Exam (elaborations)
TAX 503 CHAPTER 4 EXAM QUESTIONS AND ANSWERS
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TAX 503 CHAPTER 4 EXAM QUESTIONS AND ANSWERS.,...
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Put the following items in the order in which they are found in theindividual income tax formula. - ANSWER 5. Equals taxable income
4. Minus from AGI deductions
3. Equals adjusted gross income
1. Gross income
2. Minus for AGI deductions
The U.S. tax laws are based on the all-inclusive concept where gross
income includes all realized income from whatever source derived. -
ANSWER True
Which one of the following choices is the definition of realized income? -
ANSWER Income from a transaction with a second party where there is
a measurable change in property rights between parties
Income that is taxed in the current year according to the tax rate
schedule is referred to as ______ income. - ANSWER ordinary
Depreciable assets used in a trade or business are classified as capital
assets. - ANSWER False
Which of the following statements is TRUE regarding the individual
income tax formula? - ANSWER A taxpayer may deduct the greater of
his standard deduction or his itemized deductions from AGI to arrive at
taxable income.
The U.S. tax laws are based on the all-inclusive concept where gross
income includes all realized income from "whatever_______ ________ ."
- ANSWER source derived
Which of the following choices describe tax deductions? (Choose all that
apply.) - ANSWER - Tax deductions are a matter of legislative grace.
- Taxpayers are NOT allowed to deduct anything unless a specific tax
provision allows them to do so.
, Which of the following statements is correct? - ANSWER Stock which
has appreciated in value must be sold before it is considered part of
gross income.
Deductions ______ (for/from) AGI cause a reduction in AGI, which
increases the deductibility of _________ (for/from) AGI deductions
subject to AGI limitations. - ANSWER for , from
Yolanda is your client. With her current level of taxable income, she is
paying tax at a 24% marginal rate. She received $2,000 in qualified
dividends this year. What rate of tax do you expect that Yolanda will pay
on her dividends? - ANSWER The qualified dividends are taxed at a
favorable rate. Since Yolanda is in the 24% bracket, the dividends will be
taxed at 15%.
Which of the following assets are classified as capital assets? (Check all
that apply.) - ANSWER - A house owned and used by a taxpayer
- Stock held for investment
Zack is single and has collected the following information for preparing
his 2019 taxes: Gross income $74,000, tax credits $2,500, itemized
deductions $9,000, deductions for AGI $5,000, tax prepayments $8,400.
Based on this information, Zack's "adjusted gross income" equals
$_______ , and his "taxable income" equals $_________ - ANSWER -
69000
- 56800
Which of the following items are deductions FOR adjusted gross
income? (Check all that apply.) - ANSWER - Capital losses
- Contributions to (non Roth) qualified retirement accounts
- Health insurance for self-employed persons
- Alimony paid for divorces finalized before 1/1/2019
All sources of income are taxable unless specifically excluded through a
tax provision. However,________ are NOT permitted unless a specific
tax provision allows them. - ANSWER deductions
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