ACC 555 Week 5 Midterm Exam Chapters 1 Through 6

ACC 555 Week 5 Midterm Exam Chapters 1 Through 6
Chapter 1 An Introduction to Taxation

1) The federal income tax is the dominant form of taxation by the federal government.

2) The Sixteenth Amendment permits the passage of a federal income tax.

3) When a change in the tax law is deemed necessary by Congress, the entire Internal Revenue Code must be revised.

4) The largest source of federal revenues is the corporate income tax.
Answer: FALSE

5) A progressive tax rate structure is one where the rate of tax increases as the tax base increases.

6) The terms “progressive tax” and “flat tax” are synonymous.
Answer: FALSE

7) A proportional tax rate is one where the rate of the tax is the same for all taxpayers, regardless of income levels.

8) Regressive tax rates decrease as the tax base increases.

9) The marginal tax rate is useful in tax planning because it measures the tax effect of a proposed transaction.

10) A taxpayer- average tax rate is the tax rate applied to an incremental amount of taxable income that is added to the tax base.

11) If a taxpayer- total tax liability is $30,000, taxable income is $100,000, and economic income is $120,000, the average tax rate is 30 percent.

12) If a taxpayer- total tax liability is $4,000, taxable income is $20,000, and total economic income is $40,000, then the effective tax rate is 20 percent.

13) All states impose a state income tax which is generally based on an individual- federal adjusted gross income (AGI) with minor adjustments.

14) The unified transfer tax system, comprised of the gift and estate taxes, is based upon the total property transfers an individual makes during lifetime and at death.

15) Gifts between spouses are generally exempt from transfer taxes.

16) The primary liability for payment of the gift tax is imposed upon the donee.

17) For gift tax purposes, a $14,000 annual exclusion per donee is permitted.

18) An individual will be subject to gift tax on gifts made to a charity

19) Property is generally included on an estate tax return at its historical cost basis.

20) Property transferred to the decedent- spouse is exempt from the estate tax because of the estate tax marital deduction provision.

21) Gifts made during a taxpayer- lifetime may affect the amount of estate tax paid by the taxpayer- estate.

22) While federal and state income taxes as well as the federal gift and estate taxes are generally progressive in nature, property taxes are proportional.

23) Adam Smith- canons of taxation are equity, certainty, convenience and economy.

24) The primary objective of the federal income tax law is to achieve various economic and social policy objectives.

25) Individuals are the principal taxpaying entities in the federal income tax system.

26) The various entities in the federal income tax system may be classified into two general categories, taxpaying entities (such as individuals and C [regular] corporations) and flow-through entities such as sole proprietorships, partnerships, S corporations, and limited liability companies.

27) Dividends paid from most U.S. corporations are taxed at the same rate as the recipients’ salaries and wages.

28) Flow-through entities do not have to file tax returns since they are not taxable entities.

29) S Corporations result in a single level of taxation.

30) In a limited liability partnership, a partner is not liable for his partner- acts of negligence or misconduct.

31) Limited liability companies may elect to be taxed as corporations.

32) Limited liability company members (owners) are responsible for the liabilities of their limited liability company.

33) The tax law encompasses administrative and judicial interpretations, such as Treasury regulations, revenue rulings, revenue procedures, and court decisions, as well as statutes.

34) Generally, tax legislation is introduced first in the Senate and referred to the Senate Finance Committee.

35) The Internal Revenue Service is the branch of the Treasury Department responsible for administering the federal tax law.

36) Generally, the statute of limitations is three years from the later of the date the tax return is filed or the due date.

37) The largest source of revenues for the federal government comes from
A) individual income taxes.
B) corporate income taxes.
C) Social Security and Medicare taxes (FICA).
D) estate and gift taxes.

38) Arthur pays tax of $5,000 on taxable income of $50,000 while taxpayer Barbara pays tax of $12,000 on $120,000. The tax is a
A) progressive tax.
B) proportional tax.
C) regressive tax.
D) None of the above.

39) Which of the following taxes is progressive?
A) sales tax
B) excise tax
C) property tax
D) federal income tax

40) Which of the following taxes is proportional?
A) gift tax
B) income tax
C) sales tax
D) Federal Insurance Contributions Act (FICA)

41) Which of the following taxes is regressive?
A) Federal Insurance Contributions Act (FICA)
B) excise tax
C) property tax
D) gift tax

42) Sarah contributes $25,000 to a church. Sarah- marginal tax rate is 35% while her average tax rate is 25%. After considering her tax savings, Sarah- contribution costs
A) $6,250.
B) $8,750.
C) $16,250.
D) $18,750.

43) Helen, who is single, is considering purchasing a residence that will provide a $28,000 tax deduction for property taxes and mortgage interest. If her marginal tax rate is 25% and her effective tax rate is 20%, what is the amount of Helen- tax savings from purchasing the residence?
A) $5,600
B) $7,000
C) $21,000
D) $22,400

44) Charlotte pays $16,000 in tax deductible property taxes. Charlotte- marginal tax rate is 28%, effective tax rate is 22% and average rate is 25%. Charlotte- tax savings from paying the property tax is
A) $3,520.
B) $4,000.
C) $4,480.
D) $11,520.

45) Anne, who is single, has taxable income for the current year of $38,000 while total economic income is $43,000 resulting in a total tax of $5,356. Anne- average tax rate and effective tax rate are, respectively,
A) 14.09% and 12.46%.
B) 12.46% and 14.09%.
C) 14.09% and 25%.
D) 12.46% and 25%.

46) The unified transfer tax system
A) imposes a single tax upon transfers of property during an individual- lifetime only.
B) imposes a single tax upon transfers of property during an individual- life and at death.
C) imposes a single tax upon transfers of property only at an individual- death.
D) none of above.

47) When property is transferred, the gift tax is based on
A) replacement cost of the transferred property.
B) fair market value on the date of transfer.
C) the transferor- original cost of the transferred property.
D) the transferor- depreciated cost of the transferred property.

48) Paul makes the following property transfers in the current year:
• $22,000 cash to his wife
• $34,000 cash to a qualified charity
• $220,000 house to his son
• $3,000 computer to an unrelated friend

The total of Paul- taxable gifts, assuming he does not elect gift splitting with his spouse, subject to the unified transfer tax is
A) $206,000.
B) $214,000.
C) $234,000.
D) $279,000.

49) Charlie makes the following gifts in the current year: $40,000 to his spouse, $30,000 to his church, $18,000 to his nephew, and $25,000 to a friend. Assuming Charlie does not elect gift splitting with his wife, his taxable gifts in the current year will be
A) $13,000.
B) $15,000.
C) $25,000.
D) $41,000.

50) Shaquille buys new cars for five of his friends. Each car cost $70,000. What is the amount of Shaquille- taxable gifts?
A) $0
B) $280,000
C) $336,000
D) $350,000

51) In 2014, an estate is not taxable unless the sum of the taxable estate and taxable gifts made after 1976 exceeds
A) $1,000,000.
B) $3,500,000.
C) $5,000,000.
D) $5,340,000.

52) Eric dies in the current year and has a gross estate valued at $6,500,000. The estate incurs funeral and administrative expenses of $100,000 and also pays off Eric- debts which amount to $250,000. Eric bequeaths $600,000 to his wife. Eric made no taxable transfers during his life. Eric- taxable estate will be
A) $210,000.
B) $5,550,000.
C) $6,150,000.
D) $6,500,000.

53) Thomas dies in the current year and has a gross estate valued at $3,000,000. During his lifetime (but after 1976) Thomas had made taxable gifts of $400,000. The estate incurs funeral and administrative expenses of $100,000 and also pays off Thomas’ debts which amount to $300,000. Thomas bequeaths $500,000 to his wife. What is the amount of Thomas’ tax base, the amount on which the estate tax is computed?
A) $2,100,000
B) $2,500,000
C) $2,600,000
D) $3,400,000

54) Which of the following statements is incorrect?
A) Property taxes are levied on real estate.
B) Excise taxes are assessed on items such as gasoline and telephone use.
C) Gift taxes are imposed on the recipient of a gift.
D) The estate tax is based on the fair market value of property at death or the alternate valuation date.

55) Denzel earns $130,000 in 2014 through his job as a sales manager. What is his FICA tax?
A) $9,139
B) $8,951
C) $8,698
D) $9,945
Answer: A

56) Jillian, a single individual, earns $230,000 in 2014 through her job as an accounting manager. What is her FICA tax?
A) $10,859
B) $17,595
C) $10,589
D) $8,951

57) Martha is self-employed in 2014. Her business profits are $140,000. What is her self-employment tax?
A) $21,420
B) $18,568
C) $18,159
D) None of the above.

58) Which of the following is not one of Adam Smith- canons of taxation?
A) equity
B) convenience
C) certainty
D) paid by all citizens

59) Horizontal equity means that
A) taxpayers with the same amount of income pay the same amount of tax.
B) taxpayers with larger amounts of income should pay more tax than taxpayer- with lower amounts of income.
C) all taxpayers should pay the same tax.
D) none of the above.

60) Vertical equity means that
A) taxpayers with the same amount of income pay the same amount of tax.
B) taxpayers with larger amounts of income should pay more tax than taxpayer- with lower amounts of income.
C) all taxpayers should pay the same tax.
D) none of the above.

61) Which of the following is not an objective of the federal income tax law?
A) Stimulate private investment.
B) Reduce employment.
C) Encourage research and development activities.
D) Prevent taxpayers from paying a higher percentage of their income in personal income taxes due to inflation.

62) Which of the following is not a social objective of the tax law?
A) prohibition of a deduction for illegal bribes, fines and penalties
B) a deduction for charitable contributions
C) an exclusion for interest earned by large businesses
D) creation of tax-favored pension plans

63) Which of the following is not a taxpaying entity?
A) Corporation
B) Partnership
C) Individual
D) All of the above are taxpayers.

64) All of the following are classified as flow-through entities for tax purposes except
A) partnerships.
B) C corporations.
C) S corporations.
D) limited liability companies.

65) Rocky and Charlie form RC Partnership as equal partners. Rocky contributes $100,000 into RC while Charlie contributes real estate with a fair market value of $100,000. During the current year, RC earned net income of $600,000. The partnership distributes $200,000 to each partner. The amount that Rocky should report on his individual tax return is
A) $0.
B) $100,000.
C) $200,000.
D) $300,000.

66) AB Partnership earns $500,000 in the current year. Partners A and B are equal partners who do not receive any distributions during the year. How much income does partner A report from the partnership?
A) $0
B) $250,000
C) $500,000
D) None of the above.

67) In an S corporation, shareholders
A) are taxed on their proportionate share of earnings.
B) are taxed only on dividends.
C) may allocate income among themselves in order to consider special contributions.
D) are only taxed on salaries.

68) All of the following statements are true except
A) the net income earned by a sole proprietorship is reported on the owner- individual income tax return.
B) the net income of an S corporation is subject to double taxation because it is taxed at the entity level and dividends paid from the S corporation to individual shareholders are also taxed.
C) the net income of C corporation is subject to double taxation because it is taxed at the entity level and dividends paid from the C corporation to individual shareholders is also taxed.
D) LLCs are generally taxed as partnerships.

69) Which of the following is not an advantage of a limited liability company (LLC)?
A) limited liability for all members of a LLC
B) ability to choose between taxation as a partnership or corporation
C) default tax treatment as a corporation, unless otherwise elected
D) All of the above are advantages of an LLC.

70) What is an important aspect of a limited liability partnership?
A) It is the same as a limited partnership where the general partner has unlimited liability.
B) A partner has unlimited liability arising from his or her own acts of negligence or misconduct or similar acts of any person under his or her direct supervision, but does not have unlimited liability in other matters.
C) All partners have limited liability regarding all partnership activities.
D) All partners have unlimited liability.

71) The term “tax law” includes
A) Internal Revenue Code.
B) Treasury Regulations.
C) judicial decisions.
D) all of the above.

72) Which of the following serves as the highest authority for tax research, planning, and compliance activities?
A) Internal Revenue Code
B) Income Tax Regulations
C) Revenue Rulings
D) Revenue Procedures

73) All of the following are executive (administrative) sources of tax law except
A) Internal Revenue Code.
B) Income Tax Regulations.
C) Revenue Rulings.
D) Revenue Procedures.

74) Which of the following steps, related to a tax bill, occurs first?
A) signature or veto by the President of the United States
B) consideration by the Senate
C) consideration by the House Ways and Means Committee
D) consideration by the Joint Conference Committee

75) A tax bill introduced in the House of Representatives is then
A) referred to the House Ways and Means Committee for hearings and approval.
B) referred to the full House for hearings.
C) forwarded to the Senate Finance Committee for consideration.
D) voted upon by the full House.

76) When new tax legislation is being considered by Congress,
A) the tax bill will usually originate in the Senate.
B) different versions of the House and Senate bills are reconciled by the Speaker of the House and the President of the Senate.
C) different versions of the House and Senate bills are reconciled by a Joint Conference Committee.
D) after the President of the U.S. approves a tax bill, the Joint Conference Committee must then vote on passage of the bill.

77) The Senate equivalent of the House Ways and Means Committee is the Senate
A) Joint Committee on Taxation.
B) Ways and Means Committee.
C) Finance Committee.
D) Joint Conference Committee.

78) When returns are processed, they are scored to determine their potential for yielding additional tax revenues. This program is called
A) Taxpayer Compliance Measurement Program.
B) Discriminant Function System.
C) Standard Audit Program.
D) Field Audit Program.

79) Which of the following individuals is most likely to be audited?
A) Lola has AGI of $35,000 from wages and uses the standard deduction.
B) Marvella has a $145,000 net loss from her unincorporated business (a horse farm). She also received $950,000 salary as a CEO of a corporation.
C) Melvin is retired and receives Social Security benefits.
D) Jerry is a school teacher with two children earning $55,000 a year. He also receives $200 in interest income on a bank account.

80) Alan files his 2014 tax return on April 1, 2015. His return contains no misstatements or omissions of income. The statute of limitations for changes to the return expires
A) April 1, 2018.
B) April 15, 2018.
C) April 15, 2017.
D) The statute of limitations never expires.

81) Peyton has adjusted gross income of $20,000,000 on his 2014 tax return, filed April 15, 2015. He accidentally failed to include $200,000 that he received for a television advertisement. How long does the IRS have to audit Peyton- federal tax return?
A) until April 15, 2017
B) until April 15, 2018
C) until April 15, 2021
D) The IRS can audit Peyton- return at any future date.

82) Latashia reports $100,000 of gross income on her 2014 tax return, filed April 15, 2015. She omits $30,000 of income, but the error was not fraudulent. When does the statute of limitations for examining her tax return expire?
A) April 15, 2017
B) April 15, 2018
C) April 15, 2021
D) It never expires.

83) The IRS must pay interest on
A) all tax refunds.
B) tax refunds paid later than 30 days after the due date.
C) tax refunds paid later than 45 days after the due date.
D) The IRS never pays interest on tax refunds.

84) Kate files her tax return 36 days after the due date. When she files the return, she sends a check for $2,000 which is the balance of the tax owed by her. Kate- penalty for failure to file a return will be
A) 0.5% per month (or factor thereof) up to a maximum of 25%.
B) 5% per month (or factor thereof) up to a maximum of 25%.
C) 20% per month (or factor thereof).
D) 25%.

85) What are the correct monthly rates for calculating failure to file and failure to pay penalties?

A)
Failure to file Failure to pay
5.0% 5.0%

B)
Failure to file Failure to pay
0.5% 0.5%

C)
Failure to file Failure to pay
5.0% 0.5%

D)
Failure to file Failure to pay
0.5% 5.0%

86) Which is not a component of tax practice?
A) providing clients tax refund advance loans
B) tax research
C) tax planning and consulting
D) compliance

87) Larry and Ally are married and file a joint return. They are considering purchasing a personal residence that will generate two deductions: $10,000 in home mortgage interest and $8,000 in real estate taxes. Their marginal tax rate is 25%. What is the total tax savings if Larry and Ally purchase the residence?

88) Vincent makes the following gifts during 2014:

$15,000 cash gift to wife
Gift of automobile valued at $35,000 to his adult son
Gift of golf clubs valued at $5,000 to a friend
$10,000 contribution to church

Although he is married, none of the gifts are considered joint gifts with his wife. What are the total taxable gifts subject to the unified transfer tax?

89) Jeffery died in 2014 leaving a $16,000,000 gross estate. Six months after his death, the gross assets are valued at $16,100,000. In years prior to 2014 (but after 1976), Jeffery had made taxable gifts of $300,000. Of the $16,000,000 gross estate, estate assets valued at $3 million were transferred to his wife and $100,000 was used to pay administrative and funeral expenses. Jeffery had debts of $200,000, and the remainder of the estate was transferred to his children.
a. What is the amount of Jeffery- taxable estate?
b. What is the tax base for computing Jeffery- estate?
c. What is the amount of estate tax owed if the unified credit is $2,081,800?
d. Alternatively, if six months after his death, the gross assets in Jeffery- estate declined in value to $15,000,000, can the administrator of Jeffery- estate elect the alternate valuation date?

90) Mia is self-employed as a consultant. During 2013, Mia earned $180,000 in self-employment income. What is Mia- self-employment tax?

91) Brad and Angie had the following income and deductions during 2014:

Salaries $110,000
Interest income 10,000
Itemized deductions 16,000
Taxes withheld during year 15,000

Calculate Brad and Angie- tax liability due or refund, assuming that they have 2 personal exemptions. They file a joint tax return.

92) Chris, a single taxpayer, had the following income and deductions during 2014:

Salary $55,000
Interest on bank account 300
Tax-exempt interest 200
Deduction for AGI 4,000
Itemized deductions 8,000
Taxes withheld 6,500

Calculate Chris- tax liability due or refund for 2014.

93) During the current tax year, Frank Corporation generated gross income of $1,900,000 and had ordinary and necessary deductions of $1,400,000. What is the amount of Frank Corporation- corporate income tax for the year?

94) During the current tax year, Charlie Corporation generated gross income of $1,800,000 and had ordinary and necessary deductions of $1,300,000, resulting in taxable income of $500,000. If Charlie Corporation paid qualifying dividends of $200,000 to shareholders, all of whom are in the 25% marginal tax bracket, what is the total tax paid on both corporate income and the corporate dividends?

95) Doug and Frank form a partnership, D and F Advertising, each contributing $50,000 to start the business. During the first year of operations, D and F earns $80,000, which is allocated $40,000 each to Doug and Frank. At the beginning of the second year, Doug sells his interest to Marcus for $90,000. What is the amount of Doug- taxable gain on the sale?

96) Leonard established a trust for the benefit of his son. The principal amount of the trust is $400,000. The trust is projected to earn approximately 5% per year. In the current year, the trust earned $20,000. Expenses of $4,000 were incurred. Assume that $14,000 is distributed to Leonard- son.
a. How much income is taxed to the trust?
b. How much income is taxed to Leonard- son?

97) Frederick failed to file his 2014 tax return on a timely basis. In fact, he filed his 2014 income tax return on October 31, 2015, (the due date was April 15, 2015) and paid the amount due at that time. He failed to make timely extensions. Below are amounts from his 2014 return:

Taxable income $120,000
Total tax liability on taxable income 26,776
Total tax withheld from his salary 25,000

Frederick sent a check for $1,776 in payment of his liability. He thinks that he has met all of his financial obligations to the government for 2014. For what additional amounts may Frederick be liable assuming any applicable interest rate is 6%?

98) A presidential candidate proposes replacing the income tax with a national sales tax. The sales tax would have a flat rate. Describe the impact of this change in terms of tax structure and equity.

99) Describe the steps in the legislative process for major tax reform.

100) Explain how returns are selected for audit.

101) Describe the types of audits that the IRS conducts.

102) What does the statute of limitations mean? Describe the different statutes of limitations that apply to tax returns.

103) Describe the nondeductible penalties imposed upon taxpayers for failure to comply.

104) Describe the components of tax practice.

Chapter 2 Determination of Tax

1) Gross income is income from whatever source derived less exclusions.

2) Although exclusions are usually not reported on an individual- income tax return, interest income on state and local government bonds must be reported on the tax return.

3) Generally, deductions for (not from) adjusted gross income are personal expenses specifically allowed by tax law.

4) Generally, itemized deductions are personal expenses specifically allowed by the tax law.

5) Taxpayers have the choice of claiming either the personal and dependency exemption or the standard deduction.

6) Refundable tax credits are allowed to reduce or totally eliminate a taxpayer- tax liability but any credits in excess of the tax liability are lost.

7) Nonrefundable tax credits are allowed to reduce or totally eliminate a taxpayer- tax liability but any credits in excess of the tax liability are lost.

8) The standard deduction is the maximum amount of itemized deductions which may be claimed by a taxpayer, and is based on an individual- filing status, age, and vision.

9) Nonresident aliens are allowed a full standard deduction.

10) The standard deduction may not be claimed by one married taxpayer filing a separate return if the other spouse itemizes deductions.

11) An individual who is claimed as a dependent by another person is not entitled to a personal exemption on his or her own return.

12) A qualifying child of the taxpayer must meet the gross income test.

13) For purposes of the dependency exemption, a qualifying child must be under age 19, a full-time student under age 24, or a permanently and totally disabled child.

14) For purposes of the dependency exemption, a qualifying child may not provide more than one-half of his or her own support during the year.

15) An individual may not qualify for the dependency exemption as a qualifying child but may still qualify as a dependent.

16) One requirement for claiming a dependent other than a qualifying child is that the taxpayer provides more than 50 percent of the dependent- support (assuming it is not a multiple support agreement situation).

17) When two or more people qualify to claim the same person as a dependent, a taxpayer who is entitled to the exemption through the qualified child rules has priority over a taxpayer who meets the requirements for other relatives.

18) The person claiming a dependency exemption under a multiple support declaration must provide more than 25% of the dependent- support.

19) Generally, in the case of a divorced couple, the parent who has physical custody of a child for the greater part of the year is entitled to the dependency exemption.

20) A child credit is a partially refundable credit.

21) A married couple need not live together to file a joint return.

22) A legally married same-sex couple can file a joint return.

23) A widow or widower may file a joint tax return and claim an exemption for the deceased spouse in the year of the spouse- death as long as the surviving spouse does not remarry before the end of the year.

24) An unmarried taxpayer may file as head of household if he maintains a home for his qualifying child.

25) For 2014, unearned income in excess of $2,000 of a child under age 18 is generally taxed at the parents’ rate.

26) Kelly is age 23 and a full-time student with interest and dividend income of $2,600 in the current year. The total cost of her support for the year is $19,000. She is not subject to the kiddie tax.

27) If a 13-year-old has earned income of $500 and unearned income of $2,500, all of the income can be reported on the parent- return.

28) Suri, age 8, is a dependent of her parents and has unearned income of $6,000. She must file her own tax return.

29) The only business entity that pays income taxes is the C corporation.

30) A $10,000 gain earned on stock held 13 months is taxed in a more favorable manner than a $10,000 gain earned on stock held 11 months.

31) A building used in a business is sold after five years of use for a gain. The gain will be treated as a long-term capital gain.

32) A married couple in the top tax bracket has a new baby. Due to the birth of the baby their taxable income will be reduced in 2014 by $3,950.

33) Mia is a single taxpayer with projected AGI of $250,000 in 2014. She is considering selling a long-term investment before year-end. She expects to realize a gain of $25,000. If Mia sells the investment by December 31, her 2014 taxable income will increase by $25,000.

34) Charishma is a taxpayer with taxable income exceeding $500,000. She sells a stock for a $50,000 gain. She acquired the stock 13 months earlier. The gain will be taxed at the 20% rate.

35) Generally, when a married couple files a joint return, each spouse is liable for one-half of the entire tax and any penalties incurred.

36) A taxpayer is able to change his filing status from married filing jointly to married filing separately by filing amended return.

37) The requirement to file a tax return is based on the individual- adjusted gross income.

38) Tax returns from individual and corporate taxpayers are due on the 15th day of the third month following the close of the tax year.

39) Taxable income for an individual is defined as
A) AGI reduced by itemized deductions.
B) AGI reduced by personal and dependency exemptions.
C) total income reduced by the standard deduction.
D) AGI reduced by deductions from AGI and personal and dependency exemptions.

40) All of the following items are generally excluded from income except
A) child support payments.
B) interest on corporate bonds.
C) interest on state and local government bonds.
D) life insurance proceeds paid by reason of death.

41) All of the following items are included in gross income except
A) alimony received.
B) rent income.
C) interest earned on a bank account.
D) child support payments received.

42) All of the following items are deductions for adjusted gross income except
A) alimony paid.
B) trade or business expenses.
C) rent and royalty expenses.
D) state and local income taxes.

43) All of the following items are deductions for (not from) adjusted gross income except
A) moving expenses.
B) unreimbursed employee business expenses.
C) qualifying contributions to individual retirement accounts.
D) one-half of self-employment taxes paid.

44) Which of the following credits is considered a refundable credit?
A) child and dependent care credit
B) earned income credit
C) adoption expense credit
D) lifetime learning credit

45) A single taxpayer provided the following information for 2014:

Salary $80,000
Interest on local government bonds
(qualifies as a tax exclusion) 4,000
Allowable itemized deductions 13,000

What is taxable income?
A) $57,050
B) $63,050
C) $63,000
D) $67,050

46) Which of the following types of itemized deductions are included in the category of miscellaneous expenses that are deductible only if the aggregate amount of such expenses exceeds 2% of the taxpayer- adjusted gross income?
A) unreimbursed employee business expenses
B) charitable contributions
C) medical expenses
D) home mortgage interest expense

47) In 2014 the standard deduction for a married taxpayer filing a joint return and who is 67 years old with a spouse who is 65 years old is
A) $12,400.
B) $13,600.
C) $14,800.
D) $15,500.

48) In 2014 Brett and Lashana (both 50 years old) file a joint tax return claiming as a dependent their son who is blind. Their standard deduction is
A) $12,400.
B) $13,600.
C) $13,950.
D) $7,750.

49) Annisa, who is 28 and single, has adjusted gross income of $55,000 and itemized deductions of $5,000. In 2014, Annisa will have taxable income of
A) $44,850.
B) $46,050.
C) $51,050.
D) $43,800.

50) On June 1, 2014, Ellen turned 65. Ellen has been a widow for five years and has no dependents. Her standard deduction is
A) $3,950.
B) $6,200.
C) $7,750.
D) $12,400.

51) The regular standard deduction is available to which one of the following taxpayers?
A) married taxpayer filing a separate return where the other spouse itemizes
B) a person who has only unearned income and is a dependent of another
C) an individual filing a return for a period of less than 12 months because of a change in accounting period
D) an abandoned spouse

52) Husband and wife, who live in a common law state, are eligible to file a joint return for 2014, but elect to file separately. They do not have dependents. Wife has adjusted gross income of $25,000 and has $2,200 of expenditures which qualify as itemized deductions. She is entitled to one exemption. Husband deducts itemized deductions of $11,200. What is the taxable income for the wife?
A) $14,850
B) $18,850
C) $8,650
D) $22,800

53) Lewis, who is single, is claimed as a dependent on his parents’ tax return. He received $2,000 during the year in dividends, which was his only income. What is his standard deduction?
A) $1,000
B) $2,000
C) $2,350
D) $6,200

54) Charlie