Question 1

Max is a 14-year-old dependent of his parents. During 2014, Max earned $1,800 working part time jobs and he received $1,500 of interest income from corporate bonds that were given to him last year. What is Max's 2014 taxable income?

Accepted Answer

The answer of Max is a 14-year-old dependent of his...

Question 2

The American opportunity credit is available only for those students who are in their first or second year of postsecondary education.

Accepted Answer

A) True 
 B)False

Question 3

The alternative minimum tax system requires taxpayers to apply an alternative tax rate on the regular income tax base to determine the amount of the alternative minimum tax.

Accepted Answer

A) True 
 B)False

Question 4

Depending on the year, the original (unextended) due date for an individual's tax return may be before April 15.

Accepted Answer

A) True 
 B)False

Question 5

Long-term capital gains are taxed at the stated AMT rate for purposes of the alternative minimum tax.

Accepted Answer

A) True 
 B)False

Question 6

Quantitatively, what is the relationship between the AGI phase-out thresholds for the child tax credit?

Accepted Answer

A)   Head of household/Single = Married Filing Separately = Married Filing Jointly
B)   Head of household/Single 
C)   Head of household/Single = Married Filing Separately > Married Filing Jointly
D)   Head of household/Single > Married Filing Separately < Married Filing JointlyE) None of the above
F) A) and B)

Question 7

The computation of the alternative minimum tax base begins with regular taxable income. Which of the following is not part of the formula for computing the alternative minimum tax base?

Accepted Answer

A)   Subtract personal exemptions
B)   Add the standard deduction amount if used for regular tax
C)   Subtract the AMT exemption amount (if any) 
D)   Add back tax exempt interest from a private activity bond not issued in 2009 or 2010.E) A) and D)
F) C) and D)

Question 8

All capital gains are taxed at preferential rates.

Accepted Answer

A) True 
 B)False  False

Question 9

The wage base for which of the following taxes is capped?

Accepted Answer

A)   Federal income
B)   Social Security
C)   Medicare
D)   Alternative minimumE) B) and C)
F) None of the above

Question 10

Demeter is a single taxpayer. Her AGI in 2014 is $81,200. Demeter may claim a child tax credit for her daughter Persephone. What amount of child tax credit is Demeter entitled to claim after any applicable phase-out?

Accepted Answer

The answer of Demeter is a single taxpayer. Her AGI...

Question 11

Which of the following best describes the manner in which self-employed taxpayers may deduct self-employment taxes?

Accepted Answer

A)   Deduct employer portion from AGI.
B)   Deduct entire amount from AGI.
C)   Deduct employer portion for AGI.
D)   Deduct entire amount for AGI.
E)   No deductionF) C) and E)
G) A) and B)

Question 12

Parents may claim a child and dependent care credit for expenses incurred in providing for their dependents while the parents work as long as the children are over age 14 and under age 20 at year end.

Accepted Answer

A) True 
 B)False

Question 13

For married couples, the Social Security wage base limitation applies separately to each spouse.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements regarding late filing penalties is true?

Accepted Answer

A)   If a taxpayer fails to file a tax return, the late filing penalty will continue to grow until the taxpayer files the tax return.
B)   The amount of the late filing penalty is the same for both fraudulent failure to file and non fraudulent failure to file.
C)   Taxpayers who owe no tax as of the due date of their tax returns are not subject to late filing penalties even if they file late.
D)   None of these.E) All of the above
F) A) and D) C

Question 15

Which of the following does not affect the amount of the earned income credit?

Accepted Answer

A)   Filing status
B)   Amount of credit taken in previous years
C)   Number of qualifying children
D)   Taxpayer's AGIE) C) and D)
F) A) and B)

Question 16

The late payment penalty is based on the amount of tax owed and the number of days that the tax is not paid. The maximum amount of the penalty is unlimited.

Accepted Answer

A) True 
 B)False

Question 17

Hera earned $175,000 salary in 2014. Her husband, Zeus, earned $100,000 salary in 2014. Hera and Zeus file a joint tax return. How much FICA taxes will they owe in 2014?

Accepted Answer

A)   $21,263
B)   $17,667
C)   $13,454
D)   $4,213E) A) and D)
F) A) and B)

Question 18

Hestia (age 17)  is claimed as a dependent by her parents, Rhea and Chronus. In 2014, Hestia received $1,000 of interest income from a corporate bond that she owns. In addition, she has earned income of $200. What is her taxable income for 2014?

Accepted Answer

A)   $0
B)   $200
C)   $650
D)   $1,200E) A) and B)
F) None of the above

Question 19

Which of the following suggests that a working taxpayer is an independent contractor rather than an employee?

Accepted Answer

A)   Works for more than one firm
B)   May realize a loss from business activities
C)   Sets own working hours
D)   Works somewhere other than on employer premises
E)   All of these suggest independent contractor statusF) A) and E)
G) None of the above

Question 20

Which of the following statements regarding the child tax credit is false?

Accepted Answer

A)   The child for whom the credit is claimed must be under the age of 15 at the end of the year
B)   The credit is subject to phase-out based on the taxpayer's AGI
C)   The full credit for a child who qualifies is $1,000
D)   The child for whom the credit is claimed must meet the definition of a qualifying childE) B) and C)
F) A) and B) A

Exam 7: Individual Income Tax Computation and Tax Credits

Max is a 14-year-old dependent of his parents. During 2014, Max earned $1,800 working part time jobs and he received $1,500 of interest income from corporate bonds that were given to him last year. What is Max's 2014 taxable income?

Correct AnswerverifiedShow Answer

The American opportunity credit is available only for those students who are in their first or second year of postsecondary education.

Correct AnswerverifiedShow Answer

The alternative minimum tax system requires taxpayers to apply an alternative tax rate on the regular income tax base to determine the amount of the alternative minimum tax.

Correct AnswerverifiedShow Answer

Depending on the year, the original (unextended) due date for an individual's tax return may be before April 15.

Correct AnswerverifiedShow Answer

Long-term capital gains are taxed at the stated AMT rate for purposes of the alternative minimum tax.

Correct AnswerverifiedShow Answer

Quantitatively, what is the relationship between the AGI phase-out thresholds for the child tax credit?

Correct AnswerverifiedShow Answer

The computation of the alternative minimum tax base begins with regular taxable income. Which of the following is not part of the formula for computing the alternative minimum tax base?

Correct AnswerverifiedShow Answer

All capital gains are taxed at preferential rates.

Correct AnswerverifiedFalse

The wage base for which of the following taxes is capped?

Correct AnswerverifiedShow Answer

Demeter is a single taxpayer. Her AGI in 2014 is $81,200. Demeter may claim a child tax credit for her daughter Persephone. What amount of child tax credit is Demeter entitled to claim after any applicable phase-out?

Correct AnswerverifiedShow Answer

Which of the following best describes the manner in which self-employed taxpayers may deduct self-employment taxes?

Correct AnswerverifiedShow Answer

Parents may claim a child and dependent care credit for expenses incurred in providing for their dependents while the parents work as long as the children are over age 14 and under age 20 at year end.

Correct AnswerverifiedShow Answer

For married couples, the Social Security wage base limitation applies separately to each spouse.

Correct AnswerverifiedShow Answer

Which of the following statements regarding late filing penalties is true?

Correct AnswerverifiedC

Which of the following does not affect the amount of the earned income credit?

Correct AnswerverifiedShow Answer

The late payment penalty is based on the amount of tax owed and the number of days that the tax is not paid. The maximum amount of the penalty is unlimited.

Correct AnswerverifiedShow Answer

Hera earned $175,000 salary in 2014. Her husband, Zeus, earned $100,000 salary in 2014. Hera and Zeus file a joint tax return. How much FICA taxes will they owe in 2014?

Correct AnswerverifiedShow Answer

Hestia (age 17) is claimed as a dependent by her parents, Rhea and Chronus. In 2014, Hestia received $1,000 of interest income from a corporate bond that she owns. In addition, she has earned income of $200. What is her taxable income for 2014?

Correct AnswerverifiedShow Answer

Which of the following suggests that a working taxpayer is an independent contractor rather than an employee?

Correct AnswerverifiedShow Answer

Which of the following statements regarding the child tax credit is false?

Correct AnswerverifiedA

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False

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C

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A