CHAPTER 3 COMPUTING THE TAX

1. Under the Federal
income tax formula for individuals, a choice must be made between claiming
deductions forAGI and itemized
deductions.
a. True
b. False

2. Under the Federal
income tax formula for individuals, the determination of adjusted gross income
(AGI) precedes that of taxable income (TI).
a. True
b. False

3. Under the income tax
formula, a taxpayer must choose between deductions forAGI and the standard deduction.
a. True
b. False

.

4. After Ellie moves out
of the apartment she had rented as her personal residence, she recovers her
damage deposit of $1,000. The $1,000 is not
income to Ellie.
a. True
b. False

5. An “above the line”
deduction refers to a deduction forAGI.
a. True
b. False

6. Because they appear
on page 1 of Form 1040, itemized deductions are also referred to as “page 1
deductions.”
a. True
b. False

7. A decrease in a
taxpayer’s AGI could increase the amount of medical expenses that can be
deducted.
a. True
b. False

8. An increase in a
taxpayer’s AGI could decrease the amount of charitable contribution that can be
claimed.
a. True
b. False

9. All exclusions from
gross income are reported on Form 1040.
a. True
b. False

10.The filing status of
a taxpayer (e.g., single, head of household) must be identified before the
applicable standard deduction is determined.
a. True
b. False

11.Lee, a citizen of
Korea, is a resident of the U.S. Any rent income Lee receives from land he owns
in Korea is not subject to the U.S.
income tax.
a. True
b. False

12.The additional
standard deduction for age and blindness is greater for married taxpayers than
for single taxpayers.
a. True
b. False

13.
The
basicand additionalstandard deductions both aresubject to an annual adjustment for inflation.
a. True
b. False

14.Many taxpayers who
previously itemized will start claiming the standard deduction when they
purchase a home.
a. True
b. False

.

15.Once they reach age
65, many taxpayers will switch from itemizing their deductions fromAGI and start claiming the standard
deduction.
a. True
b. False

16.Claude’s deductions fromAGI exceed the standard deduction
allowed for 2014. Under these circumstances, Claude cannot claim the standard
deduction.
a. True
b. False

17.As opposed to
itemizing deductions fromAGI, the
majority of individual taxpayers choose the standard deduction.
a. True
b. False

18.Howard, age 82, dies
on January 2, 2014. On Howard’s final income tax return, the full amount of the
basic and additional standard deductions will be allowed even though Howard
lived for only 2 days during the year.
a. True
b. False

19.In 2014, Ed is 66 and
single. If he has itemized deductions of $7,400, he should notclaim the standard deduction alternative.
a. True
b. False

20.Jason and Peg are
married and file a joint return. Both are over 65 years of age and Jason is
blind. Their standard deduction for 2014 is $16,000 ($12,400 + $1,200 + $1,200
+ $1,200).
a. True
b. False

21.Derek, age 46, is a
surviving spouse. If he has itemized deductions of $12,700 for 2014, Derek should notclaim the standard deduction.
a. True
b. False

22.Buddy and Hazel are
ages 72 and 71 and file a joint return. If they have itemized deductions of
$14,600 for 2014, they should notclaim
the standard deduction.
a. True
b. False

23.Clara, age 68, claims
head of household filing status. If she has itemized deductions of $10,250 for
2014, she should notclaim the
standard deduction.
a. True
b. False

24.Monique is a resident
of the U.S. and a citizen of France. If she files a U.S. income tax return,
Monique cannot claim the standard
deduction.
a. True
b. False

25.Dan and Donna are
husband and wife and file separate returns for the year. If Dan itemizes his
deductions from AGI, Donna cannotclaim the standard deduction.
a. True
b. False

26.Benjamin, age 16, is
claimed as a dependent by his parents. During 2014, he earned $700 at a car
wash.
Benjamin’s standard
deduction is $1,350 ($1,000 + $350).
a. True
b. False

27.Debby, age 18, is
claimed as a dependent by her mother. During 2014, she earned $1,100 in
interest income on a savings account. Debby’s standard deduction is $1,450
($1,100 + $350).
a. True
b. False

28.Katrina, age 16, is
claimed as a dependent by her parents. During 2014, she earned $5,600 as a
checker at a grocery store. Her standard deduction is $5,950 ($5,600 earned
income + $350).
a. True
b. False

29.A dependent cannotclaim a personal exemption on his
or her own return.
a. True
b. False

30.When separate income
tax returns are filed by married taxpayers, one spouse cannotclaim the other spouse as an exemption.
a. True
b. False

31.Butch and Minerva are
divorced in December of 2014. Since they were married for more than one-half of
the year, they are considered as married for 2014.
a. True
b. False

.

32.For the year a spouse
dies, the surviving spouse is considered married for the entire year for income
tax purposes.
a. True
b. False

33.In determining
whether the gross income test is met for dependency exemption purposes, only
the taxable portion of a scholarship is considered.
a. True
b. False

34.Albert buys his
mother a TV. For purposes of meeting the support test, Albert cannot include
the cost of the TV.
a. True
b. False

35.Using borrowed funds
from a mortgage on her home, Leah provides 52% of her own support, while her
sons furnished the rest. Leah can be claimed as a dependent under a multiple
support agreement.
a. True
b. False
.

36.Roy and Linda were
divorced in 2013. The divorce decree awards custody of their children to Linda
but is silent as to who is entitled to claim them as dependents. If Roy
furnished more than half of their support, he can claim them as dependents in
2014.
a. True
b. False

37.In 2014, Hal
furnishes more than half of the support of his ex-wife and her father, both of
whom live with him. The divorce occurred in 2013. Hal may claim the
father-in-law and the ex-wife as dependents.
a. True
b. False

38.After her divorce,
Hope continues to support her ex­husband’s sister, Cindy, who does not live
with her. Hope can claim Cindy as a
dependent.
a. True
b. False

39.Darren, age 20 and
not disabled, earns $4,000 during 2014. Darren’s parents cannotclaim him as a dependent unless he is a full-time student.
a. True
b. False

40.Lucas, age 17 and
single, earns $6,000 during 2014. Lucas’s parents cannot claim him as a
dependent if he does not live with them.
a. True
b. False