Personal Income Tax
Pre-Test Questions
Course Introduction
This course provides an in-depth introduction to the principles and practices of personal income taxation. Students will explore the structure and function of income tax systems, focusing on the laws, regulations, and policies governing individual taxpayers. Topics include income determination, allowable deductions and credits, filing requirements, tax planning strategies, and compliance obligations. The course emphasizes practical application through case studies and tax return preparation, equipping students with the skills necessary to understand and manage personal income tax responsibilities effectively.
Recommended Textbook
Income Tax Fundamentals 2017 35th Edition by Gerald
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12 Chapters
1259 Verified Questions
1259 Flashcards
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E. Whittenburg
Page 2
Chapter 1: The Individual Income Tax Return
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128 Verified Questions
128 Flashcards
Source URL: https://quizplus.com/quiz/70133
Sample Questions
Q1) If taxpayers are married and living together at the end of the year, they must file a joint tax return.
A)True
B)False
Answer: False
Q2) The maximum official individual income tax rate for 2016 is 39.6 percent, not including the Medicare surtax on net investment income.
A)True
B)False
Answer: True
Q3) An unmarried taxpayer who maintains a household for a dependent child and whose spouse died four years ago should file as:
A)Single
B)Head of household
C)Qualifying widow(er)
D)Married, filing separately
E)None of the above
Answer: B
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Chapter 2: Gross Income and Exclusions
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132 Verified Questions
132 Flashcards
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Sample Questions
Q1) An auto that is received as a prize should be included in the taxpayer's income at its list price rather than its fair market value.
A)True
B)False
Answer: False
Q2) In June of the current year, Rob's wealthy stepmother died and left him a stock portfolio worth $600,000. Before she died, she gave him a gift of $20,000 in cash. How much of these amounts, if any, are taxable to Rob? Why?
Answer: $0
Inheritances and gifts are not taxable to the recipient.
Q3) If a taxpayer holding EE bonds makes an election with respect to the taxation of the bonds, how is the interest which accrues on the bonds, but is not paid, taxed each year?
Answer: If an election is made, the annual increase in the redemption value of the bond (or interest accrual as it is commonly called) is included in taxable income each year.
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Chapter 3: Business Income and Expenses Part I
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122 Verified Questions
122 Flashcards
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Sample Questions
Q1) Ellen loans Nicole $45,000 to start a hair salon. Unfortunately, the business fails in 2016 and she is unable to pay back Ellen. In 2016, Ellen also had $20,000 of income from her part-time job and $15,000 of capital gain from the sale of stock. How much of the $45,000 bad debt can Ellen claim as a capital loss in 2016?
A)$12,000, with $33,000 carried forward to 2017
B)$18,000, with $27,000 carried forward to 2017
C)$35,000
D)$15,000, with $30,000 carried forward to 2017
E)$0
Answer: B
Q2) Gary is a self-employed accountant who pays $2,000 for business meals. How much of a deduction can he claim for the meals and where should the deduction be claimed?
A)50 percent, miscellaneous itemized deduction
B)50 percent, Schedule C deduction
C)100 percent, miscellaneous itemized deduction
D)100 percent, Schedule C deduction
Answer: B
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Page 5
Chapter 4: Business Income and Expenses Part II
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97 Verified Questions
97 Flashcards
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Sample Questions
Q1) If a residence is rented for 15 days or more and is used for personal purposes for not more than 14 days or 10 percent of the days rented, whichever is greater, no allocation of expenses is required and the taxpayer may claim a deduction for the full amount of the expenses.
A)True
B)False
Q2) Serissa Corporation has a Section 401(k) plan for its employees. The plan provides for a maximum contribution equal to 15 percent of the employees' salaries. Scott, a 40-year-old employee of Serissa Corporation, elects to contribute the maximum amount possible to the Section 401(k) plan. During 2016, Scott has $42,000 in wages. For 2016, what is the maximum amount that Scott may contribute to the plan on a tax-deferred basis?
Q3) Selma owns a beach cottage that she rents to tourists. In the current year she rented the cottage for 90 days. What is the maximum number of days Selma can use the cottage before her expense deduction will be limited to her gross rental income?
A)0 days
B)9 days
C)14 days
D)18 days
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Page 6
Chapter 5: Itemized Deductions and Other Incentives
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143 Verified Questions
143 Flashcards
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Sample Questions
Q1) The 2016 standard mileage rate for taxpayer use of a personal auto for transportation for medical care is $.23 per mile.
A)True
B)False
Q2) All personal casualty losses incurred during the year are added together and only one $100 floor amount is used to reduce the casualty deduction.
A)True
B)False
Q3) If the taxpayer fails to locate a job, job hunting expenses are not deductible.
A)True
B)False
Q4) Which of the following is not deductible as an itemized deduction?
A)State income taxes
B)Personal property taxes
C)Charitable contributions
D)Local income taxes
E)All of the above may be deductible as itemized deductions
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Chapter 6: Credits and Special Taxes
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107 Verified Questions
107 Flashcards
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Sample Questions
Q1) Margo and her spouse have health insurance for the entire year through the state health care exchange. Margo will need to pay her spouse's individual shared responsibility.
A)True
B)False
Q2) Alice is a single taxpayer with no dependents that has AGI of $9,000 in 2016. Alice is required to carry minimum essential coverage in 2016.
A)True
B)False
Q3) List at least two AMT preferences and/or adjustments and show the simplified formula for calculating AMT. Do not include dollar exemption amounts or the tax rate schedule.
Q4) The child tax credit is $1,000 per qualifying child unless it is phased out due to higher levels of parental income.
A)True
B)False
Q5) New York is a community property state.
A)True
B)False
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Chapter 7: Accounting Periods and Methods and Depreciation
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111 Verified Questions
111 Flashcards
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Sample Questions
Q1) ABC Corp bought a production machine on January 1, 2014 for $31,250. The company elected out of Section 179 expensing and elected out of claiming bonus depreciation in 2014, and is depreciating the machine using the MACRS accelerated depreciation tables for 5-year property. What is the 2016 depreciation (year 3) deduction for the machine?
A)$6,000
B)$6,250
C)$10,000
D)$12,500
E)None of the above is correct
Q2) An asset (not an automobile) put in service in June 2016 has a depreciable basis of $535,000, a recovery period of 5 years, and is the only asset placed in service during the year. Assuming bonus depreciation is used, a half-year convention, and the expensing election is made, what is the maximum amount of cost that can be deducted in 2016 (assume no income limitation)?
A)$267,500
B)$321,000
C)$500,000
D)$521,000
E)$535,000
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Chapter 8: Capital Gains and Losses
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109 Verified Questions
109 Flashcards
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Sample Questions
Q1) What is the treatment given to personal casualty gains and losses?
Q2) Accounts receivable are capital assets.
A)True
B)False
Q3) Sol purchased land as an investment on January 12, 2011 for $85,000. On January 31, 2016, Sol sold the land for $90,000 cash. What is the nature of the gain or loss?
A)Long-term capital loss
B)Long-term capital gain
C)Short-term capital gain
D)Short-term capital loss
E)None of the above
Q4) Stewart, age 44, sells his personal residence of 4 years on June 14, 2016, for $190,000. The expenses of sale are $15,000 and he has paid for capital improvements of $3,000. Stewart purchased the residence for $100,000. On February 2, 2017, Stewart purchases and occupies a new residence at a cost of $200,000.
a.Calculate the gain realized on the sale of Stewart's residence.
b.How much gain must be recognized on the sale of Stewart's residence?
c.Calculate Stewart's basis in the new residence.
Q5) What are capital assets?
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Chapter 9: Withholding Estimated Payments and Payroll Taxes
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82 Verified Questions
82 Flashcards
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Sample Questions
Q1) If a husband and wife both work, they must divide their withholding allowances equally on their W-4 Forms.
A)True
B)False
Q2) 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.
Q3) In 2016, Lew earned wages of $386,724.
a.What is the amount of Social Security tax withheld from his salary?
b.What is the amount of Medicare tax (including surtax) withheld from his salary?
Q4) Choose the correct answer. Self-employment taxes:
A)Consist of Medicare tax and Social Security tax.
B)Are not affected by wages the taxpayer earns as an employee.
C)Apply to taxpayers with less than $400 in self-employment earnings.
D)Are calculated based on unearned income such as interest and dividends as well as net earnings from self-employment.
Q5) Tom had net earnings of $80,000 from the plant nursery he owns. What is his liability for FICA taxes on his earnings?
11
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Chapter 10: Partnership Taxation
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81 Verified Questions
81 Flashcards
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Sample Questions
Q1) Phil and Bill each own a 50 percent interest in P&B Interests. P&B Interests has ordinary income for the year of $35,000 before guaranteed payments to Phil. If Phil receives guaranteed payments of $20,000 during the tax year, what is the total income or loss that should be reported by Bill from the partnership for this tax year?
A)$5,000 income
B)$7,500 income
C)$25,000 income
D)$30,000 income
E)None of the above
Q2) Owen owns 60 percent of the Big Time partnership. He sells to the partnership a machine for $70,000 that has a $45,000 basis. What would the taxable income be for Owen and what is the partnership's basis in the machine?
A)$25,000; $45,000
B)$0; $45,000
C)$25,000; $70,000
D)None of the above is correct
Q3) The "at-risk" rule does not apply to activities involving real estate.
A)True
B)False
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Page 12
Chapter 11: The Corporate Income Tax
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80 Verified Questions
80 Flashcards
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Sample Questions
Q1) Which of the following statements is true of corporations?
A)Income of all corporations is taxed in the same way that income of partnerships is taxed.
B)A corporation's charitable contribution deduction is limited to 25 percent of the corporation's taxable income.
C)Capital losses of a corporation may be deducted from ordinary income, subject to an annual limitation.
D)If a corporation has a long-term capital loss that is carried back, it is treated as a short-term capital loss.
E)A corporation may deduct organizational expenditures as they are incurred.
Q2) What is the maximum amount of accumulated earnings that a corporation is allowed to accumulate, without regard to business needs, before the accumulated earnings tax is imposed?
A)$150,000 for all corporations
B)$150,000 for nonservice corporations only
C)$250,000 for all corporations
D)$250,000 for nonservice corporations only
E)None of the above
Q3) What is the purpose of Schedule M-1?
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Page 13
Chapter 12: Tax Administration and Tax Planning
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67 Flashcards
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Sample Questions
Q1) Which of the following types of audits was suspended due to protests from taxpayers and lawmakers?
A)Discriminant Function System selected audit
B)Taxpayer Compliance Measurement Program selected audit
C)Correspondence audit
D)Office audit
E)None of the above
Q2) Tax returns selected for most audits are selected by the Discriminant Function System.
A)True
B)False
Q3) The tax law is administered by the Federal Trade Commission.
A)True
B)False
Q4) Which of the following is not a possible result of an audit by the IRS?
A)Payment of a refund to the taxpayer
B)Payment of a deficiency by the taxpayer
C)An appeal
D)No change in the liability
E)All of the above are possible results
Page 14
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