Individual Income Tax Practice Exam
Course Introduction
This course provides an in-depth examination of the principles, laws, and procedures governing federal individual income taxation in the United States. Students will study the structure of the Internal Revenue Code as it applies to individuals, including topics such as gross income, deductions, credits, filing status, exemptions, and tax computation. The course emphasizes practical application through the analysis of tax forms, case studies, and recent legislative changes, preparing students to understand compliance requirements, tax planning strategies, and ethical considerations related to individual income tax.
Recommended Textbook
Income Tax Fundamentals 2019 37th Edition by Gerald E. Whittenburg
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12 Chapters
1187 Verified Questions
1187 Flashcards
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Page 2
Chapter 1: The Individual Income Tax Return
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117 Verified Questions
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Sample Questions
Q1) List if a form is used for an individual, a corporation, or a partnership tax return.
a.Form 1065
b.Schedule A, Itemized Deductions
c.Form 1040
d.Form 1120
e.Schedule B, Interest and Dividends
Answer: a.Partnership
b.Individual
c.Individual
d.Corporation
e.Individual
Q2) Partnerships:
A)Are not taxable entities.
B)Are taxed in the same manner as individuals.
C)File tax returns on Form 1120.
D)File tax returns on Form 1041.
Answer: A
Q3) The taxpayer is unmarried and is living with his girlfriend.
Answer: a
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Page 3
Chapter 2: Gross Income and Exclusions
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151 Verified Questions
151 Flashcards
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Sample Questions
Q1) In 2018, Uriah received the following interest payments:Interest of $300 on an overpayment of 2017 Federal income taxesInterest of $400 from his bank certificate of deposit.Interest of $1,000 on municipal bondsInterest of $1,500 on US savings bonds (Series HH)What amount, if any, should Uriah report as taxable interest income on his 2018 individual income tax return?
A)$0
B)$700
C)$2,200
D)$3,200
E)None of the above
Answer: C
Q2) Child support payments
Answer: b
Q3) The value of lodging provided to a professor to enable him to live on the campus is excluded from gross income.
A)True
B)False
Answer: False
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4
Chapter 3: Additional Income Part 1
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114 Verified Questions
114 Flashcards
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Sample Questions
Q1) Which of the following is not a factor that the IRS looks at to determine if a loss is from a hobby or from a business?
A)Whether the activity is owned and run by the taxpayer alone
B)The history of the income and loss from the activity
C)Whether the losses are due to circumstances beyond a person's control
D)The financial status of the taxpayer
Answer: A
Q2) Under the specific charge-off method, a deduction for a bad debt is taken when the debt is determined to be worthless.
A)True
B)False
Answer: True
Q3) A gift to a foreman by a worker is considered business related and therefore subject to the $25 limit.
A)True
B)False
Answer: False
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Chapter 4: Additional Income Part 2
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109 Flashcards
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Sample Questions
Q1) An asset has an original basis of $25,000 and depreciation has been claimed for the asset in the amount of $20,000.If the asset's adjusted basis is $15,000, what is the amount of capital improvements that have been made to the asset?
A)$5,000
B)$10,000
C)$20,000
D)$30,000
E)None of the above
Q2) Which of the following sales results in a short-term gain/loss?
A)A capital asset bought on June 30, 2017 and sold June 20, 2018.
B)A capital asset bought on July 25, 2017 and sold August 19, 2018.
C)A capital asset bought on September 12, 2011 and sold August 19, 2018.
D)A capital asset bought on August 15, 2017 and sold August 16, 2018.
E)All of the above are long-term gains/losses.
Q3) The adjusted basis of an asset may be determined by the:
A)Selling price + gain realized.
B)Selling price gain realized.
C)Selling price + capital improvements accumulated depreciation.
D)Original basis + capital improvements selling price.
E)None of the above.
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Chapter 5: Deductions and Adjustments to Income
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135 Verified Questions
135 Flashcards
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Sample Questions
Q1) Jim lives in California.What is Jim's deadline for making a contribution to traditional IRA or a Roth IRA for 2018?
A)April 15, 2018
B)December 31, 2018
C)April 15, 2019
D)October 15, 2019
Q2) In 2018, all taxpayers may make a deductible or nondeductible contribution to an IRA.
A)True
B)False
Q3) Earnings on nondeductible IRA contributions are allowed to accumulate tax-free until they are withdrawn.
A)True
B)False
Q4) Meade paid $5,000 of state income taxes in 2018.The total actual sales taxes paid during 2018 was $4,500, which did not include $3,000 for the sales taxes paid in 2018 on Meade's new boat.How should Meade treat the taxes paid in his 2018 tax return?
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Chapter 6: Accounting Methods and Taxes
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Sample Questions
Q1) Which of the following is true with respect to the related party rules?
A)Bill sells stock to his sister for a $3,000 loss.Bill can deduct the loss on his tax return.
B)A taxpayer's uncle is a related party for purposes of Section 267.
C)A disallowed loss on a related party transaction can be used to offset any future gain when the property is sold to an unrelated party.
D)Under the constructive ownership rules of Section 267, a shareholder owns 10 percent of the stock owned by a corporation in which he or she is a shareholder.
E)None of the above are true.
Q2) Karen is single and earns wages of $250,000 in 2018.She has no other income.How much is her 0.9 percent Medicare tax on earned income?
Q3) The hybrid method of accounting involves the use of both the accrual and cash methods of accounting.
A)True B)False
Q4) Unearned income of a 16-year-old child may be taxed at trust and estate rates. A)True B)False
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Chapter 7: Tax Credits
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Sample Questions
Q1) The child tax credit is not available for children ages 17 and older.
A)True
B)False
Q2) A tax credit is allowed for qualified adoption expenses paid by taxpayers:
A)And an additional credit is allowed for qualified adoption expenses paid for by taxpayers' employers.
B)And an income exclusion is allowed for qualified adoption expenses paid for by taxpayers' employers.
C)And is available each year qualifying expenses are incurred.
D)And is not subject to a phase-out based on adjusted gross income.
Q3) Vicky is a single, 21-year-old, full-time student who purchased health care through the state health care exchange for the full year.Her part-time job pays her $12,000 in 2018.She files her own tax return but is claimed as a dependent by her parents.Vicky is eligible for the premium tax credit.
A)True
B)False
Q4) Maxine is a 29-year-old single mother.Her tax liability before any credits is $1,000 and her earned income credit is $2,500.What is the amount of Maxine's refund? Explain.
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Page 9
Chapter 8: Depreciation and Sale of Business Property
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Sample Questions
Q1) John purchases residential rental property on June 30, 2018 for a cost of $290,000.Of this amount, $140,000 is allocable to the cost of the home and the remaining $150,000 is allocable to the cost of the land.What is John's maximum depreciation deduction for 2018?
A)$2,758
B)$1,485
C)$1,061
D)$370
E)None of the above
Q2) In the current year, Tim sells Section 1245 property for $28,000 that he had purchased 6 years ago.Tim has claimed $7,000 in depreciation on the property and originally purchased it for $20,000.How much of the gain is taxable as ordinary income?
A)$7,000
B)$8,000
C)$13,000
D)$18,000
E)None of the above is correct
Q3) To be depreciated, must an asset actually lose value each year?
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Chapter 9: Payroll, Estimated Payments, and Retirement Plans
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Sample Questions
Q1) Employers must provide employees with their Form W-2 by February 15 of the year following the calendar year of payment of the wages.
A)True
B)False
Q2) The FUTA tax is a voluntary unemployment tax which an employer may or may not wish to contribute toward.
A)True
B)False
Q3) Karen is single with no dependents and earns $18,000 a year.She gives her employer a Form W-4 on which she claims 17 allowances.What is her employer required to do about the Form W-4? Explain.
Q4) Janet is single and claims two allowances on her Form W-4.In 2018, her salary is $1,800 per month.
a.Use the percentage method to calculate the amount of Janet's withholding for a monthly pay period.
b.Use the withholding tables to determine the amount of Janet's withholding for a monthly pay period.
Q5) What is the purpose of backup withholding?
Page 11
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Chapter 10: Partnership Taxation
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Sample Questions
Q1) Which of the following is true about an LLC (Limited Liability Company)?
A)An LLC is always treated like a corporation for tax purposes.
B)An LLC must have at least two members.
C)An LLC is always taxed like a partnership.
D)An LLC's limited liability is similar to a corporation's.
E)All of the above are false.
Q2) Please answer the following questions:
a.What form is used to report income and expenses from a partnership?
b.If a partner's basis at the beginning of the year is $1,000 and the partnership allocates $7,000 of loss to the partner: how much of the loss is deductible in the current year; what is his new basis in the partnership; and what happens to any excess loss not deducted?
c.What is the exemption amount for a partnership?
Q3) The "at-risk" rule applies, with limited exceptions, to all taxable activities.
A)True
B)False
Q4) There is no general partner required in a limited liability company (LLC).
A)True
B)False
Q5) List three benefits of an LLC.
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Chapter 11: The Corporate Income Tax
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Sample Questions
Q1) An S corporation files a Form 1120S.
A)True
B)False
Q2) A corporation owning 80 percent or more of the stock of another corporation has a dividends-received deduction of 100 percent.
A)True
B)False
Q3) The Peach Corporation is a regular corporation that contributes $25,000 cash to qualified charitable organizations during the current year.The corporation has net taxable income of $190,000 before deducting the contributions.
a.What is the amount of Peach Corporation's allowable deduction for charitable contributions for the current year?
b.What may the corporation do with any excess amount of contributions?
Q4) A corporation may elect to take a credit for dividends paid in lieu of claiming a dividends-received deduction.
A)True
B)False
Q5) What is the purpose of Schedule M-1?
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Chapter 12: Tax Administration and Tax Planning
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Sample Questions
Q1) The IRS may issue summons for a taxpayer's bank account records.
A)True
B)False
Q2) All paid tax return preparers must sign up with the IRS and obtain a preparer tax identification number.
A)True
B)False
Q3) A taxpayer made estimated tax payments in excess of the tax due for the year, but failed to file a tax return.Since the taxes were paid in full, would there be a penalty?
Q4) A taxpayer's average tax rate is determined by dividing the total tax paid by the total income of the taxpayer.
A)True
B)False
Q5) What are the requirements that an unenrolled preparer needs to do in order to participate in the Annual Filing Season Program?
Q6) Tax evasion involves the use of illegal methods to reduce or avoid income tax.
A)True
B)False
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