- A single individual with two dependents works at a bank and earns wages of $50,000. She received a $6,000 gift from a parent to go to Europe and inherited $10,000 from an uncle when he died. Her municipal bond paid $500 interest. This individual has itemized deductions of $7,000.
What is the tax liability?
$3,568
$3,628
$4,288
$4,768
$3,568
- A married individual with one dependent earned wages of $63,000. The individual won $2,000 at a casino, inherited $5,000, and has itemized deductions of $4,100.
What is the tax liability?
$4,539
$4,899
$5,139
$5,368
$4,539
- Which two expenses are a tax-free use of a qualified tuition plan (QTP) distribution?
Choose 2 answers
Rent
Textbooks
Travel expenses
Student health insurance deductible
Rent
Textbooks
- Which event would result in taxable income?
Cancellation of debt while the taxpayer is insolvent
Forgiveness of mortgage debt on rental property
Discharge of debt in bankruptcy
Forgiveness of student loan debt after the individual’s public service
Forgiveness of mortgage debt on rental property
- An individual bought 200 shares of stock in a company for $80 per share in January. By September of that year, the stock had declined to $50 per share, whereupon the individual sold 100 shares and held the other 100 shares. In November of that year, the stock returned to $78 per share, and the individual sold the remaining 100 shares.
Assume the shares paid no dividends during the course of the year.
What is the maximum amount this individual can deduct as a capital loss when preparing this year’s tax return?
$200
$3,000
$3,200
$6,000
$3,000
An individual bought a piece of land for $50,000 as an investment. A few years later, the individual wants to sell the land. The individual has the land appraised and finds out it is only worth $45,000. The individual decides not to sell the land that year but paid $500 in appraisal fees.
The land has a $15,000 mortgage on it, and the property tax bill is $250 for the year.
What capital losses may this individual deduct when preparing taxes?
$0
$500
$5,500
$5,750
$0
- Which tax status is most beneficial for a divorced single parent with sole custody of a child?
Single
Married filing jointly
Qualifying widow(er)
Head of household
Head of household
- An individual has three children living with her,–ages 3, 13, and 18–and the children meet the other criteria for the Child Tax Credit.
What is the maximum Child Tax Credit that can be claimed?
$1,000
$2,000
$3,000
$4,000
$4,000
Which IRS form must an employee file with his or her employer to determine the amount of federal tax to be withheld from the employee’s pay?
Form W-4
Form W-2
Form 1099
Form 1040
Form W-4
- A business buys a $10,000 computer on February 1. The business buys $200,000 worth of other equipment in November.
What is the MACRS depreciation deduction for the computer? (Ignore section 179 and any applicable bonus depreciation.)
$1,500
$2,000
$2,500
$3,500
$3,500
- Which item is classified as an itemized deduction?
Mortgage interest
Property taxes paid by a business
Contribution to an individual retirement account
Theft of a personal car
Mortgage interest
- What is deductible as an investment expense?
Purchase of a car to drive to a broker’s office
Lobby expenses to obtain permits on investment land
Travel expenses to attend an annual company stockholder meeting
Interest on a loan to purchase land for an investment
Interest on a loan to purchase land for an investment
- A taxpayer runs an automotive repair business in a building he owns. The income and expenses are reported on Form 1040, Schedule C. There was no section 179 election made.
Which action represents a deductible business expense for the current tax year, and is therefore not subject to capitalization and depreciation?
Purchasing new car lifts
Expanding building area by adding a service bay
Repairing a leak in the roof of the building
Installing a new air conditioning and heating system
Repairing a leak in the roof of the building
- Which item is a deductible business expense?
Purchase of a 12-month liability insurance policy
Replacement of a machine with a newer, faster model
Installation of a fire suppression system in the computer room
Conversion of part of the warehouse to office space for the manager
Purchase of a 12-month liability insurance policy
- An individual is calculating his deductions for a given year.
He examines his records and finds that in the last calendar year, he paid $2,000 in property taxes, paid $40,000 towards his mortgage ($30,000 of which was payments on the principal), spent $5,100 on medical expenses, paid $250 for tax preparation services, and spent $100 on professional publications last year.
What would be his itemized deductions total if the individual’s adjusted gross income is $80,000?
$5,450
$12,000
$17,350
$47,350
$12,000
- A 50-year old individual is calculating his deductions for a given year.
The individual examines his records and finds that in the last calendar year he donated $500 to charity, paid state income taxes of $600, received a local tax refund of $100, spent $5,600 on medical expenses, paid $1,250 for tax preparation services, and spent $50 on professional publications last year.
What would be his itemized deductions total if this individual’s adjusted gross income is $50,000?
$1,850
$2,000
$6,200
$2,950
$2,950
- Which type of gain does a taxpayer have if the taxpayer owns stock that has appreciated in value?
A capital gain
An unrealized gain
A realized and recognized gain
A realized and unrecognized gain
An unrealized gain
- What is true about realized and recognized gains and losses?
Realized gains may be less than recognized gains.
Realized losses and recognized losses on personal use items are deductible.
Realized losses may be more than recognized losses.
Realized losses may be less than recognized losses on items of personal use.
Realized losses may be more than recognized losses.
- What is an example of a noncapital asset?
Inventory
Personal residence
Furniture in a taxpayer’s personal residence
Shares of stock a taxpayer has owned for two years
Inventory
- Which three items are capital assets?
Choose 3 answers
A personal residence A business warehouse Land held for personal use Business inventory held for sale Supplies used in conduct of business Investment in common stock held by a business
A personal residence
Land held for personal use
Investment in common stock held by a business
- Which tax qualifies as an itemized deduction?
State income tax
Unemployment tax
Social Security tax
Gambling income tax
State income tax
- Which type of interest qualifies as an itemized deduction?
Home mortgage interest
Interest for a vacation loan
Rental house mortgage interest
Interest on a flat screen television
Home mortgage interest
- What is the limit on the amount of charitable contribution that can be deducted if the contribution was paid in cash to a public charity?
10% of adjusted gross income
30% of adjusted gross income
50% of adjusted gross income
60% of adjusted gross income
60% of adjusted gross income
- Which statement describes the authoritative weight carried by financial treasury regulations?
They have the highest authoritative weight of the administrative sources.
They are guidelines issued for the taxpayer and carry no authoritative weight.
They carry more authoritative weight than the revenue rulings.
They are considered a secondary source and do not carry as much authoritative weight as the Internal Revenue Code.
They have the highest authoritative weight of the administrative sources.
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Topic 7 Tax Research2
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Topic 3 Gains and Losses24
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Topic 2- Individual Income Tax Formula Chapter 314
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Topic 2- Individual Income Tax Formula Chapter 47
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Topic 6 Final Steps of the Individual Income Tax Formula Chapter 811
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OA Review Webinar20
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Topic 4/5 Deduction and Itemized Deduction24
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Practice Assessment25
