1. Ann Bolen's husband died last year. Ann maintains a household where she and
her 8-year-old daughter reside for the tax year. On her tax return, she
properly claims a dependency exemption for her daughter. For the current year,
Ann should file her tax return as:
a. married taxpayer filing separately.
b. surviving spouse.
c. head of household.
d. single individual.
e. none of the above.
4. Tammy Yeager (unmarried, age 56) claims her elderly mother (age 74) as a
dependent. Tammy's mother does not live with her, but Tammy pays for almost
all of the costs of maintaining her mother's household. Tammy's 2009 standard
deduction is:
a. $8,350.
b. $9,750.
c. $5,700.
d. $7,100.
e. $9,450.
Answer: ______
10. In 2008, a couple pays $10,000 towards the adoption of a U.S. born child.
The couple pays another $10,000 in 2009 when the adoption is finalized. In
both years, AGI is less than $150,000. Which of the following statements best
describes the couple's adoption credit?
a. The couple is entitled to a $10,000 adoption credit in 2008, and a
$2,150 adoption credit in 2009.
b. The couple is entitled to a $20,000 adoption credit in 2009.
c. The couple is entitled to a $12,150 adoption credit in 2009, and will
carryover $7,850 to 2010.
d. The couple is entitled to a $10,000 adoption credit in 2009, and will
carryover $7,850 to 2010.
e. none of the above.
Answer: ______
11. A married couple with two dependent children (ages 6 and 9) and AGI of
$121,600 can claim a child tax credit of:
a. $0.
b. $600.
c. $1,400.
d. $2,000.
e. none of the above.
Answer: ______
12. A taxpayer's earned income and AGI is $23,000. The taxpayer's total tax
liability (before any tax credits) is $1,300. The taxpayer's only tax credits
are a $840 child and dependent care credit and the child tax credit for two
qualifying children. The taxpayer's refundable child tax credit is:
a. $2,000.
b. $460.
c. $0.
d. $1,540.
e. $700.
Answer: ______
16. As part of their divorce agreement, Harry transfers to Mary, his former
spouse, GM stock with a market value of $30,000. Harry had $20,000 invested in
the stock. How does this transfer affect Harry, and what is Mary's basis in
the stock?
a. Harry has no gain or loss, and Mary's basis is $20,000.
b. Harry has no gain or loss, and Mary's basis is $30,000.
c. Harry has a gain of $10,000, and Mary's basis is $20,000.
d. Harry has a gain of $10,000, and Mary's basis is $30,000.
e. None of the above.
17. Joyce Rescho is self-employed and uses the calendar year and the accrual
method of accounting. She reports the following activities for December:
Received
$10,000
from
clients
for
services
to be
performed
next year
Received
$30,000
for
services
performed
in
December
Reports
$15,000 in
accounts
receivable
for work
performed
in
December
Received
$2,000 for
services
performed
in
November
What amount must Rescho include in gross income for December?
a. $45,000
b. $47,000
c. $55,000
d. $57,000
e. None of the above
Answer: ______
19. Dan's taxable income falls in the 15% tax bracket. Included in his taxable
income is $5,000 of ordinary dividends, of which $2,000 are qualified
dividends. The amount of tax Dan will pay on his qualified dividends is:
a. $300.
b. $0.
c. $250.
d. $100.
e. $200.
Answer: ______
23. Which of the following statements does not apply to Coverdell education
savings accounts?
a. Parents may make nondeductible contributions of up to $2,000 per
child each year.
b. Contributions must be for a child of the taxpayer under the age of
c. Qualifying educational expenses include tuition, books, supplies, and
room and board.
d. When the child reaches age 30, unused amounts are distributed to the
parent who is taxed on any accumulated earnings.
e. All of the above apply to Coverdell education savings accounts.
Answer: ______
24. Mike and Deb (ages 49 and 53, respectively) file a joint return. Mike's
wages of $92,300 are their only source of income in 2009. Mike contributes to
his 401(k) plan at work. What amount can Mike contribute and deduct to his
traditional IRA for 2009?
a. $0
b. $3,730
c. $4,180
d. $5,000
e. $6,000
Answer: ______
25. The maximum dollar limit on deductible moving expenses is:
a. $2,250.
b. $5,250.
c. $7,250.
d. $10,250.
e. None of the above.
Answer: ______
26. Which of the following statements does not apply to the deduction for
student loan interest?
a. The student loan interest deduction is a deduction for AGI.
b. The deduction is available only for the first 60 months of interest
payments.
c. Acceptable educational expenses include tuition, books, supplies, and
room and board.
d. An interest deduction phase-out may apply.
e. None of the above.
Answer: ______
27. Post-graduate fellowship grants are taxable.
a. True
b. False
Answer: ______
28. A single person with $2,400 of earned income and $3,000 of unearned income
is entitled to contribute $5,000 to her IRA.
a. True
b. False
Answer: ______
29. Expenses not allowed as deductible medical expenses include:
a. cost of artificial teeth or limbs.
b. expenses to hire an ambulance.
c. premiums on life insurance.
d. cost of orthopedic shoes.
e. all of the above are deductible medical expenses.
Answer: ______
30. Olin owns a principal residence and two vacation homes. His home mortgage
interest on these three homes is $16,950, $20,900, and $22,680, respectively.
How much of the $60,530 can Olin deduct on Schedule A?
a. $60,530
b. $16,950
c. $39,630
d. $37,850
e. $43,580
Answer: ______
31. The Starks own a home in Tampa, Florida. They paid $1.2 million for the
home several years ago. They originally took out a $1 million mortgage on the
home. In the current year, the Starks refinanced their home at a time when the
home was worth $2 million and the outstanding mortgage balance was $700,000.
Their new mortgage is for $1.3 million. After the refinancing, the Starks's
acquisition debt amount is:
a. $1.2 million.
b. $700,000.
c. $1.3 million.
d. $1 million.
e. $800,000.
Answer: ______
32. The Martins' home is damaged in a hurricane. Prior to the hurricane, their
living expenses were $3,000 a month. Because the Martins had to move out of
their home for five months while it was being fixed, their total living
expenses increased to $5,000 a month. The insurance company reimbursed the
Martins $2,000 a month for their temporary living expenses. The amount that
the Martins must include in gross income is:
a. $0.
b. $5,000.
c. $2,000.
d. $3,000.
e. $10,000.
Answer: ______
33. Tom incurred two casualties during the year. The first involved his car,
which was involved in an accident. Tom's basis in the car was $15,000. Prior
to the accident, the car was worth $5,000; after the accident it was worth
$2,800. Tom's insurance company reimbursed him $1,000 for his loss. The second
casualty involved a theft of artwork from his home. Tom purchased the artwork
for $20,000 and it was worth $35,000 at the time of the theft. Tom's insurance
company reimbursed him $10,000 for his loss. If Tom's AGI is $55,000, his
casualty and theft loss deduction on Schedule A is:
a. $4,700.
b. $5,700.
c. $5,200.
d. $0.
e. None of the above.
Answer: ______
34. Investment income includes net capital gain and qualified dividends that
the taxpayer pays a lower (0% or 15%) tax rate on.
a. True
b. False
Answer: ______
35. When an individual has insurance coverage but declines to report a car
accident to the insurance company in order to avoid an increase in future
insurance premiums, the taxpayer cannot claim a casualty loss deduction for
any of the loss.
a. True
b. False
Answer: ______
36. Which of the following is not a factor considered in determining whether
an activity is a business or a hobby?
a. Locating the activity in the taxpayer's home
b. Relative amount of pleasure derived from the activity
c. Time and effort devoted to the activity
d. Extent of dependence on the activity for financial support
e. All of the above are factors considered in determining whether an
activity is a business or a hobby
Answer: ______
38. A taxpayer has $7,200 in gambling losses and has $6,000 of lottery
winnings. On his tax return:
a. The taxpayer will deduct $1,200 of gambling losses as a miscellaneous
itemized deduction subject to the 2% AGI rule.
b. The taxpayer will deduct $1,200 of gambling losses as a miscellaneous
itemized deduction (not subject to the 2% AGI rule).
c. The taxpayer will deduct $6,000 of gambling losses as a miscellaneous
itemized deduction (not subject to the 2% AGI rule).
d. The taxpayer will deduct $6,000 of gambling losses as a miscellaneous
itemized deduction subject to the 2% AGI rule.
e. None of the above.
Answer: ______
39. Katie is sent by her employer on a domestic business trip. She is gone a
total of 8 days. She flies to New York on Saturday and spends Sunday
sightseeing. She attends a conference Monday - Friday of that next week and
then flies home on Saturday. What portion of her airfare can Katie take as a
travel expense deduction?
a. 62.5%
b. 75%
c. 80%
d. 87.5%
e. 100%
Answer: ______
40. Which of the following statements is false regarding the hobby loss rules?
a. The deduction for expenses related to hobby activities cannot exceed
hobby income.
b. Hobby income is included in gross income and hobby-related expenses
are miscellaneous deductions subject to the 2% AGI rule.
c. Depreciation is the last expense taxpayers deduct against hobby
income.
d. Hobby deductions in excess of hobby income are carried over to offset
hobby income in future tax years.
e. All of the above statements are true (there are no false statements).
Answer: ______
41. Impairment-related work expenses for disabled employees are subject to the
2% of AGI rule in computing deductible miscellaneous expenses.
a. True
b. False
Answer: ______
42. Dues paid to public service organizations are deductible as employee
business expenses.
a. True
b. False
Answer: ______
43. Which of the following is generally not a deductible business expense on
Schedule C?
a. Office supplies
b. Depreciation
c. Rent
d. Charitable contributions
e. All of the above are deductible business expenses on Schedule C
Answer: ______
44. If the accumulation of home office expenses for the business use of a home
results in a net loss for the year, the expense that is the last deduction
taken and thus the first expense postponed to the next year is:
a. mortgage interest.
b. property taxes.
c. depreciation.
d. utilities.
e. none of the above.
Answer: ______
45. The maximum number of employees that an employer can have to be able to
offer a SIMPLE plan is:
a. 25.
b. 50.
c. 100.
d. 200.
e. none of the above.
Answer: ______
46. If a 45-year-old employee contributes $11,000 to his employer's 401(k)
plan during 2009, how much can he contribute to his employer's Roth 401(k)?
a. $5,500.
b. $16,500.
c. $11,000.
d. $10,500.
e. $0.
Answer: ______
47. The self-employment tax in 2009 for a sole proprietor with $154,800 of
profits from self-employment and no wages is:
a. $23,684.
b. $17,389.
c. $21,873.
d. $16,340
e. none of the above.
Answer: ______
48. The self-employment tax in 2009 for a sole proprietor with $154,800 of
profits from self-employment and $54,500 of wages is:
a. $8,002.
b. $12,437.
c. $10,631.
d. $15,346.
e. none of the above.
Answer: ______
49. If a taxpayer has Schedule C net profit of $60,000, the maximum
contribution to a SEP plan is $12,000, which is 20% of the Schedule C net
profit.
a. True
b. False
Answer: ______
50. On the first of each month, Donna's employer gives her $500 to cover her
work-related car expenses. The employer does not require Donna to report her
actual costs. During the year, Donna can substantiate driving 24,000
work-related miles. Which of the following describes the correct tax treatment
of Donna's car expenses and reimbursement?
a. Donna's employer adds $6,000 to her wages, and Donna deducts $6,000
for AGI and $7,200 as a miscellaneous deduction subject to the 2% AGI
rule.
b. Donna's employer adds $6,000 to her wages and Donna deducts $13,200
as a miscellaneous deduction subject to the 2% AGI rule.
c. Donna is not taxed on the reimbursement and she deducts $7,200 as a
miscellaneous itemized deduction subject to the 2% AGI rule.
d. Donna is not taxed on the reimbursement and she deducts $7,200 for
AGI.
e. Donna is not taxed on the reimbursement and she deducts $13,200 as a
miscellaneous deduction subject to the 2% AGI rule.
Answer: ______
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Tammy (unmarried, age 56) claims her elderly mother (age 74) as a dependent. Tammy's mother does not live with her, but Tammy pays for almost all of her mother's household costs. If the mother has $3,000 of taxable interest income and good eyesight, the mother's 2014 standard deduction is:
1. To determine how Ann should file her tax return, we need to consider her marital status and household situation. Since her husband passed away last year, she is no longer considered married. She is also maintaining a household where she and her 8-year-old daughter reside. Based on the given information, Ann should file her tax return as a head of household. The correct answer is c. head of household.
4. To determine Tammy's standard deduction for 2009, we need to know her filing status and age. Tammy is unmarried and 56 years old. The standard deduction for an unmarried individual who is 65 or older is $7,100 in 2009. Since Tammy's standard deduction is less than $7,100, we can conclude that her standard deduction is $5,700. The correct answer is c. $5,700.
10. The couple paid $10,000 in 2008 and another $10,000 in 2009 for the adoption of a U.S. born child. Both years, their AGI is less than $150,000. The couple is eligible for an adoption credit based on their qualified adoption expenses. For 2008, the maximum adoption credit is $10,000. For 2009, the maximum adoption credit is $12,150. However, the maximum credit allowed is limited to the couple's actual qualified adoption expenses, which are $10,000. Therefore, they are entitled to a $10,000 adoption credit in 2008, and a carryover is not applicable. The correct answer is a. The couple is entitled to a $10,000 adoption credit in 2008, and a $2,150 adoption credit in 2009.
11. The married couple with two dependent children and an AGI of $121,600 can claim a child tax credit. The child tax credit is $1,000 per qualifying child. Since they have two qualifying children, the total child tax credit they can claim is $2,000. The correct answer is d. $2,000.
12. To determine the taxpayer's refundable child tax credit, we need to consider their earned income, AGI, total tax liability, and any eligible tax credits. The taxpayer's earned income and AGI are both $23,000. Their total tax liability is $1,300. They have two qualifying children, which makes them eligible for the child tax credit. The child tax credit is non-refundable up to the taxpayer's total tax liability. In this case, their total tax liability is $1,300, which is less than the maximum child tax credit of $2,000 for two qualifying children. Therefore, their refundable child tax credit is the difference between their total tax liability and the child tax credit, which is $1,300 - $2,000 = -$700. Since the refundable child tax credit cannot be negative, the correct answer is c. $0.
16. In a transfer of property as part of a divorce agreement, the transfer is generally treated as a tax-free event. Harry transferred GM stock with a
Why would you want someone to answer the exam for you?
19. Dan's taxable income falls in the 15% tax bracket. Included in his taxable
income is $5,000 of ordinary dividends, of which $2,000 are qualified
dividends. The amount of tax Dan will pay on his qualified dividends is:
a. $300.
b. $0.
c. $250.
d. $100.
e. $200.