True False
,Chapter 1: The Individual Income Tax Return
1. A corporation is a reporting entity but not a tax-paying entity.
True False
2. Partnership capital gains and losses are allocated separately to each of the partners.
True False
3. Married taxpayers may double their standard deduction amount by filing separate
returns.
True False
4. An item is not included in gross income unless the tax law specifies that the item is
subject to taxation.
True False
5. For taxpayers who do not itemize deductions, the standard deduction amount is
subtracted from the taxpayer's adjusted gross income.
True False
6. A taxpayer with self-employment income of $600 must file a tax return.
True False
7. A dependent child with earned income in excess of the available standard deduction
amount must file a tax return.
True False
True False
,8. A single taxpayer, who is not blind and who is under age 65, with income of $8,750
must file a tax return.
True False
,9. If a taxpayer is due a refund, it will be mailed to the taxpayer regardless of whether he
or she files a tax return.
True False
10. Taxpayers with self-employment income of $400 or more must file a tax return.
True False
11. If your spouse dies during the tax year and you do not remarry, you must file as
single for the year of death.
True False
12. Taxpayers who do not qualify for married, head of household, or qualifying widow or
widower filing status must file as single.
True False
13. If an unmarried taxpayer paid more than half the cost of keeping a home which is the
principal place of residence of a nephew, who is not her dependent, she may use the
head of household filing status.
True False
14. The maximum official individual income tax rate for 2012 is 35 percent.
True False
15. All taxpayers may use the tax rate schedule to determine their tax liability.
True False
16. The head of household tax rates are higher than the rates for a single taxpayer.
True False
17. Most states are community property states.
True False
,18. If taxpayers are married and living together at the end of the year, they must file a
joint tax return.
True False
19. A taxpayer who maintains a household with an unmarried child may qualify to file as
head of household even if the child is not the taxpayer's dependent.
True False
20. A married person with a dependent child may choose to file as head of household if it
reduces his or her tax liability.
True False
21. A taxpayer who is living alone and is legally separated from his or her spouse under a
separate maintenance decree at year-end should file as single.
True False
22. An individual, age 22, enrolled on a full-time basis at a trade school, is considered a
student for purposes of determining whether a dependency exemption is permitted.
True False
23. A dependency exemption may be claimed by the supporting taxpayer in the year of
death of a dependent.
True False
24. For 2012, personal and dependency exemptions are $3,800 each.
True False
25. Scholarships received by a student may be excluded for purposes of the support test
for determining the availability of the dependency exemption.
True False
,26. The two types of exemptions are the personal exemption and the dependency
exemption.
True False
27. A child for whom a dependency exemption is claimed on the parents' tax return may
also claim a personal exemption on his or her own tax return.
True False
28. If a taxpayer's adjusted gross income exceeds certain threshold amounts, he or she
may be required to reduce the amount of the otherwise allowable deductions for
itemized deductions and personal and dependency exemptions in 2012.
True False
29. Most taxpayers may deduct the standard deduction amount or the amount of their
itemized deductions, whichever is higher.
True False
30. An individual taxpayer with a net capital loss may deduct up to $3,000 per year
against ordinary income.
True False
31. Taxpayers can download tax forms from the IRS Internet site.
True False
32. Which of the following is not a goal of the tax law?
A. Encouraging certain social goals such as contributions to charity.
B. Encouraging certain economic goals such as a thriving business community.
C. Encouraging smaller families.
D. Raising revenue to operate the government.
E. None of the above are goals of the tax law.
,33. Which one of the following provisions was passed by Congress to meet a social goal
of the tax law?
A. The deduction for job hunting expenses
B. The charitable deduction
C. The moving expense deduction for adjusted gross income
D. The deduction for soil and water conservation costs available to farmers
E. None of the above
34. Wesley owns and operates the Cheshire Chicken Ranch in Turpid, Nevada. The
income from this ranch is $49,000. Wesley wishes to use the easiest possible tax form.
He may file:
A. Form 1040EZ
B. Form 1040A
C. Form 1040
D. Form 1065
E. None of the above.
35. Which of the following forms may be filed by individual taxpayers?
A. Form 1040
B. Form 1041
C. Form 1065
D. Form 1120
E. None of the above
36. 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
37. Which of the following is correct?
A. An individual is a reporting entity but not a taxable entity
B. A partnership is a taxable entity and a reporting entity
C. A corporation is a reporting entity but not a taxable entity
D. A partnership is a reporting entity but not a taxable entity
,38. Form 1040 allows a taxpayer to report which of the following items that are not
allowed for taxpayers who file form 1040A.
A. Salary income
B. Joint return status
C. Withholding on wages
D. Self-employment income
39. Partnership income is reported on:
A. Form 1040PTR
B. Form 1120S
C. Form 1040X
D. Form 1065
40. Amended returns are filed on:
A. Form 1040X
B. Form 1120S
C. Form 1041
D. Form 1040Amend
41. Depending on the amounts of income and other tax information, some individuals
may report their income on:
A. Form 1040A
B. Form 1065
C. Form 1120
D. Form 1041
42. If an individual wishes to amend his individual tax return, he will make the
amendment using what form?
A. Form 1040A
B. Form 1040X
C. Form 1120
D. Schedule K-1
E. None of the above
,43. Eugene and Velma are married. For 2012, Eugene earned $25,000 and Velma earned
$30,000. They have decided to file separate returns and are each entitled to claim one
personal exemption. They have no deductions for adjusted gross income. Eugene's
itemized deductions are $11,200 and Velma's are $4,000. Assuming Eugene and Velma
do not live in a community property state, what is Velma's taxable income?
A. $14,300
B. $20,350
C. $26,000
D. $22,200
E. None of the above
44. An individual is a head of household. What is her standard deduction?
A. $11,900
B. $5,950
C. $14,600
D. $8,700
E. None of the above
45. Eugene and Velma are married. For 2012, Eugene earned $25,000 and Velma earned
$30,000. They have decided to file separate returns and are each entitled to claim one
personal exemption. They have no deductions for adjusted gross income. Eugene's
itemized deductions are $11,200 and Velma's are $4,000. Assuming Eugene and Velma
do not live in a community property state, what is Eugene's taxable income?
A. $25,000
B. $13,800
C. $13,600
D. $10,000
E. None of the above
46. Oscar and Mary have no dependents and file a joint income tax return for 2012. They
have adjusted gross income of $145,000 and itemized deductions of $32,000. What is
the amount of taxable income that Oscar and Mary must report on their 2012 income tax
return?
A. $113,000
B. $109,200
C. $125,500
D. $129,300
E. $105,400
, 47. Which of the following taxpayers does not have to file a tax return for 2012?
A. A single taxpayer who is under age 65, with income of $10,000.
B. Married taxpayers (ages 45 and 50 years), filing jointly, with income of $21,000.
C. A student, age 22, with unearned income of $1,200 who is claimed as a dependent by
her parents.
D. A qualifying widow (age 67) with a dependent child and income of $14,500.
E. All of the above taxpayers must file a return.
48. In which of the following situations is the taxpayer not required to file an income tax
return?
A. When an individual has a 2012 income tax refund and would like to obtain it.
B. When the taxpayer is a single 67-year-old with wages of $9,800 in 2012.
C. When the taxpayer is a 35-year-old head of household with wages of $16,800 in 2012.
D. When the taxpayer is a 79-year-old widow with wages of $16,500 in 2012.
E. When the taxpayers are a married couple with both spouses under 65 years old with
wages of $19,800 in 2012.
49. All of the following factors are important in determining whether an individual is
required to file an income tax return, except:
A. The taxpayer's filing status
B. The taxpayer's gross income
C. The taxpayer's total itemized deductions
D. The availability of the additional standard deduction for taxpayers who are elderly
E. None of the above
50. John, age 25, is a full-time student at a state university. John lives with his sister, Ann,
who provides over half of his support. His only income is $4,000 of wages from a part-
time job at the college book store. What is Ann's filing status for 2012?
A. Single
B. Head of household
C. Married, filing separately
D. Qualifying widow(er)
E. None of the above
51. Robert is a single taxpayer who has AGI of $145,000 in 2012; his taxable income is
$122,000. What is his federal tax liability for 2012?
A. $34,160
B. $27,087
C. $27,621
D. $22,750
E. $42,449
