Jenna Williams
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Introduction to Taxation, Accounting 315

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ACCT315 Intro to Taxation

Question 1 of 67

1

Taxes influence personal decisions such as whether to buy or rent a house.

Select one of the following:

  • True
  • False

Explanation

Question 2 of 67

1

Jerry recently paid $20 in tolls for the Florida turnpike. The payment of $20 is considered a tax.

Select one of the following:

  • True
  • False

Explanation

Question 3 of 67

1

Taxes are voluntary payments paid to a government for a specific benefit received by the specific taxpayer.

Select one of the following:

  • True
  • False

Explanation

Question 4 of 67

1

The federal income tax is an example of a regressive tax system.

Select one of the following:

  • True
  • False

Explanation

Question 5 of 67

1

The marginal tax rate is often used in tax planning.

Select one of the following:

  • True
  • False

Explanation

Question 6 of 67

1

The gift tax is imposed on the fair market value of items transferred upon death.

Select one of the following:

  • True
  • False

Explanation

Question 7 of 67

1

A reduced pre-tax rate of return on municipal bonds is an example of an explicit tax.

Select one of the following:

  • True
  • False

Explanation

Question 8 of 67

1

Marc, a single taxpayer, earns $100,000 in taxable income and $10,000 in interest from an investment in city of Birmingham Bonds. Using the U.S. tax rate schedule for year 2018, what is his effective tax rate (rounded)? (Tax rate schedule) http://ezto-demo.mheducation.com/extMedia/bne/accounting/spilker_10e/taxrateschedule2018.png

Select one of the following:

  • 22%

  • 24%

  • 18.29%

  • 16.63%

  • None of the choices are correct

Explanation

Question 9 of 67

1

James invests $100,000 in a city of Athens bond that pays 8% interest. Alternatively, James could have invested the $100,000 in a bond recently issued by HighTech, Inc. that pays 10% interest with similar risk as the city of Athens bond. Assume that James’s marginal tax rate is 25%. Which bond should James should choose and why?

Select one of the following:

  • The HighTech, Inc. bond because it earns a higher pre-tax rate of return

  • The HighTech, Inc. bond because it earns a higher after-tax rate of return

  • The city of Athens bond because it earns a higher pre-tax rate of return

  • The city of Athens bond because it earns a higher after-tax rate of return

  • James should be indifferent between the two bonds

Explanation

Question 10 of 67

1

Marc, a single taxpayer, earns $100,000 in taxable income and $10,000 in interest from an investment in city of Birmingham Bonds. If Marc earned an additional $80,000, what would his 2018 marginal tax rate be on the $80,000 (rounded)? (Tax rate schedule)

Select one of the following:

  • 26.25%

  • 24%

  • 32.48%

  • 32%

Explanation

Question 11 of 67

1

Marc, a single taxpayer, earns $100,000 in taxable income and $10,000 in interest from an investment in city of Birmingham Bonds. Using the U.S. tax rate schedule for year 2018, what is his average tax rate (rounded)? (Tax rate schedule)

Select one of the following:

  • 22.%

  • 13.88%

  • 18.29%

  • 24%

  • None of the choices are correct.

Explanation

Question 12 of 67

1

Mitch, a single taxpayer, earns $100,000 in taxable income and $10,000 in interest from an investment in city of Birmingham Bonds. Using the U.S. tax rate schedule for year 2018, how much federal tax will he owe? (Tax rate schedule)

Select one of the following:

  • $22,000

  • $18,289.50

  • $13,879

  • $24,000

  • None of the choices are correct

Explanation

Question 13 of 67

1

Horizontal equity means that two taxpayers with different amounts of income should pay different amounts of tax but fairly in relation to their ability to pay.

Select one of the following:

  • True
  • False

Explanation

Question 14 of 67

1

Which of the following is considered a tax:

Select one of the following:

  • Fees to register an automobile

  • Speeding ticket

  • Entrance fee for a national museum

  • Local surcharge for a homeowner to connect to city sewer service

  • 1% local surcharge on hotel rooms to pay for city government.

Explanation

Question 15 of 67

1

Which of the following is an example of a progressive tax system?

Select one of the following:

  • social security tax

  • sales tax

  • proportional tax

  • US Federal Income tax

Explanation

Question 16 of 67

1

Fill the blank space to complete the text.

Mitch, a single taxpayer, earns $100,000 in taxable income and $10,000 in interest from an investment in city of birmingham Bonds. Using the US tax rate schedule for year 2018, how much federal tax will he owe? Federal tax due =

Explanation

Question 17 of 67

1

Fill the blank space to complete the text.

Average tax rate for Marc, single taxpayer, earns $100,000 taxable income, $10,000 interest from investment bond. 2018 US tax rate schedule. Average tax rate =

Explanation

Question 18 of 67

1

Fill the blank space to complete the text.

Average tax rate for arc, single taxpayer, earns $100,000 taxable income, $10,000 interest from investment bond. 2018 US tax rate schedule. What is his effective tax rate? =

Explanation

Question 19 of 67

1

Fill the blank space to complete the text.

If Marc earned an additional $80,000, what would his 2018 marginal tax rate be on the $80,000? Marginal tax rate =

Explanation

Question 20 of 67

1

Fill the blank space to complete the text.

Change in tax / change in income = tax rate

Explanation

Question 21 of 67

1

Fill the blank space to complete the text.

Hugh has the choice between investing in a City of Heflin bond at 6 percent and a Surething bond at 9 percent. Assuming that both bonds have the same nontax characteristics and that Hugh has a 40 percent marginal tax rate, in which bond should she invest?

Explanation

Question 22 of 67

1

Fill the blank space to complete the text.

Hugh has the choice between investing in a City of Heflin bond at 6 percent and a Surething bond at 9 percent. Assuming that both bonds have the same nontax characteristics and that Hugh has a 40 percent marginal tax rate, in which bond should she invest? Using the facts in this problem, what interest rate does Surething, Inc. need to offer to make Hugh indifferent between investing in the two bonds? Pretax return =

Explanation

Question 23 of 67

1

Income-related items are excluded from gross income unless specifically included by a provision in the tax code.

Select one of the following:

  • True
  • False

Explanation

Question 24 of 67

1

Based on the tax law effective for 2018, it is no longer important to determine who is a taxpayer's dependent because the deduction for dependency exemptions is zero.

Select one of the following:

  • True
  • False

Explanation

Question 25 of 67

1

In prior years, John was single and he was a qualifying child of his parents. This year John, age 23 and a full-time student, got married. John and his wife file a joint return. If they were to file separately, John would report a $0 tax liability. John’s wife would report a $200 tax liability. John’s parents cannot claim him as a dependent in the current year.

Select one of the following:

  • True
  • False

Explanation

Question 26 of 67

1

A temporary absence from the taxpayer’s home for full-time schoolwork by the child may cause the child to fail the qualifying child residence test.

Select one of the following:

  • True
  • False

Explanation

Question 27 of 67

1

For purposes of determining filing status, a taxpayer’s marital status is determined on the last day of the tax year in question.

Select one of the following:

  • True
  • False

Explanation

Question 28 of 67

1

If spouses are filing separate returns, both spouses must itemize their deductions even if the itemized deductions are less than the standard deduction for one of the spouses.

Select one of the following:

  • True
  • False

Explanation

Question 29 of 67

1

Trudy and Ben file a joint return. Trudy’s reported income creates $200 of income tax and Ben’s reported income creates $180 of income tax. In addition to the reported income, Trudy has unreported income on which she owes $50 of income tax. How much of the $430 potential tax liability is Ben liable for?

Select one of the following:

  • $50

  • $180

  • $380

  • $430

Explanation

Question 30 of 67

1

James received $25,000 of compensation from his employer and he received $1,900 of interest from a municipal bond. What is the amount of James’s gross income?

Select one of the following:

  • $0

  • $1,900

  • $25,000

  • $26,900

Explanation

Question 31 of 67

1

Which of the following is a from AGI deduction?

Select one of the following:

  • Contributions to qualified retirement accounts

  • rental and royalty expenses

  • business expenses for a self-employed taxpayer

  • home mortgage interest expense

Explanation

Question 32 of 67

1

Which of the following is not an itemized deduction?

Select one of the following:

  • Deduction for qualified business income

  • medical expenses

  • state income taxes

  • charitable contributions

  • none of the choices are correct

Explanation

Question 33 of 67

1

Sarah is the Colton family’s 23-year-old daughter. She is a full-time student at an out-of-state university (for 8 months of the year) but plans to return home when the school year ends. During the year, Sarah earned $4,500 of income working part-time. Her support totaled $20,000 for the year. Of this amount, Sarah paid $7,000 with her own funds, her parents paid $12,000, and Sarah’s grandparents paid $1,000. Which of the following statements most accurately describes whether Sarah’s parents can claim a dependency exemption for her?

Select one of the following:

  • Yes, Sarah is a qualifying child of her parents.

  • No, Sarah fails the support test for both qualifying children and qualifying relatives.

  • No, Sarah does not pass the gross income test.

  • Yes, Sarah is a qualifying relative of her parents.

Explanation

Question 34 of 67

1

Filing status determines all except which of the following

Select one of the following:

  • The AGI threshold for reductions in certain tax benefits.

  • The amount used for the qualifying relative gross income test.

  • the appropriate tax rate schedule or tax table.

  • the applicable standard deduction amount.

Explanation

Question 35 of 67

1

In May of year 1, David left his wife Juliette. While the couple was apart, they were not legally divorced. Juliette found herself having to financially provide for the couple’s only child (6 years of age) and to pay all the costs of maintaining the household. When Juliette filed her tax return for year 1, she filed a return separate from David. What is Juliette’s most favorable filing status for year 1?

Select one of the following:

  • Head of household

  • single

  • married filing separately

  • qualifying widow

Explanation

Question 36 of 67

1

In year 1, Danny’s wife died. Danny has no dependents. As of the end of year 2, Danny had not remarried. Which is the most advantageous filing status available to Danny in year 2?

Select one of the following:

  • married filing joint

  • surviving spouse

  • married filing separate

  • single

  • head of household

Explanation

Question 37 of 67

1

Caroline and her husband Chris got divorced in May of this year. During the year, Caroline provided all the support for herself and her 23-year-old child Hans (not a full-time student) who lived in the same home as Caroline for the entire year. Hans earned $29,000 this year. What is the Caroline’s most favorable filing status for the year?

Select one of the following:

  • head of household

  • married filing separately

  • surviving spouse

  • single

Explanation

Question 38 of 67

1

Fill the blank space to complete the text.

Jeremy earned $100,200 in salary and $6,200 in interest income during the year. Jeremy’s employer withheld $11,200 of federal income taxes from Jeremy’s paychecks during the year. Jeremy has one qualifying dependent child who lives with him. Jeremy qualifies to file as head of household and has $23,200 in itemized deductions. (Use the tax rate schedules.)
a. Determine Jeremy’s tax refund or taxes due.
Description Amount
Gross income $106,400
For AGI deductions 0
Adjusted gross income $106,400
Standard deduction 18,000
Itemized deductions 23,200
Greater of s/d or itemized deduction 23,200
Taxable income $83,200
Income tax liability $12,866
Child tax credit 2,000
Tax withholding 11,200
Taxes refunds

Explanation

Question 39 of 67

1

Fill the blank space to complete the text.

Jeremy earned $100,200 in salary and $6,200 in interest income during the year. Jeremy’s employer withheld $11,200 of federal income taxes from Jeremy’s paychecks during the year. Jeremy has one qualifying dependent child who lives with him. Jeremy qualifies to file as head of household and has $23,200 in itemized deductions.

b. Assume that in addition to the original facts, Jeremy has a long-term capital gain of $4,550. What is Jeremy’s tax refund or tax due including the tax on the capital gain?

Description Amount
Gross income $110,950
For AGI deductions 0
Adjusted gross income $110,950
Standard deduction 18,000
Itemized deductions 23,200
Greater of s/d or itemized
deduction 23,200
Taxable income $87,750
Income tax liability $13,549*
Child tax credit 2,000
Tax withholding 11,200
Taxes due

Explanation

Question 40 of 67

1

Fill the blank space to complete the text.

Jeremy earned $100,200 in salary and $6,200 in interest income during the year. Jeremy’s employer withheld $11,200 of federal income taxes from Jeremy’s paychecks during the year. Jeremy has one qualifying dependent child who lives with him. Jeremy qualifies to file as head of household and has $23,200 in itemized deductions. (Use the tax rate schedules.)

C. Assume the original facts except that Jeremy had only $7,000 in itemized deductions. What is Jeremy’s tax refund or tax due?

Description Amount
Gross income $110,950
For AGI deductions 0
Adjusted gross income $110,950
Standard deduction 18,000
Itemized deductions 7,000
Greater of s/d or itemized
deduction 23,200
Taxable income $87,750
Income tax liability $13,549*
Child tax credit 2,000
Tax withholding 11,200
Taxes due

Explanation

Question 41 of 67

1

Fill the blank space to complete the text.

David and Lilly Fernandez have determined their tax liability on their joint tax return to be $1,705. They have made prepayments of $875 and also have a child tax credit of $2,000.

What is the amount of their tax refund or taxes due?

Description Amount
(1)Total tax $1,705
(2)Prepayment 875
(3)Child tax credit 2,000
Tax refund

Explanation

Question 42 of 67

1

Fill the blank spaces to complete the text.

Through November, Cameron has received gross income of $60,000. For December, Cameron is considering whether to accept one more work engagements for the year. Engagement 1 will generate $7,960 of revenue at a cost to Cameron of $3,700, which is deductible for AGI. In contrast, engagement 2 will generate $8,250 of qualified business income (QBI) which is eligible for the 20% QBI deduction. Cameron files as a single taxpayer.

Calculate Cameron’s taxable income assuming he chooses engagement 1 and assuming he chooses engagement 2. Assume he has no itemized deductions.

Description Engagement 1 Engagement 2
Gross income before new work engagement $60,000 $60,000
Income from engagement 7,960 8,250
Additional for AGI deduction 3,700 0
Adjusted gross income $64,260 $68,250
Greater of itemized deductions or S/D 12,000 12,000
Deduction for QBI 0 1,650
Taxable income

Explanation

Question 43 of 67

1

Gary and Lakesha were married on December 18 last year. They are now preparing their taxes for the April 15 deadline and are unsure of their filing status. Select all that apply.

Select one or more of the following:

  • Single

  • married filing jointly

  • married filing separately

  • head of household

Explanation

Question 44 of 67

1

Gary and Lakesha were married on December 18 last year. They are now preparing their taxes for the April 15 deadline and are unsure of their filing status. (Select All That Apply.)

Assume instead that Gary and Lakesha were married on January 5 of this year. What is their filing status for last year (neither has been married before and neither had any dependents last year)?

Select one of the following:

  • Single

  • married filing jointly

  • married filing separately

  • head of household

Explanation

Question 45 of 67

1

Gary and Lakesha were married on December 18 last year. They are now preparing their taxes for the April 15 deadline and are unsure of their filing status. (Select All That Apply.)

What filing status options do Gary and Lakesha have for last year?

Select one or more of the following:

  • single

  • married filing jointly

  • married filing separately

  • head of household

Explanation

Question 46 of 67

1

Gary and Lakesha were married on December 18 last year. They are now preparing their taxes for the April 15 deadline and are unsure of their filing status. (Select All That Apply.)

Assume instead that Gary and Lakesha were married on January 1 of this year. What is their filing status for last year (neither has been married before and neither had any dependents last year)?

Select one or more of the following:

  • single

  • married filing jointly

  • married filing separately

  • head of household

Explanation

Question 47 of 67

1

Fill the blank space to complete the text.

Jasper and Crewella Dahvill were married in year 0. They filed joint tax returns in years 1 and 2. In year 3, their relationship was strained and Jasper insisted on filing a separate tax return. In year 4, the couple divorced. Both Jasper and Crewella filed single tax returns in year 4. In year 5, the IRS audited the couple’s joint year 2 tax return and each spouse’s separate year 3 tax returns. The IRS determined that the year 2 joint return and Crewella’s separate year 3 tax return understated Crewella’s self-employment income, causing the joint return year 2 tax liability to be understated by $12,700 and Crewella’s year 3 separate return tax liability to be understated by $7,350. The IRS also assessed penalties and interest on both of these tax returns. Try as it might, the IRS has not been able to locate Crewella, but they have been able to find Jasper.

a. What amount of tax can the IRS require Jasper to pay for the Dahvill’s year 2 joint return?

Explanation

Question 48 of 67

1

Fill the blank space to complete the text.

Jasper and Crewella Dahvill were married in year 0. They filed joint tax returns in years 1 and 2. In year 3, their relationship was strained and Jasper insisted on filing a separate tax return. In year 4, the couple divorced. Both Jasper and Crewella filed single tax returns in year 4. In year 5, the IRS audited the couple’s joint year 2 tax return and each spouse’s separate year 3 tax returns. The IRS determined that the year 2 joint return and Crewella’s separate year 3 tax return understated Crewella’s self-employment income, causing the joint return year 2 tax liability to be understated by $12,700 and Crewella’s year 3 separate return tax liability to be understated by $7,350. The IRS also assessed penalties and interest on both of these tax returns. Try as it might, the IRS has not been able to locate Crewella, but they have been able to find Jasper.

b. What amount of tax can the IRS require Jasper to pay for Crewella’s year 3 separate tax return?

Explanation

Question 49 of 67

1

Juan and Bonita are married and have two dependent children living at home. This year, Juan is killed in an avalanche while skiing.

a. What is Bonita’s filing status this year?

Select one or more of the following:

  • single

  • qualifying widow

  • married filing jointly

Explanation

Question 50 of 67

1

JJuan and Bonita are married and have two dependent children living at home. This year, Juan is killed in an avalanche while skiing.

c. Assuming Bonita doesn’t remarry and doesn’t have any dependents next year, what will her filing status be next year?

Select one or more of the following:

  • Single

  • Qualifying widow

  • Married filing jointly

Explanation

Question 51 of 67

1

Kimberly is divorced and the custodial parent of a three-year-old girl named Bailey. Kimberly and Bailey live with Kimberly’s parents, who pay all the costs of maintaining the household (such as mortgage, property taxes, and food). Kimberly pays for Bailey’s clothing, entertainment, and health insurance costs. These costs comprised only a small part of the total costs of maintaining the household. Kimberly does not qualify as her parents’ dependent.
a. Determine the appropriate filing status for Kimberly.

Select one or more of the following:

  • single

  • head of household

  • married filing single

Explanation

Question 52 of 67

1

Kimberly is divorced and the custodial parent of a three-year-old girl named Bailey. Kimberly and Bailey live with Kimberly’s parents, who pay all the costs of maintaining the household (such as mortgage, property taxes, and food). Kimberly pays for Bailey’s clothing, entertainment, and health insurance costs. These costs comprised only a small part of the total costs of maintaining the household. Kimberly does not qualify as her parents’ dependent.

b. What if Kimberly lived in her own home and provided all the costs of maintaining the household?

Select one or more of the following:

  • single

  • head of household

  • married filing single

Explanation

Question 53 of 67

1

Gross income includes all realized income that is recognized during the year.

Select one of the following:

  • True
  • False

Explanation

Question 54 of 67

1

A taxpayer who receives money when taking out a bank loan will include the amount borrowed in their gross income under the all-inclusive definition of income.

Select one of the following:

  • True
  • False

Explanation

Question 55 of 67

1

The cash method of accounting requires taxpayers to recognize income when they receive it in the form of cash, property, or services.

Select one of the following:

  • True
  • False

Explanation

Question 56 of 67

1

Generally, a portion of each payment from a purchased annuity represents a return of capital.

Select one of the following:

  • True
  • False

Explanation

Question 57 of 67

1

The exclusion amount for a purchased fixed-term annuity can be calculated by dividing the cost of the annuity by the total number of payments.

Select one of the following:

  • True
  • False

Explanation

Question 58 of 67

1

Gambling winnings are excluded from gross income.

Select one of the following:

  • True
  • False

Explanation

Question 59 of 67

1

Larry received $4,250 from disability insurance that he purchased earlier this year from an insurance provider. Larry is allowed to exclude the $4,250 from his gross income.

Select one of the following:

  • True
  • False

Explanation

Question 60 of 67

1

Worker’s compensation benefits received from a state-sponsored workers’ compensation plan are taxable.

Select one of the following:

  • True
  • False

Explanation

Question 61 of 67

1

This year Bill purchased 1,000 shares of Cain common stock for $12 per share. At year-end the Cain shares were worth $32 per share. What amount must Bill include in income this year?

Select one of the following:

  • $12,000

  • $20,000

  • $32,000

  • Bill can deduct $12,000 because his cost is a return of capital

  • None of the choices are correct - Bill has not realized any gain

Explanation

Question 62 of 67

1

Identify the rule that determines whether a taxpayer must include in income a refund of an amount deducted in a previous year:

Select one of the following:

  • Tax benefit rule

  • Constructive receipt

  • Return of capital principle

  • Claim of right rule

  • None of the choices are correct

Explanation

Question 63 of 67

1

Identify the rule that determine whether a married taxpayer must recognize income earned by their spouse:

Select one of the following:

  • Residence of the married couple in a community property law state

  • Tax benefit rule

  • Claim of right

  • Both, residence of the married couple in a community property law state and tax benefit rule

  • None of the choices are correct.

Explanation

Question 64 of 67

1

Geoff purchased a life annuity for $4,800 that will provide him monthly payments of $100 as long as he lives. Based on IRS tables, Geoff’s life expectancy is 240 months. How much of the first $100 payment will George include in his gross income?

Select one of the following:

  • $100

  • $80

  • $48

  • $20

  • None of these choices are correct

Explanation

Question 65 of 67

1

To calculate the amount realized on the sale of an asset, the proceeds is reduced by which of the following?

Select one of the following:

  • Tax basis of the property

  • Selling expenses

  • Gain realized

  • Both, tax basis of the property and selling expenses

  • All of the choices are correct

Explanation

Question 66 of 67

1

Bonnie and Howard got divorced in 2018. Under the terms of the decree Bonnie will pay Howard $100,000 in cash in each of the next ten years (or until Howard’s death or remarriage). In addition, Bonnie will transfer a residence worth $2,000,000 to Howard and pay $30,000 per year to support their daughter, Kristina, until she turns 19 years old. What amount (if any) is included in Howard’s gross income this year?

Select one of the following:

  • $2,130,000

  • $100,000

  • $500,000

  • $130,000

  • None of the payments are included in Howard’s gross income

Explanation

Question 67 of 67

1

Shelly is a student who has received an academic scholarship to the University. The scholarship paid $4,000 for tuition, $500 for fees, and $400 for books. What amount must Shelly include in her gross income?

Select one of the following:

  • $4,900

  • $4,000

  • $4,500

  • $4,400

  • Zero - none of the above benefits is included in gross income

Explanation

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