Income tax Tutoria prep questions



1. History and Objectives of the Tax System (LO 1.1)Which of the following is?not?a purpose of the U.S. federal tax system?a.Meet social goals.b.Meet economic goals.c.Exact political revenge.d.Raise revenue.2. On which of these would wage income be reported?a.Form 1040b.Schedule 4c.Schedule 2d.Schedule 13. Which of the following is a deduction for adjusted gross income in 2018?a.Personal casualty losses.b.Student loan interest.c.Charitable contributions.d.Medical expenses.e.None of these choices are correct.4. All of the following are itemized deductions in 2018?except:a.Medical expenses.b.Pre-2019 alimony payments.c.State and local taxes.d.Charitable contributions.e.All of these choices are itemized deductions.5 Ramon, a single taxpayer with no dependents, has adjusted gross income for 2018 of $98,000 and his itemized deductions total $19,000. What taxable income will Ramon show in 2018?a.$74,850b.$79,000c.$74,950d.$87,650e.$86,0006. Glenda, a single taxpayer from Kansas, paid for more than one-half of the support for her mother, Dorothy. Dorothy did not live with Glenda in Kansas, but rather has lived in a nursing home in an adjacent state since Dorothy’s husband died three years ago. Glenda’s filing status should be:a.Singleb.Married filing separatelyc.Head of householdd.Parental dependente.Qualifying widower7. Lyn, age 65, and Robert, age 66, are married and support Lyn's father (no taxable income) and Robert's mother, who has $2,200 of gross income. If they file a joint return for 2018, how many exemptions may Lyn and Robert claim?a.4b.3c.5d.0e.28. Taxpayers who are 65 or older get the benefit of:a.An additional amount added to their itemized deductions.b.An additional amount added to their standard deduction.c.An additional exemption.d.None of these choices are correct.9 Jayne purchased General Motors stock 6 years ago for $20,000. In the current year, she sells the stock for $35,000. What is her gain or loss?a.$15,000 extraordinary gainb.$15,000 long-term gain.c.$15,000 ordinary gain.d.$15,000 short-term gain.e.No gain or loss is recognized on this transaction.10 Electronically filed tax returns:a.May not be transmitted from a taxpayer's home computer.b.Constitute more than 90 percent of the returns filed with the IRS.c.Offer faster refunds than paper returns.d.Have error rates similar to paper returns.11 The definition of gross income in the tax law is:a.All cash payments received for goods provided and services performed.b.All income from whatever source derived.c.All income from whatever source derived unless the income is earned illegally.d.All items specifically listed as income in the tax law.12. Which of the following types of income is tax-exempt?a.Dividends from foreign corporations.b.Municipal bond interest.c.Unemployment compensation.d.Dividends from utility corporations' stock.e.Income earned illegally.13 Which of the following items would be includable in the gross income of the recipient?a.Payments to a student for working at the student union food court.b.Season tickets worth $2,000 given to a son by his father.c.Lodging provided to a worker on a remote oil rig.d.Insurance payments for medical care of a dependent child.e.Insurance payments for loss of the taxpayer's sight.14. Which of the following will result in the recognition of gross income?a.Hannah purchases a new sofa from her employer, Sofas-R-Us, for $1,200. The cost of the sofa to the furniture store is $1,100 and the sofa normally sells for $1,700.b.Jayden's employer purchases her commuting pass for the subway at a cost of $225 per month.c.Gail's employer allows her to set aside $4,000 from her wages to cover the cost of daycare for Gail's four-year old daughter. Gail's daycare costs are $4,300 for the year.d.Havana is a lawyer. The law firm she works for pays for her subscription to Lawyer's Weekly, a trade magazine for attorneys.e.None of these choices will result in recognition of gross income.15 Which of the following prizes or awards is taxable?a.Professional sports awards.b.Awards for superior performance on the job.c.A 1-acre lot received as a prize.d.Prizes from a television game show.e.All of these choices are taxable.16 Which of the following would result in life insurance proceeds that are taxable to the recipient?a.A life insurance policy in which the insured is the son of the taxpayer and the beneficiary is the taxpayer.b.A life insurance policy purchased by a taxpayer insuring his or her spouse.c.A life insurance policy transferred by a partner to the partnership.d.A life insurance policy purchased by a corporation insuring an officer.e.A life insurance policy transferred to a creditor in payment of a debt.17 Nomi is in the highest individual tax bracket and receives $500 in qualified dividends from Omega Corp. Nomi’s tax liability (not including any net investment income tax) with respect to these dividends is:a.$100.00b.$50.00c.$277.20d.$75.00e.$018. Kelly receives a $40,000 scholarship to Ivy University. She uses $30,000 on tuition and books, $5,000 for a used car, and $5,000 for rent while at school. Kelly will recognize _______ gross income.a.$10,000b.$40,000c.$0d.$30,000e.$5,00019 Hillary gets divorced in 2016 and is required to pay her ex-spouse $200 per month until her son reaches 18 years of age in 7 years and $120 per month thereafter. How much of her 2018 payments are deductible as alimony?a.$960b.$1,440c.$2,400d.$020 For married taxpayers filing a joint return in 2018, at what AGI level does the phase-out limit for contributions to Qualified Tuition Programs start?a.$220,000b.$190,000c.$110,000d.There is no phase-out limit on QTP contributions.21. Which of the following is?not?a test for the deductibility of a business expense?a.Expectation of profit test.b.Ordinary and necessary test.c.Reasonableness test.d.Business purpose test.22. In the current year, Mary started a profitable housekeeping business as a sole proprietor. She has 10 housekeepers working for her and spends her time selling their services and coordinating her employees' time. Mary made $50,000 in her first year of operations. In addition to filing a Schedule C to report her business earnings, Mary?must?also file:a.Schedule Bb.Schedule SEc.Schedule Fd.Schedule Ae.None of these choices are correct.23 Heather drives her minivan 953 miles for business purposes in 2018. She elects to use the standard mileage rate for her auto expense deduction. What is the amount of her deduction? (Round to the nearest dollar.)a.$515b.$510c.$519d.$181e.$95324 Which of the following expenses incurred while the taxpayer is away from home "overnight" is?not?included as a travel expense?a.Lodging expensesb.Transportation expensesc.Meal expensesd.Laundry expensese.Business gifts25 Which of the following expenses is deductible as an entertainment expense?a.The cost of a paintball party for clients paid for by a computer salesman at a computer fair.b.The dues of a racket club used to keep in shape.c.The cost of a hunting camp used to entertain customers.d.The depreciation on an airplane used to entertain customers.e.None of these choices are deductible.26. Which of the following taxpayers may?not?deduct their educational expense?a.A self-employed attorney who attends a course on computing legal damages.b.An independent sales representative who attends a customer relations course at a local university.c.An independent real estate broker who attends a college course on real estate law.d.A CPA who attends a course to review for the real estate agents' exam.e.All of these choices are deductible.27. Which of the following business gifts are fully deductible?a.A gift to a client and her nonclient spouse costing $45.b.A gift to a client that cost $35.c.A gift to an employee, for 10 years of continued service, costing $250.d.A gift to an employee paid under a qualified plan, for not having an on-the-job injury for 25 years, costing $1,650.e.None of these choices are fully deductible.28. Loren loaned a friend $9,000 as financing for a new business venture. In the current year, Loren's friend declares bankruptcy and the debt is considered totally worthless. What amount may Loren deduct on his individual income tax return for the current year as a result of the worthless debt, assuming he has no other capital gains or losses for the year?a.$9,000 ordinary loss.b.$3,000 ordinary loss.c.$6,000 short-term capital loss.d.$6,000 ordinary losse.$9,000 short-term capital loss.f.$3,000 short-term capital loss.29. Carol maintains an office in her home where she conducts a dressmaking business. During the year she collects $4,000 from sales, pays $1,300 for various materials and supplies, and properly allocates $2,500 of rent expense and $500 of her utilities expense to the use of her home office. What amount of the rent and utilities expense may Carol deduct in the current year in computing her net income or loss from the dressmaking business?a.$500b.$0c.$3,000d.$2,500e.$2,70030. Which of the following factors is not considered by the IRS in determining whether an activity is a hobby?a.Whether the activity is conducted like a business.b.Whether there has been changes in the methods of operation in an attempt to improve profitability.c.Income and loss history of the activity.d.The time and effort expended by the taxpayer.e.All of these choices are considered to determine if an activity is a hobby.31 Which of the following is a capital asset?a.Copyright created by the taxpayer.b.Accounts receivable.c.A taxpayer's residence.d.Copyright (held by the writer).e.Business inventory.32. Yasmeen purchases stock on January 30, 2017. If she wishes to achieve a long-term holding period, what is the first date that she can sell the stock as a long-term gain?a.July 30, 2017b.July 31, 2017c.January 20, 2018d.January 31, 2018e.February 1, 201833 In 2018, Tim, a single taxpayer, has ordinary income of $29,000. In addition, he has $2,000 in short-term capital gains, long-term capital losses of $10,000, and long-term capital gains of $4,000. What is Tim's AGI for 2018?a.$27,000b.$32,000c.$29,000d.$26,00034. Jim, a single taxpayer, bought his home 20 years ago for $25,000. He has lived in the home continuously since he purchased it. In 2018, he sells his home for $300,000. What is Jim's taxable gain on the sale?a.$125,000b.$0c.$25,000d.$275,00035. Which of the following is true about the rental of real estate?a.A vacation home is a home that is rented for 15 days or more and is used by the taxpayer for personal purposes for not more than 14 days or 10 percent of the days rented (whichever is greater) for fair value during the year.b.Repairs on rental property are deductible by the taxpayer.c.If a home is rented for less than 15 days a year, the rent is not taxable.d.Depreciation and maintenance expenses for an apartment complex are deductible.e.All of these choices are correct.36. John owns a second home in Palm Springs, CA. During the year, he rented the house for $5,000 for 56 days and used the house for 14 days during the summer. The house remained vacant during the remainder of the year. The expenses for the home included $5,000 in mortgage interest, $850 in property taxes, $900 for utilities and maintenance, and $3,500 of depreciation. What is John's deductible rental loss, before considering the passive loss limitations?a.$0b.$3,200c.$200d.$2,500e.$87537. Which of the following types of income is passive income?a.Interest income from certificates of deposit. rental income from real estate limited partnership investments.c.Wages.d.Dividends from domestic corporations.e.None of these choices are correct.38 Norm is a real estate professional with a real estate trade or business as defined in the tax law. He has $80,000 of business income and $40,000 of losses from actively managed real estate rentals. How much of the $40,000 in losses is he allowed to claim on his tax return?a.$25,000b.$40,000c.$20,000d.None of these choices are correct.39 Jim has a net operating loss in 2018. If he does not make any special elections, what is the first year to which Jim carries the net operating loss?a.2015b.2020c.2017d.2019e.201640 Qualified business income does not include which of the following:a.Deductions for business expenses such as rent.b.Interest income from an investment in bonds.c.Income from sales of goods.d.Deductions related to cost of goods sold.41. Charlene has self-only coverage in a qualifying high-deductible health insurance plan. She is 47 years old and wishes to contribute the maximum amount to her HSA. How much is she allowed to contribute and deduct in 2018?a.$1,000b.$4,600c.$3,400d.$1,300e.$3,45042. Which of the following type of insurance is?not?deductible as self-employed health insurance?a.Dental insurance.b.Medical insurance.c.Long-term care insurance.d.Spousal medical insurance.e.Disability insurance.43. Martha and Rob, a married couple, under 50 years of age, have adjusted gross income on their 2018 joint income tax return of $45,000, before considering any IRA deduction. Martha and Rob have no earned income. What is the amount of Martha's maximum deductible IRA contribution?a.$2,700b.$11,000c.$5,500d.$3,500e.$044. What is the deadline for making a contribution to a traditional IRA or a Roth IRA for 2018?a.April 15, 2019b.October 15, 2019c.December 31, 2018d.April 17, 201945. Qualified Retirement Plans Including Section 401(K) Plans (LO 5.4)What is the maximum tax-deferred contribution that can be made to a Section 401(k) plan by an employee under age 50 in 2018?a.$55,000b.$18,000c.$7,500d.$18,500e.$10,00046. Eliza is a kindergarten teacher for Alexander Hamilton Elementary School. Eliza decorates her classroom with new artwork, posters, bulletin boards, etc. In 2018, she spends $470 on materials and supplies for her classroom. The school reimburses her $100 (the annual reimbursement limit). Eliza can deduct _________ for AGI and _________ from AGI.a.$250 for and $0 from AGIb.$0 for and $370 from AGIc.$0 for and $0 from AGId.$250 for and $120 from AGIe.$370 for and $0 from AGI47. The itemized deduction for state and local in taxes in 2018 isa.Unlimitedb.Total taxes less 7.5% of AGIc.Limited to no more than $10,000d.Deductible if your home value is less than $750,000e.Only deductible if the taxes are business related48. Carrie finished her undergraduate degree using money from a student loan. She earned $36,000 her first year and paid $2,600 in interest. She can take a deduction for student loan interest in the amount of:a.$0b.$2,500c.$1,500d.$2,600e.None of these choices are correct.49. Which of the following gifts is a deductible charitable contribution:a.$1,000 spent on church bingo games.b.A $200 contribution to the federal government to pay down the national debt.c.A gift of $100 to a homeless person.d.A $500 gift to the Democratic National Committee.50 Which of the following items is deductible as a miscellaneous deduction on Schedule A?a.Charitable contributions.b.Gambling losses to the extent of gambling winnings.c.Investment expenses.d.Unreimbursed business expenses.e.Subscriptions to professional publications.51 E Corporation is a subchapter S corporation owned by three individuals with calendar year-ends. The corporation sells a sports drink as its principal product and has similar sales each month. What options does E Corporation have in choosing a tax year?a.E Corporation may choose any month end as its tax year.b.E Corporation may choose a tax year ending in September, October, or November, but only if the corporation also makes an annual cash deposit and adjusts the amount every year depending on the income deferred.c.Because the owners of E Corporation have tax years ending in December, E Corporation must also choose a December year-end.d.E Corporation may choose an October, November, or December tax year-end but only if the corporation also makes an annual cash deposit.52 Income and loss from which of the following entity(ies) is passed through and taxed on the individual's personal tax returns?a.S corporation.b.Partnership.c.Sole proprietor.d.All of these choices are correct.53 Which of the following is an acceptable method of accounting under the tax law?a.The accrual method.b.The hybrid method.c.The cash method.d.None of the choices are correct.e.The accrual method, the cash method, and the hybrid method.54 Accounting Methods (LO 6.2)Which of the following entity(ies) is required to report on the accrual basis?a.A regular C corporation engaged in tropical fruit farming in Southern California.b.An accounting firm operating as a Personal Service Corporation.c.A manufacturing business with $30,000,000 of gross receipts operating as a regular C corporation.d.All of the these corporations must report on the accrual basis.55 BJT Corporation is owned 40 percent by Bill, 35 percent by Jack, and 25 percent by Teresa. Bill and Jack are father and son. What is Jack's total direct and constructive ownership under Section 267?a.40 percent.b.75 percent.c.65 percent.d.35 percent.e.None of these choices are correct.56 Which of the following is not a condition that will require a taxpayer to be subject to the tax on unearned income of minors (kiddie tax) in 2018?a.Must be claimed as a dependent.b.18 years of age or younger (full time student up to age 23). unearned income must exceed $2,100.d.Both parents must be living.e.All of these choices are required.57 Generally, the tax rate that applies to the unearned income of a minor under the kiddie tax in 2018 is:a.The unearned income of a minor is not taxed.b.The same as the parents' tax rate.c.The same as the head of household rate.d.The same as the trust and estate rate.e.The same as the single taxpayer rate.58 Which of the following is?not?subject to self-employment tax?a.Gain on the sale of real estate held for investment.b.Distributive share of earnings of a partnership. earnings of the owner of a shoe store. earnings of the owner of a dry cleaner. earnings of a self-employed lawyer.59 The 3.8 percent Medicare tax on net investment income applies to:a.Interest and dividends.b.IRA distributions.c.Tax-exempt interest income.d.Wages.60 Which of the following type of insurance is?not?deductible as self-employed health insurance?a.Dental insurance.b.Medical insurance.c.Long-term care insurance.d.Spousal medical insurance.e.Disability insurance. ................
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