGI) and taxable income.

A) AGI $164,900; taxable income $134,700

B) AGI $158,700; taxable income $132,500

C) AGI $158,700; taxable income $108,500

D) AGI $164,900; taxable income $8,500

Explanation: $164,900 total income − $6,200 = $158,700 AGI − $26,200 itemized deductions = $132,500 taxable income.

Difficulty: 2 Medium

Topic: Overview of the Taxable Income Computation

Learning Objective: 14-02 List the four steps for computing individual taxable income.

Accessibility: Keyboard Navigation

Type: Static

68) Which of the following statements regarding the calculation of taxable income is false?

A) The first step in the calculation of taxable income is determining the taxpayer's total income.

B) Adjusted gross income is equal to total income less above-the-line deductions.

C) Adjusted gross income can be reduced by the greater of the standard deduction or itemized deductions.

D) Taxpayers are allowed to deduct the greater of itemized deductions or above-the-line deductions in calculating taxable income.

Difficulty: 2 Medium

Topic: Overview of the Taxable Income Computation

Learning Objective: 14-02 List the four steps for computing individual taxable income.

Accessibility: Keyboard Navigation

Type: Static

69) Julie, an unmarried individual, lives in a home with her 13-year-old dependent son, Oscar. This year, Julie had the following tax information: Standard Deduction Table.

Compute Julie's adjusted gross income (AGI) and taxable income.

A) AGI $118,000; taxable income $92,750

B) AGI $118,000; taxable income $90,900

C) AGI $118,000; taxable income $99,650

D) AGI $107,000; taxable income $88,700

Explanation: $118,800 total income − $800 = $118,000 AGI − $18,350 standard deduction (HH) = $99,650 taxable income.

Difficulty: 2 Medium

Topic: Overview of the Taxable Income Computation

Learning Objective: 14-02 List the four steps for computing individual taxable income.

Accessibility: Keyboard Navigation

Type: Static

70) Jennifer and Jamar are married and live in a home with their 13-year-old dependent son, Oscar. This year, they had the following tax information.

Compute adjusted gross income (AGI) and taxable income.

A) AGI $157,800; taxable income $124,188.

B) AGI $157,800; taxable income $130,900.

C) AGI $151,088; taxable income $89,888.

D) AGI $151,088; taxable income $107,888.

Explanation: $157,800 total income − $6,712 = $151,088 AGI − $24,200 itemized deductions − $19,000 20% QBI deduction = $107,888 taxable income.

Difficulty: 3 Hard

Topic: Overview of the Taxable Income Computation

Learning Objective: 14-02 List the four steps for computing individual taxable income.; 14-04 Identify the impact of the QBI deduction on taxable income.

Accessibility: Keyboard Navigation

Type: Static

71) Tamara and Todd Goble, ages 66 and 60, file a joint return. Todd is legally blind. Compute their standard deduction.

A) $21,400

B) $24,400

C) $25,700

D) $27,000

Explanation: $24,400 + $1,300 + $1,300.

Difficulty: 2 Medium

Topic: Standard Deduction or Itemized Deductions

Learning Objective: 14-03 Explain the relationship between the standard deduction and itemized deductions.

Accessibility: Keyboard Navigation

Type: Static

72) In determining the standard deduction, which of the following statements is true?

A) The standard deduction is a function of filing status.

B) An individual who is both blind and age 65 by the last day of the taxable year is entitled to one additional standard deduction amount.

C) An individual who is considered a dependent of another person for tax purposes is not allowed a standard deduction.

D) The standard deduction for a head of household is twice the standard deduction for a single individual.

Difficulty: 2 Medium

Topic: Standard Deduction or Itemized Deductions

Learning Objective: 14-03 Explain the relationship between the standard deduction and itemized deductions.

Accessibility: Keyboard Navigation

Type: Static

73) Mr. and Mrs. Kay, ages 68 and 66, file a joint return. Mrs. Kay is legally blind. Compute their standard deduction.

A) $24,400

B) $28,300

C) $25,700

D) $27,000

Explanation: $24,000 + $1,300 + $1,300 + $1,300.

Difficulty: 2 Medium

Topic: Standard Deduction or Itemized Deductions

Learning Objective: 14-03 Explain the relationship between the standard deduction and itemized deductions.

Accessibility: Keyboard Navigation

Type: Static

74) Melissa, age 16, is claimed as a dependent on her parents' tax return. This year, Melissa earned $2,000 from babysitting and $1,280 interest income from a savings account. Compute Melissa's standard deduction.

A) $2,000

B) $2,350

C) $0

D) $1,100

Explanation: Greater of ($2,000 earned income + $350) or $1,100.

Difficulty: 2 Medium

Topic: Standard Deduction or Itemized Deductions

Learning Objective: 14-03 Explain the relationship between the standard deduction and itemized deductions.

Accessibility: Keyboard Navigation

Type: Static

75) Meraleigh, age 16, is claimed as a dependent on her parents' tax return. This year, Meraleigh earned $510 from babysitting and $220 interest income from a savings account. Compute Meraleigh's standard deduction.

A) $730

B) $860

C) $510

D) $1,100

Explanation: Greater of ($510 earned income + $350) or $1,050.

Difficulty: 2 Medium

Topic: Standard Deduction or Itemized Deductions

Learning Objective: 14-03 Explain the relationship between the standard deduction and itemized deductions.

Accessibility: Keyboard Navigation

Type: Static

76) Hunter, age 17, is considered a dependent of his parents for tax purposes. This year, Hunter earned $16,000 for appearing in a television commercial. Compute Hunter's standard deduction.

A) $12,550

B) $16,000

C) $12,200

D) $0

Difficulty: 2 Medium

Topic: Standard Deduction or Itemized Deductions

Learning Objective: 14-03 Explain the relationship between the standard deduction and itemized deductions.

Accessibility: Keyboard Navigation

Type: Static

77) Mr. and Mrs. Upton's marginal tax rate on their joint return is 32%. This year, their itemized deductions totaled $25,200, and their standard deduction (MFJ) was $24,400. Compute their incremental tax savings from their itemized deductions.

A) $0

B) $256

C) $7,808

D) $8,064

Explanation: ($25,200 − $24,400) × 32%.

Difficulty: 2 Medium

Topic: Standard Deduction or Itemized Deductions

Learning Objective: 14-03 Explain the relationship between the standard deduction and itemized deductions.

Accessibility: Keyboard Navigation

Type: Static

78) Which of the following statements describing individual tax deductions is false?

A) Individuals can take both above-the-line and the standard deduction in the same year.

B) Individuals elect to itemize deductions in a tax year in which total itemized deductions exceed the standard deduction.

C) In a year in which an individual takes the standard deduction, any itemized deductions yield no tax benefit.

D) Individuals who pay self-employment tax can deduct the tax as an itemized deduction.

Explanation: Individuals can deduct one half of their self-employment tax as an above-the- line deduction.

Difficulty: 2 Medium

Topic: Standard Deduction or Itemized Deductions

Learning Objective: 14-03 Explain the relationship between the standard deduction and itemized deductions.

Accessibility: Keyboard Navigation

Type: Static

79) Which of the following statements describing individual tax deductions is false?

A) In a year in which an individual takes the standard deduction, any itemized deductions yield no tax benefit.

B) The majority of individual taxpayers itemize rather than taking the standard deduction.

C) Individuals elect to itemize deductions in a tax year in which total itemized deductions exceed the standard deduction.

D) Individuals who pay self-employment tax can deduct one half of the tax as an above-the-line deduction.

Difficulty: 2 Medium

Topic: Standard Deduction or Itemized Deductions

Learning Objective: 14-03 Explain the relationship between the standard deduction and itemized deductions.

Accessibility: Keyboard Navigation

Type: Static

80) Mr. and Mrs. Steel, who file a joint return, have $513,200 taxable income in 2019. Compute their regular tax liability.

A) $105,062

B) $130,007

C) $154,872

D) None of the above

Difficulty: 1 Easy

Topic: Computing Individual Tax

Learning Objective: 14-05 Compute the regular tax on ordinary income.

Accessibility: Keyboard Navigation

Type: Static

81) Benjamin, who files as a single taxpayer, has $359,900 taxable income in 2019. Compute his regular tax liability.

A) $101,159

B) $97,547

C) $125, 965

D) None of the above

Difficulty: 1 Easy

Topic: Computing Individual Tax

Learning Objective: 14-05 Compute the regular tax on ordinary income.

Accessibility: Keyboard Navigation

Type: Static

82) Alice is an unmarried individual. She has $182,340 taxable income in 2019. Compute Alice's regular tax liability if she files as a single taxpayer and if she files as a head of household.

A) Single $37,936; head of household $43,762

B) Single $43,762; head of household $38,647

C) Single $39,666; head of household $38,247

D) None of the above

Difficulty: 2 Medium

Topic: Computing Individual Tax

Learning Objective: 14-05 Compute the regular tax on ordinary income.

Accessibility: Keyboard Navigation

Type: Static

83) Ms. Kilo is an unmarried individual. She has $219,344 taxable income in 2019. Compute Ms. Kilo's regular tax liability if she files as a single taxpayer and if she files as a surviving spouse.

A) Single $70,190; surviving spouse $52,642

B) Single $55,990; surviving spouse $42,222

C) Single $43,896; surviving spouse $52,460

D) None of the above

Difficulty: 2 Medium

Topic: Filing Status for Individuals; Computing Individual Tax

Learning Objective: 14-01 Determine an individual's filing status.; 14-05 Compute the regular tax on ordinary income.

Accessibility: Keyboard Navigation

Type: Static

84) Which of the following statements regarding the calculation of regular tax liability is false?

A) The rate schedule for calculating regular tax liability depends on the taxpayer's filing status.

B) All taxpayer, regardless of the amount of their taxable income, pay a 10% tax on their first bracket of income.

C) The individual tax rate schedules are adjusted annually for inflation.

D) All of the tax brackets in the single rate schedule are one-half of the brackets in the married-filing-jointly rate schedule.

Difficulty: 2 Medium

Topic: Computing Individual Tax

Learning Objective: 14-05 Compute the regular tax on ordinary income.

Accessibility: Keyboard Navigation

Type: Static

85) Which of the following statements regarding the calculation of regular tax liability is false?

A) Regardless of filing status, the highest marginal rate for individual taxpayers is 37%.

B) The individual tax rate schedules are adjusted annually for inflation.

C) All of the tax brackets in the married-filing-separately rate schedule are one-half of the brackets in the married-filing-jointly rate schedule.

D) None of the above is false.

Difficulty: 2 Medium

Topic: Computing Individual Tax

Learning Objective: 14-05 Compute the regular tax on ordinary income.

Accessibility: Keyboard Navigation

Type: Static

86) Mr. and Mrs. David file a joint tax return. They have $169,300 taxable income in 2019, $120,300 of which is ordinary income and $49,000 of which is taxed at a 15% preferential rate. Compute their tax savings from the preferential rate. 

A) $7,032

B) $3,448

C) $10,798

D) None of the above.

Explanation: The Davids' tax liability is $25,533 ($18,183 tax on $120,300 ordinary income + $7,350 tax on $49,000 preferential income). The tax on $169,300 ordinary income would be $28,981. The tax savings from the preferential rate is $3,448.

Difficulty: 2 Medium

Topic: Computing Individual Tax

Learning Objective: 14-05 Compute the regular tax on ordinary income.

Accessibility: Keyboard Navigation

Type: Static

87) Mr. and Mrs. Daniels, ages 45, and 42, had the following income items in 2019:

Mr. and Mrs. Daniels have no dependents and claim the standard deduction. Compute their income tax liability on a joint return.

A) $15,570

B) $16,868

C) $22,348

D) None of the above.

Explanation: Taxable income is $110,300 ($134,700 AGI − $24,400 standard deduction). Tax on $104,400 ordinary income is $14,685. Tax on $5,900 dividends and capital gains is $885. Total tax is $15,570.

Difficulty: 2 Medium

Topic: Computing Individual Tax

Learning Objective: 14-05 Compute the regular tax on ordinary income.

Accessibility: Keyboard Navigation

Type: Static

88) Linda and Raj are engaged to be married. Linda's 2019 taxable income as a single individual would be $212,000. Raj's 2019 taxable income as a single individual would be $418,000. When they marry before the end of 2019, how much of a marriage penalty will they incur?

A) $0

B) $352

C) $599

D) None of the above

Explanation: Linda's tax as a single individual is $49,394, Raj's tax as a single individual is $121,494, and the combined tax is $170,888. Their tax on $630,000 combined income at the MFJ rates is $171,240. The marriage penalty is $352.

Difficulty: 2 Medium

Topic: The Marriage Penalty Dilemma

Learning Objective: 14-06 Explain why a marriage penalty exists in the federal income tax system.

Accessibility: Keyboard Navigation

Type: Static

89) Which of the following situations result in a marriage penalty for federal income tax purposes?

A) Mr. and Mrs. Gooding, who have filed a joint return for 11 years, divorce before the end of the tax year.

B) Mr. Dylan, who is a head of household, marries Ms. Boyle, who has no taxable income, before the end of the tax year.

C) Mr. and Mrs. Small, who have filed a joint return for 20 years, elect to file separate tax returns this year.

D) Mr. Langley, a single taxpayer, marries Ms. Nuyen, also a single taxpayer. Both individuals earn a salary in excess of $350,000.

Difficulty: 2 Medium

Topic: The Marriage Penalty Dilemma

Learning Objective: 14-06 Explain why a marriage penalty exists in the federal income tax system.

Accessibility: Keyboard Navigation

Type: Static

90) Mr. and Mrs. Kain reported $80,000 AGI on their joint return. The couple has four dependent children: Beatrice, age 19; Bruce, age 16; Angie, age 11, and Arnold, age 8. Compute the Kains' child tax credit.

A) $1,000

B) $3,000

C) $6,000

D) $8,000

Difficulty: 1 Easy

Topic: Individual Tax Credits

Learning Objective: 14-07 Describe four important individual tax credits.

Accessibility: Keyboard Navigation

Type: Static

91) Mr. and Mrs. Cox reported $490,000 AGI on their joint return. The couple has three dependent children under age 17. Compute their child tax credit.

A) $0

B) $1,500

C) $4,500

D) $6,000

Explanation: The phaseout of the $6,000 credit is $4,500 ([$90,000 excess AGI/$1000] rounded up to 90 × $50).

Difficulty: 3 Hard

Topic: Individual Tax Credits

Learning Objective: 14-07 Describe four important individual tax credits.

Accessibility: Keyboard Navigation

Type: Static

92) Mr. and Mrs. Lansing, who file a joint tax return, have four dependent children under age 17. Which of the following statements is false?

A) If the Lansings' AGI is $77,900, their child tax credit is $8,000.

B) If the Lansings' AGI is $417,300, their child tax credit is $7,100.

C) If the Lansings' AGI is $596,000, their child tax credit is zero.

D) None of the above is false.

Explanation: If the Lansings' AGI is $417,300, the phaseout of their $8,000 credit is $900 ([$17,300 excess AGI/$1000] rounded up to 18 × $50). If the Lansings' AGI is $596,000, the phaseout is $9,800 ([$196,000 excess AGI/$1000] × $50).

Difficulty: 3 Hard

Topic: Individual Tax Credits

Learning Objective: 14-07 Describe four important individual tax credits.

Accessibility: Keyboard Navigation

Type: Static

93) Lennie and Margo spent $2,800 for child care for their 7-year-old son. Lennie's earned income was $41,000, Margo's earned income was $24,800, and the AGI on their joint return was $71,200. Calculate their dependent care credit.

A) $0

B) $560

C) $980

D) $2,800

Explanation: 20% × $2,800

Difficulty: 2 Medium

Topic: Individual Tax Credits

Learning Objective: 14-07 Describe four important individual tax credits.

Accessibility: Keyboard Navigation

Type: Static

94) Mr. and Mrs. Arlette spent $5,900 for child care for their 12-year-old daughter. Mr. Arlette's earned income was $178,000, Mrs. Arlette's earned income was $33,100, and the AGI on their joint return was $225,200. Calculate their dependent care credit.

A) $5,900

B) $1,180

C) $600

D) $0

Explanation: 20% × $3,000 limited cost for one dependent.

Difficulty: 2 Medium

Topic: Individual Tax Credits

Learning Objective: 14-07 Describe four important individual tax credits.

Accessibility: Keyboard Navigation

Type: Static

95) Mr. and Mrs. Borem spent $1,435 for child care for their two dependent children, who are two and four years old. Mr. Borem's earned income was $55,870, Mrs. Borem had no earned income, and the AGI on their joint return was $66,210. Calculate their dependent care credit.

A) $0

B) $287

C) $502

D) $1,435

Explanation: The couple has no dependent care credit because Mrs. Borem has no earned income.

Difficulty: 2 Medium

Topic: Individual Tax Credits

Learning Objective: 14-07 Describe four important individual tax credits.

Accessibility: Keyboard Navigation

Type: Static

96) Mr. and Mrs. Harvey's tax liability before credits was $1,675. Their income tax withholding was $1,050, and they are entitled to a $1,189 earned income credit. Which of the following statements is true?

A) The Harveys are entitled to a $1,050 tax refund.

B) The Harveys are entitled to a $1,189 tax refund.

C) The Harveys are entitled to a $564 tax refund.

D) The Harveys owe no additional tax but they are not entitled to a refund.

Explanation: The Harveys' refund equals $2,239 ($1,050 withholding + $1,189 credit) − $1,675 precredit tax.

Difficulty: 2 Medium

Topic: Individual Tax Credits

Learning Objective: 14-07 Describe four important individual tax credits.

Accessibility: Keyboard Navigation

Type: Static

97) Mr. Marshall was employed by IMP Inc. until October, when he accepted a new position with Turine Inc. Mr. Marshall earned $140,000 compensation from IMP and $36,000 compensation from Turine. Which of the following statements is false?

A) Turine must withhold Social Security tax from Mr. Marshall's $36,000 compensation.

B) Turine must withhold Medicare tax from Mr. Marshall's $36,000 compensation.

C) Mr. Marshall is entitled to an income tax credit for excess Social Security tax withheld by his employers this year.

D) None of the above is false.

Difficulty: 1 Easy

Topic: Individual Tax Credits

Learning Objective: 14-07 Describe four important individual tax credits.

Accessibility: Keyboard Navigation

Type: Static

98) Mrs. Lincoln was employed by GGH Inc. until October, when he accepted a new position with Murdock Inc. Mrs. Lincoln earned $145,000 compensation from GGH and $36,000 compensation from Murdock. Which of the following statements is false?

A) Murdock must withhold Social Security tax from Mrs. Lincoln's $36,000 compensation.

B) Murdock must withhold Medicare tax from Mrs. Lincoln's $36,000 compensation.

C) Mrs. Lincoln is entitled to an income tax credit for both excess Social Security tax and excess Medicare tax withheld by her employers this year.

D) Both GGH and Murdock must pay the full amount of employer payroll tax on the compensation paid to Mrs. Lincoln.

Explanation: The excess payroll tax credit is for excess Social Security tax. There is no annual limit on the amount of compensation subject to Medicare tax.

Difficulty: 3 Hard

Topic: Individual Tax Credits

Learning Objective: 14-07 Describe four important individual tax credits.

Accessibility: Keyboard Navigation

Type: Static

99) Which of the following statements concerning the individual alternative minimum tax (AMT) is true?

A) The calculation of alternative minimum taxable income begins with taxable income for regular tax purposes.

B) A taxpayer with no tax preference items for the year can't be liable for AMT.

C) The standard deduction is not an AMT adjustment in calculating AMTI.

D) The individual AMT rate is a flat 28%.

Difficulty: 2 Medium

Topic: Alternative Minimum Tax

Learning Objective: 14-08 Compute the individual alternative minimum tax (AMT).

Accessibility: Keyboard Navigation

Type: Static

100) Ruth Anne, a single taxpayer, reported $529,500 alternative minimum taxable income before any exemption on her 2019 Form 1040. Calculate Ruth Anne's AMT exemption.

A) $4,800

B) $66,900

C) $71,700

D) None of the above

Explanation: $529,500 − $510,300 AMTI threshold = $19,200 × 25% = $4,800 reduction in exemption. $71,700 single exemption − $4,800 = $66,900.

Difficulty: 2 Medium

Topic: Alternative Minimum Tax

Learning Objective: 14-08 Compute the individual alternative minimum tax (AMT).

Accessibility: Keyboard Navigation

Type: Static

101) Mr. and Mrs. Stern reported $1,148,340 alternative minimum taxable income before any exemption on their 2019 Form 1040. Calculate their AMT exemption.

A) $0

B) $31,935

C) $109,400

D) None of the above

Explanation: $1,148,340 − $1,020,600 AMTI threshold = $127,740 × 25% = $31,935 reduction in exemption. $111,700  MFJ exemption − $31,935 = $79,765.

Difficulty: 3 Hard

Topic: Alternative Minimum Tax

Learning Objective: 14-08 Compute the individual alternative minimum tax (AMT).

Accessibility: Keyboard Navigation

Type: Static

102) Mr. and Mrs. Reid reported $1,435,700 ordinary taxable income for regular tax purposes and had $158,200 positive AMT adjustments and preferences. Compute their tentative minimum tax.

A) $414,414

B) $442,396

C) $446,292

D) $398,100

Explanation: $1,435,700 ordinary taxable income + $158,200 AMT adjustments and preferences = $1,593,900 AMTI (exemption reduced to zero). ($194,800 AMTI × 26%) + ($1,399,100 AMTI × 28%) = $442,396 tentative minimum tax.

Difficulty: 3 Hard

Topic: Alternative Minimum Tax

Learning Objective: 14-08 Compute the individual alternative minimum tax (AMT).

Accessibility: Keyboard Navigation

Type: Static

103) Mr. and Mrs. Luang reported $1,417,900 ordinary taxable income for regular tax purposes and had $139,100 positive AMT adjustments and preferences. Compute their tentative minimum tax.

A) $432,064

B) $435,960

C) $404,820

D) None of the above

Explanation: $1,417,900 ordinary taxable income + $139,100 AMT adjustments and preferences = $1,557,000 AMTI (exemption reduced to zero). ($194,800 AMTI × 26%) + ($1,362,200 AMTI × 28%) = $432,064 tentative minimum tax.

Difficulty: 3 Hard

Topic: Alternative Minimum Tax

Learning Objective: 14-08 Compute the individual alternative minimum tax (AMT).

Accessibility: Keyboard Navigation

Type: Static

104) Mr. and Mrs. King's regular tax liability on their joint return was $479,580. Which of the following statements is true?

A) If the Kings' tentative minimum tax is $462,220, their total tax liability is $462,220.

B) If the Kings' tentative minimum tax is $462,220, their total tax liability is $479,580.

C) If the Kings' tentative minimum tax is $492,350; their total tax liability is $492,350.

D) Both B and C are true.

Difficulty: 1 Easy

Topic: Alternative Minimum Tax

Learning Objective: 14-08 Compute the individual alternative minimum tax (AMT).

Accessibility: Keyboard Navigation

Type: Static

105) Ms. Dorley's regular tax liability on her Form 1040 is $451,890. Which of the following statements is true?

A) If Ms. Dorley's tentative minimum tax is $500,700, her total tax liability is $952,590.

B) If Ms. Dorley's AMT is $6,380, her total tax liability is $458,270.

C) If Ms. Dorley's AMT is $10,112, her total tax liability is $451,890.

D) If Ms. Dorley's tentative minimum tax is $421,200, her total tax liability is $421,200.

Difficulty: 2 Medium

Topic: Alternative Minimum Tax

Learning Objective: 14-08 Compute the individual alternative minimum tax (AMT).

Accessibility: Keyboard Navigation

Type: Static

106) Ms. Kilo's regular income tax before credits on her Form 1040 is $450,890, and she has a $5,700 minimum tax credit from a previous year. Which of the following statements is true?

A) If Ms. Kilo's tentative minimum tax is $450,890, her total tax liability is $445,190.

B) If Ms. Kilo's tentative minimum tax is $445,890, her total tax liability is $440,190.

C) If Ms. Kilo's tentative minimum tax is $445,890, her total tax liability is $445,890.

D) Both A. and C. are true.

Explanation: If tentative minimum tax is $450,890, her total tax liability is $450,890. The minimum tax credit can't reduce regular tax liability below tentative minimum tax.

Difficulty: 3 Hard

Topic: Alternative Minimum Tax

Learning Objective: 14-08 Compute the individual alternative minimum tax (AMT).

Accessibility: Keyboard Navigation

Type: Static

107) Last year, Mr. Corbett's AGI was $141,000, and his total tax liability was $33,650. This year, his total tax liability is $35,290. Compute the minimum amount of current year tax that Mr. Corbett had to prepay (withholding and estimated payments) to avoid an underpayment penalty.

A) $31,761

B) $33,650

C) $30,285

D) $35,290

Explanation: $35,290 current year tax × 90% = $31,761.

Difficulty: 2 Medium

Topic: Payment and Filing Requirements

Learning Objective: 14-09 Describe the individual tax payment and return filing requirements.

Accessibility: Keyboard Navigation

Type: Static

108) Last year, Mr. Tyker's AGI was $182,800, and his total tax liability was $51,650. This year, his total tax liability is $65,440. Compute the minimum amount of current year tax that Mr. Tyker had to prepay (withholding and estimated payments) to avoid an underpayment penalty.

A) $65,440

B) $51,650

C) $56,815

D) $58,896

Explanation: $51,650 preceding year tax × 110% = $56,815.

Difficulty: 3 Hard

Topic: Payment and Filing Requirements

Learning Objective: 14-09 Describe the individual tax payment and return filing requirements.

Accessibility: Keyboard Navigation

Type: Static

109) Which of the following statements regarding tax payments is true?

A) Sole proprietors must make quarterly estimated payments of income tax, but self-employment tax is not due until the return is filed.

B) Sole proprietors must make quarterly estimated payments of self-employment tax, but income tax is not due until the return is filed.

C) Sole proprietors must make quarterly estimated payments of income tax and self-employment tax.

D) Sole proprietors are not required to pay income tax or self-employment tax until the return is filed.

Difficulty: 2 Medium

Topic: Payment and Filing Requirements

Learning Objective: 14-09 Describe the individual tax payment and return filing requirements.

Accessibility: Keyboard Navigation

Type: Static

110) Which of the following statements concerning extensions of time to file an individual tax return is true?

A) The extension of time to file does not extend the time for payment of tax.

B) The extension of time to file is for four months.

C) An individual who requests an extension of time to file must provide the IRS with a reasonable explanation.

D) The IRS may deny an extension request if the taxpayer fails to provide a reasonable explanation.

Difficulty: 1 Easy

Topic: Payment and Filing Requirements

Learning Objective: 14-09 Describe the individual tax payment and return filing requirements.

Accessibility: Keyboard Navigation

Type: Static

111) Which of the following statements concerning extensions of time to file an individual tax return is false?

A) The extension of time to file does not extend the time for payment of any tax due.

B) An individual may receive an automatic extension of the filing date without providing any explanation to the IRS.

C) The extended due date of a calendar-year individual tax return is October 15 of the following year.

D) An extension request must be filed before the end of the taxable year.

Difficulty: 1 Easy

Topic: Payment and Filing Requirements

Learning Objective: 14-09 Describe the individual tax payment and return filing requirements.

Accessibility: Keyboard Navigation

Type: Static

112) Mr. and Mrs. Reece couldn't complete their 2019 Form 1040 before April 15, 2020.  They estimate that they will have a $700 balance of tax due with the return. Which of the following statement is true?

A) If the Reeces fail to file their return by April 15, they may opt to request an extension but still will owe penalties to the IRS.

B) The Reeces can file an extension request by April 15 to extend the tax payment and filing date for six months without penalty.

C) The Reeces can file an extension request by April 15 to extend the filing date for six months without penalty. They must pay the $700 estimated balance of tax due with the extension request.

D) None of the above is true.

Explanation: The Reeces can file an extension request by April 15 to extend the filing date for six months without penalty. They must pay the $700 estimated balance of tax due with the extension request in order to avoid a penalty on any tax due after April 15.

Difficulty: 1 Easy

Topic: Payment and Filing Requirements

Learning Objective: 14-09 Describe the individual tax payment and return filing requirements.

Accessibility: Keyboard Navigation

Type: Static

113) Determine Mr. Smith's 2019 filing status in each of the following independent cases.

a. Mr. Smith and Mrs. Smith were legally divorced on December 1. Mr. Smith has not remarried and has no dependent children.

b. Mr. Smith and the first Mrs. Smith were legally divorced on February 10. Mr. Smith remarried the second Mrs. Smith on December 5. He has no dependent children.

c. Mrs. Smith dies on June 22. Mr. Smith has not remarried and has no dependent children.

d. Mrs. Smith died on November 1, 2017. Mr. Smith has not remarried and maintains a home for one dependent child.

e. Mrs. Smith died on April 3, 2018. Mr. Smith has not remarried and has no dependent children.

f. Mr. and Mrs. Smith were legally divorced on September 10, 2016. Mr. Smith has not remarried and maintains a home for his two dependent children.

a. Single

b. Married filing jointly with the second Mrs. Smith.

c. Married filing jointly.

d. Married filing jointly as surviving spouse.

e. Single.

f. Head of household.

Difficulty: 2 Medium

Topic: Filing Status for Individuals

Learning Objective: 14-01 Determine an individual's filing status.

Accessibility: Keyboard Navigation

Type: Static

114) Mr. and Mrs. Bennett file a joint tax return. Determine if each of the following unmarried individuals is either a qualifying child or a qualifying relative.

a. Son Alex, age 22, lives in his parents' home and works fulltime as a tax accountant. Alex is self-supporting except for the fact that he does not pay rent to his parents.

b. Daughter Samantha, age 20, is a full-time college student. Samantha lives in a dormitory during the school year, but her parents' home is her permanent residence and they provide 100% of her financial support.

c. Mr. Bennett's brother Max is 42 years old and mentally handicapped. Max lives in a privately operated group home, and Mr. and Mrs. Bennett provide 100% of his financial support. Max has no gross income.

d. Mrs. Bennett's mother, Vera, age 67, lives in a retirement community. Mr. and Mrs. Bennett provide about 75% of her financial support. Vera earned $5,000 this year as a part-time receptionist. 

a. Not a qualifying child or relative.

b. Qualifying child.

c. Qualifying relative.

d. Not a qualifying child or relative, because her gross income exceeds $4,150.

Difficulty: 2 Medium

Topic: Exemption Amount

Learning Objective: 14-04 Identify the impact of the QBI deduction on taxable income.

Accessibility: Keyboard Navigation

Type: Static

115) Eileen, a single individual, had $125,000 taxable income. Compute her income tax assuming that:

a. Taxable income includes no capital gains.

b. Taxable income includes $14,000 capital gain eligible for the 15% preferential rate.

a. $24,290

b. $23,030 = $2,100 tax on capital gain + $20,930 tax on $111,000 ordinary income.

Difficulty: 2 Medium

Topic: Computing Individual Tax

Learning Objective: 14-05 Compute the regular tax on ordinary income.

Accessibility: Keyboard Navigation

Type: Static

116) Alice Grim, a single taxpayer, has $719,000 taxable income, which includes a $240,000 capital gain taxed at 20%. Her alternative minimum taxable income in excess of her exemption amount is $937,400. Compute Alice's regular tax, AMT, and total tax.

Difficulty: 3 Hard

Topic: Alternative Minimum Tax

Learning Objective: 14-08 Compute the individual alternative minimum tax (AMT).

Accessibility: Keyboard Navigation

Type: Static