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Exam 4: Individual Income Tax Overview, Exemptions, and Filing Status

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Question 1

True/False

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Taxpayers may prepay their tax liability through withholdings and through estimated tax payments.

A) True
B) False

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Question 2

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A child who is her parents' qualifying child can claim a personal exemption for herself as long as her parents choose not to claim her as a dependent.

A) True
B) False

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Question 3

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Itemized deductions and the standard deduction are deductions from AGI but deductions for personal and dependency exemptions are deductions for AGI.

Char and Russ Dasrup have one daughter,Siera,who is 16 years old.In November of last year,the Dasrup's took in Siera's 16 year old friend,Angela,who has lived with them ever since.The Dasrup's have not legally adopted Angela but Siera often refers to Angela as "her sister." In the current year,the Dasrups provide all of the support for both girls,neither girl receives any income during the year,and both girls live at the Dasrup's residence.Which of the following statements is true regarding the dependency exemptions (and the reason for the exemptions) Char and Russ may claim for the current year for these girls?

The income tax base for an individual tax return is:

Which of the following statements is true?

An individual may meet the relationship test to be a taxpayer's qualifying relative even if the individual has no family relationship with the taxpayer.

Inventory is a capital asset.

From AGI deductions are generally more valuable to taxpayers than for AGI deductions.

Miguel,a widower whose wife died in year 1,maintains a household for himself and his daughter who qualifies as his dependent.Miguel did not remarry.What is the most favorable filing status that Miguel qualifies for in year 3?

John Maylor is a self-employed plumber of John's John Service,his sole proprietorship.In the current year,John's John Service had revenue of $120,000 and $40,000 of business expenses. John also received $2,000 of interest income from corporate bonds. What is John's adjusted gross income assuming he had no other income or expenses? (ignore any deduction for self-employment tax)

For AGI deductions are commonly referred to as deductions "below the line."

It is generally more advantageous from a tax perspective for a married couple to file separately than it is for them to file jointly.

Katy has one child,Dustin,who is 18 years old at the end of the year.Dustin lived at home for three months during the year before leaving home to work full-time in another city.During the year,Dustin earned $15,000.Katy provided more than half of Dustin's support for the year.Which of the following statements regarding whether Katy may claim Dustin as a dependent for the current year is accurate?

Which of the following statements regarding tax credits is true?

Which of the following statements regarding exemptions is correct?

Which of the following types of income are not considered ordinary income?

Earl and Lawanda Jackson have been married for 15 years.They have no children.Ned,who is an old friend from high school,has been living with the Jacksons during the current year.Which of the following is a true statement regarding whether the Jacksons can claim a dependency exemption for Ned in the current year?

Relative to for AGI deductions,from AGI deductions tend to relate to items that are more personal in nature.

Jane and Ed Rochester are married with a two-year-old child who lives with them and whom they support financially.In 2017,Ed and Jane realized the following items of income and expense: They also qualified for a $1,000 tax credit.Their employers withheld $1,800 in taxes from their paychecks (in the aggregate).Finally,the 2017 standard deduction amount for MFJ taxpayers is $12,700 and the 2017 exemption amount is $4,050. What is the couple's adjusted gross income?