sarah, who is sigle, as income gross income of$7,000 and self employment of $500.

Which statement best describes her filing status

a. Must file a return

b. Is not required to file a return

c. May file a return

d. Should not file a return.

a. is correct.

filing a tax return is mandatory because she has self-employment income of at least $400.

Carlos who is required to file a tax return, wants to obtain a filing extension. 

Which of the following actions is required?

a. Paying  all taxes due

b. Give a good reason for the extension

c. Having a paid preparer request the extension

d. Request the extension no later than the filing due date.

d. Correct.  The request for the extension must be made no later than the filing deadline. 

Harrison, an employee earning $75,000, does not file his return on time and does not obtain a filing extension. He fles his return on August 15 and pays his balance due, $4,000 at that time.  The $4000 is 25% of his total tax liability.  Harrison is:

a. Subject to a late filing penalty

b. Subject to a late payment penalty

c. Subject to both a late filing and a late payment penalty.

d. Not subject to any penalty because the return was filed payment made prior to October 15.

D is correct.

The request for extension must be made no later than the filing deadline

Ed is a U.S. citizen who is single, age 70, and has gross income $65,000 (inclluding social security income of $20,000).  He owns his home on which he pays mortgage interest and property taxes.  He also makes charitable contributions.  Beacause of these payments,  it is beneficial for him to itemize his deductions.  Which tax return form should he use?

a. formEZ

b. form 1040A

c. form 1040

d. form 1040NR

C is correct.

Form 1040 is the only type of return that allows Ed to itemize his persnal deductions

During the current year, Harriet is single from January throught October; she marrys Charles on November 1.  She has no dependents.  They each have about the same amount of income and will use the standard deduction. For the current tax year,  which filing status is probably best for  Harriet (and allowed)?

a.  Single

b.  Married filing jointly

c.  Part single/part married

d.  Married filing jointly

B is correct

Because Harriet was married on December 31 (and is married on the last day of the year), she is treated as married for the entire year.  She is probably better of filing jointly than separate.

Stan married Inez several years ago after his firs wife died but is separated from Inez under a court order of legal separation.  They did live together during the current year. Stan does not have any children or other dependents.  Which filing status is the most favorable and allowable?

a   Married filing jointly

b.  Single

c.  Head of Household

d.  Qualifying widower

B is correct.

Even though Stan is still is married, a legal separation makes him "single" for tax purposes.  Since he does not have any dependents, he can not use any other filing status.

Joan and Edwin are married and have no childre or other depdents.  Joan, a part-time bookkeeper who earns a comparably modest amount, has large medical expenese that were not covered by insurance.  Edwin is a successful Wall Street broker with a comfortable six-figure income.  Edwin alson pays a large amunt of home mortgage interes nd real estate taxes.  Which permissible filing status for Joan is most likely to result in the smallest total tax liability

a.  Married filing jointly

b.  Married filing separately

c.  Single

d.  Head of household

B is correct.

Joan can choose to file separately and claim her itermized medical deductons.  Since  the threshold for the medical deductions is based on her low income, she may substantially reduce or avoid taxes, savinng the couple overall.

Ellie, who is single, support er elderly mother, who resides in a nursing home.  Ellie pays all of the costs for her own household as well as more than half the costs for her mother.  Her mother receives Social Security benefit and a modest pension that pays the expenses not covered by Ellie.  Which filing status is the most advantageous  (and allowed) for Ellie?

a.  Single

b.  Head of household

c.  Qualifying widower

d.  Married filing separatey

B is correct.

Because Ellie supports her mother, she meets the qualifications for head of household.  This status is more advantageous than filing as single.

Madeline adn wen are U.S. residents who are married, with one dependent child.  They do not have enugh deuctions to itemize. Based on these fact alone which is the simplest tax return they can file?

a. Form 1040EZ

b. Form 1040A

c. Form 1040

d. Form 1040NR

B is correct.

Form 1040A is the simplest form that they can file to claim their dependent and report their income.

Camila has two hildren who lived with her all year.  Her husband, marck, left the home in August. She has not been able to locate him, and they have not filed for divorce or legal separation.  Mark did not work all year, and Camila provided all the support for the home and children.  Which filing status can Camila use if she does not wish to file a return together with her husband?

a.  Single

b.  Head of Household

c.  Married filing separately

d.  Qualifying Widower

C is correct.

Because Camila is still married to Mark and does not wish to file as married filing jointly, her only remaining option is to file s married filing separately

Margaret, a single mother who has never been married,  lost her job in May of 2011  Margaret and her ten-year-old daughter, Samantha, moved in with Margaret's sister, Joanne, that same month and lived with her the rest of the year.  Joanne provided more than half of the support for the household during the year.  What is Margaret's filing status?

a.  Single

b.  Head of household

c.  Married filing jointly

d. Married filing separately

A is correct.

Because margaret did not provide more than half of the household support during the year, she is unable to claimthe head of household status. Margaret is not married, so the only option left for her is to claim the single status.

Art lives with his wife, Marie,  who is a full-time home maker with no outside income.  They have no dependents and file a joint return.  What is the maximum number of personal exemption that can be claimed on this return?

a.  Zero

b.  One

c.  Two

d.  Three

C is correct.

They can claim two exemptions, one fr Art and one for Marie.

George lives with his nephew, Sam, who is 18, a U.S. resident, and in school in the United States.  George, who is 17, dropped out of school so he could support himself and Sam.  Sam does not provide more than half of his support.  George cannot claim his nephew as his dependent because:

a.  Sam is not his child

b.  Sam is not yonger than George

c.  George has not shown he provides more than half of Sam's support.

d.  Sam is not a U.S. citizen.

B is correct.

The fact that Sam is not older than George provents

George from claiming Sam as his dependent

Natalie lives with her seven-year-old daughter and the daughter's father to whom she is not married.  Natalie's AGI is $21,000; the father's AGI is $25,000. Both Natalie and the father qualify for the exemption and do not file a joint return.  (they cannot do so because they are not married.)  Under IRS rules, which parent, if any, can claim the exemption for the daugher?

a.  Natalie

b.  The father

c.  Natalie and the father can split the exemption in half.

d.  Neither Natalieor the father.

B is correct.

Under the IRS tie-breaker rules, since the father's AGI ($25,000) is higher than Natalie's AGI ($21,000), he gets the exemption for the daughter.

John and Phyllis are divorced paents of Peter,  age ten.  Peter live with Phyllis, who has signed a waiver to allow John to claim Peter's exemption. If Phyllis revokes the waiver and gives John the signed statement in 2010, she can caim the exemption for Peter in:

a. 2010

b. 2011

c. 2012

d. Never

B is correct.

The waiver is effective for the year after it is signed, so 2011 is the first year in which Phyllis can claim the exemption.

Mom's only income is Social Security benefits of $18,000 that she uses for her own support.  Her tree daughters help to support her in this way: line contributes $15,000,  Betty contributes $10,000, and Carol contributes $3,000.  Which daughter, if any, can claim an exemption for Mom?

a.  Carol

b.  Either Aline or Betty

c.  Aline

d. Betty

B is correct.

Either Aline or Betty can claim the exemption because the three daughters contribute more than half of Moms support, and Aline and betty each contribute more than 10% of Mom's support.

All of the following factors show that a workeris an employee rather than an indepeendent contractor except:

a.  The company tells the worker how to do the job.

b.  The  worker can profit from an assigment, depending on how the work is done.

c.  The company gives the worker the tools to do the job.

d.  The company decides what hours and where the worker will perform duties.

B is correct.

The fact that the woker can profit rom an assignment, depending on how the work is done,  shows that the worker has a financial stake in the work and is not under the company's control; this helps to show that the worker is an independent contractor.

Cecilia rceives vacation pay, sick pay, and employer-paid health coverage.  She also receives a year-end bonus.  Which of these payments is not taxable on Cecilia's 2011 return?

a.  Vacation pay

b.  Sick pay

c.  Employer-paid health Insurance

d.  Year end bonus paid on December 24, 2011.

C is correct.

The amount of employer-paid health coverage isa tax-fre finge benefit.

Ann, a server at Joe's Diner who keeps poor records of her tips,  reported to Joe that she earned $375 in tips last momth.  She also reported that she paid out $60 to other servers and the busboy.  Joe allocated $25 in tips to nn.  Ann reports gross income from tips of:

a.  $375

b.  $400

c.  $350

d.  $340

D is correct.

Ann's tips of $375 are reduced by her tip-outs (paid to others), and increased by tips  allocated to her.  Her reportable tip income is $340 ($375-60+25).  Tips are allocated to her becauseher records are poor.

Mark is a pastor at a church where he works as an employee.  The church pays for his housing with a fair rental value of $15,000.  He pays for utilities and does not rceve reimbursement.  Which statement about this payment is correct.

a.  all of the $15,000 is includible on Mark's gross income

b.  Part may be excludable,   depending on his income.

c.  He can exclude the cost of utilities from gross income.

d.  The $15,000 is subject to self-employment tax.

D is correct.

While the housing allowance for Mark is tax free, it is still subject to self-employment tax.

Greg is out of work in 2011.  Which of the following benefits is tax free if he receives them?

a.  Severance pay

b.  Unemployment benefits

c.  Worker's Compensation

d.  Supplemental Unemployment  benefits received from a company financed fund.

C is correct.

Worker's compensation is tax free, regardless of the amount.

Caroline beomes disabled in 2011 and receives benefits under a disability  insurance policy for hich she paid the premiums.  How are the benefits treated for tax purposes?

a.  All of the benefits are taxable.

b.  None of the benefits are taxable.

c.  Benefits are tax free to the extent of the premiums she paid.

d.  Some of the benefits are tax free, depending on her age at time of disability.

B is correct.

Since Caroline paid the premiums, all of the benefits are tax free.

Fred works for a company that pays him exclusively on commission for sales of their products (insurance policies).  His Form W-2 shows $78,000 earned as "wages, tips other compensation."  He also has unreimbursed employee expenses of$2,400.  Which of the following is a true statement about Fred?

a.  Fred is a statutory employee who reports expenses on Schedule C, his form W-2 would show no Social Security or Medicare taxes withheld.

b.  Fred is a statutory employee, and because he must file Schedule C, he must also file Schedule SE to report his self-employement taxes.

c.  Fred can reduce the $78,000 shown on his Form W-2 by his unreimbursed expenses, so his tax return will show $75,600 in taxable compensation.

d.  Fred reports his unreimbursed employee expenses on Schedule C, and he should not file Schedule SE because Social Security and Medicare taxes were withheld from his gross earnings.

D is correct.

Fred is a statutory employee who reports expenses on Schedule C.  However, Social Security and Medicare taxes are withheld and shown on Form W-2.  Therefore, they should ot be reported again on Schedule SE.

Joann lives in Florida and receives the following payments.  Which of these payments is not reported s taxable interest on her federal tax return?

a.  Interest on a savings account of $8 that is not reported on form 1099-INT

b.  Dividends from a savings and loan association.

c.  Interest on a U.S. Treasury bond.

d.  Interest on California state bond.

D is correct.

Interest on a California state bond is a municipal bond exempt from federal income tax.  However, the interest is still reported on this return as tax-exempt interest.

Gil was subject to backup withholding on this interest income of $1,000.  The withholding was 280.  Backup withholding on interest means that Gil:

A.  Can opt to have taxes withheld.

B.  Can claim a credit for taxes withheld.

C.  Is subject to an additional tax (penalty)

D.  Reports interest income of $720 on the return.

Olga had interest of $200 credited to a frozen bank deposit in 2011;  she was able to withdraw $180 by the end of the year.  For 2011, $180 is reported as interest income.  In 2012, Olga is able to withdraw the remaining $20. in interest.  How much interest is included in Olga's income in 2012?

A.  $0

B.  $20

C.  $180

D.  $200

B.  Correct.  The remaining $20 of interest was available for withdrawal in 2012, therefore, it is taxable to Olga in that year.

A taxpayer has a bank account in the Cayman Islands.  Which is the correct threshold for FBAR reporting the account to the treasury?

A.  More than $1,500 interest income

B.  More than $1,500 account value

C.  More than $10,000 interest income

D.  More than $10,000 account value

A.  Incorrect.  $1,500 of interest income is the threshold for having to complete Schedule B of form 1040.

B.  Incorrect.  An account value of more than $1,500 does not trigger FBAR reporting.

C  Incorrect.  The threshold for filing is not based on interest, regardless of the amount

D.  Correct.  If the account value is more than $10,000 FBAR reporting is required.

A grandmother gives her grandchild a $10,000 gift that is used to open a custodial account under the Model Gifts of Securities to Minors Act.  The grandchild's father acts as custodian/trustee of the account.  Interest on the account for 2011 is $200.  Who reports the interest?

A.  Grandmother

B.  Father

C.  Grandchild

D.  No one because income under this type of account is tax free.

ch6.

On August 1, 2011.  Michael buys 100 shares of ABC Corporation, a profitable domestic corporation.  On September 1, ABC Corporation declares a dividend.       On September 14, Michael sells his shares.  To Michael the dividend is:

A.  Ordinary

B.  Qualified

C.  Capital gain distribution

D.  Nondividend distribution

ch6.

Which of the following is not a dividend:

A.  Cash distributions on preferred stock.

B.  Dividend from mutual savings banks.

C.  Cash dividend reinvested in additional stock.

D.  Dividends from Sony, a japanese corporation.

ch6.

What is the tax treatment for capital gain distributions?

A.  Ordinary dividends

B.  Qualified dividends

C.  Long-term capital gain treatment

D.  Tax-free treatment (regardless of the taxpayer's tax bracket)

ch6

Humphrey bought 100 shares in the DCT Corporation a number of years ago for $5,000.  In 2011, the corporation made a nondividend distribution to him of $600. (reported in box 3 of form 1099-div).  How is the distribution taxed?

A.  Ordinary dividend

B.  Qualified dividend

C.  Return of capital (basis reduction)

D.  Long-term capital gain

ch6

All of the following dividends are tax free except:

A.  Dividends on life insurance policies kept by the insurer to pay the premiums.

B.  Exempt-interest dividends

C.  Dividends received from nonprofitable corporations.

D.  Dividends consisting entirely of shareholder's basis.

ch7

On December 1, 2011, Stan, the landlord of a three family house, rents one unit for $800 per month for one year (starting December 1, 2011).  The tenant pays him $2,400 to cover the first month's rent and a security deposit, which will be used to pay the last two month's rent.  How much of the payment is taxable to Stan in 2011?

A.  $0

B.  $800

C.  $1,600

D.  $2,400

ch7

Which of the following is not taxable to a landlord?

A.  A security deposit held for purposes of protecting the property.

B.  Payments made in property services.

C.  A landlord's expenses paid by the tenant

D.  A payment by the tenant for canceling the lease.

ch7

Darren rents out his home.  What is the maximum rental period that would make the rent tax free?

A.  All rent is taxable,  regardless of the rental period.

B.  The rental period is less than 10% of the time Darren uses his home.

C.  14 days

D.  Any period as long as it is less than the time that Darren uses his home.

ch7

Miriam, a head of household, has $80,000 in wages, $12,000 income from a limited partnership (passive income), and a $30,000 loss from rental real estate activities (passive losses) in which she actively participated.  (Her MAGI does not exceed $100,000.)  What part of the $30,000 loss can she use in 2011?

A.  $0

B.  $12,000

C.  $25,000

D.  $30,000

ch8

On January 1, 2011, Seymour starts to receive a pension from his employer under a difined benefit plan.  The plan was funded entirely by the employer.  What portion of the benefits is taxable?

A.  $0

B.  A portion based on the simplified method.

C.  A portion based on the general method.

d.  100%

ch8

Joan retires and receives a pension for her lifetime.  She is 62 years old on the annuity starting date. Her investment in the contract is $26,000.  She receives monthly payments of $1,500.  How much of her annual payments of $18,000 is tax free?

A.  $1,200

B.  $1,500

C.  $16,000

D.  $18,000

ch8

Which is a lump-sum distribution (assume the recipient was born before January 2, 1936)?

A.  A distribution from an IRA

B.  A lump-sum credit or payment from the federal Civil Service Retirement System.

C.  A distribution from a participant's entire account in a profiet-sharing plan.

D.  A total distribution from a 403(b) annuity.

ch8

Alice, who is now 60 years old, contributed to a Roth IRA on March 12, 2007, for the 2006 plan year.  She files her income tax return for 2006 on April 15, 2007.  What is the date that the 5-year period for tax-free Roth IRA withdrawals begins for Alice?

A.  January 1, 2006

B.  April 15, 2006

C.  March 12, 2007

D.  April 15, 2007

ch8

Which penalty amount applies if a taxpayer fails to take required minimum distributions?

A.  5%

B.  6%

C.  10%

D.  50%

ch8

Eduardo sells a $100,000 term life policy for $18,000.  He paid premium of $10,000.  What taxation results?

A.  Nothing is taxable

B.  Part of the gain is ordinary income

C.  Part of the gain in excess of premium payments is ordinary income, the balance is capital gain.

D.  All of the gain is capital gain.

ch9

In figuring the taxable portion, if any, of Social Security benefits,  "income" includes all of the following except:

A.  All of Social Security benefits

B.  All of tax-exempt interest

C.  All of pension income

D.  An employer's payment of adoption assistance

ch9

What is the maximum portion, if any, of Social Security benefits includible in gross income?

A.  0%

B.  50%

C.  85%

D.  100%

ch9

As a result of a claim, Julia receives lump-sum payments in 2011 for benefits that should have been paid to her in 2010.  She makes no special election.  How is the lump-sum taxed?

A.  It is automatically tax free

B.  It is treated as benefits paid in 2010

C.  It is treated as benefits paid in 2011

D.  She can claim a tax credit for the payments.

ch9

How are Social Security disability benefits treated for tax purposes?

A.  They are always tax free

B.  They are taxed in the same manner as Social Security benefits paid to retirees.

C.  They are always included in gross income at the rate of 85%.

D.  The are fully taxable.

ch10

Mr. Brown a college student working on a degree in accounting received the following during the year to pay his expenses:

$4,000 scholarship used for tuition at State University

$1,000 scholarship used for fees and books required by the college.

$8,000 fellowship used for his room and board.

What amount, if any, does Mr. Brown include in taxable income for the year?

A.  $8,000

B.  $5,000

C.  $13,000

D.  $9,000

ch10

John, a cash basis taxpayer, hd borrowed $5,000 form his local credit union.  He lost his job and was unable to make payments on the loan.  The credit union determined legal fees to collect might be more than what John owed, so it canceled $3,000 of the balance due.  John did not file for bankruptcy and was not insolvent.  How much does John report as income from cancellation of the debt?

A.  $8,000

B.  $3,000

C.  $0

D.  $8,000

ch10

Sherwood received disability income of $6,000.  All premiums on the health and accident policy were paid by his employer and included in Sherwood's income.  In addition,  he received compensatory damages of $10,000 as a result of inadvertent poisoning at a restaurant.  He received no other income during the year.  How much income does Sherwood report on his tax return?

A.  $16,000

B.  $10,000

C.  $6,000

D.  $0

ch10

Lydia,  age 28, is  single and received $10,000 unemployment benefits from the state.  She also received $3,000 from the state to reduce the cost of her winter fuel bill.  What amount of income does she report for the year?

A.  $10,000

B.  $13,000

C.  $3,000

D.  $0

ch11

All of the following taxpayers file Schedule C.  Except:

A.  An independent contractor

B.  A sole proprietor running a boutique

C.  Sole proprietor running a farm

D.  A statutory Employee

ch11

Which of the following expenses of  a sole proprietor is not deducted on Schedule C?

A.  Advertizing

B.  Work-related education costs

C.  Liability and property insurance for the business.

D.  Health insurance for the sole proprietor.

ch11

The IRS standard mileage rate for a vehicle used for business takes the place of deducting the actual cost of all of the following except:

A.  Tolls

B.  Insurance

C.  Depreciation for a vehicle that is owned by the sole proprietor.

D.  Registration fees.

ch11

George starts a business in 2011.  He pays $7,700 for research, travel, and other costs before he opens his doors.  He begins operations on December 31, 2011. What is the most he can deduct in 2011?

A.  $0

B.  $5,000

C.  $7,700

D.  $10,000

ch11

Which of the following is not "listed" property?

A.  Vehicles (under a certain weight)

B.  Cell phones

C.  Video Equipment

D.  Computers

ch11

Which of the following statements regarding the home office deduction is correct?

A.  There is a dollar limit on what can be deducted annually.

B.  The deduction is composed only of direct expenses such as the cost of painting the office.

C.  There is an unlimited carryover of the deduction in excess of the taxable income limit.

D.  A sole proprietor who uses a home office only to schedule appointments, order supplies, and keep the books can never claim the deduction.

ch11

Which of the following types of farm income are not included on Schedule F?

A.  Patronage dividends

B.  Sales of livestok held for breeding purposes.

C.  Commonly Credit Corporation loans

D.  Sales of crops

ch11

A sole proprietor has net earnings from SE in 2011 of $56,000.  What is the maximum SE tax rate?

A.  2.9%

B.  10.4%

C.  13.3%

D.  15.3%

ch12

The "basis" of property is the starting point for determining all of the following except:

A.  Depreciation

B.  Excise taxes

C.  A casualty loss

D.  Gain or loss on the disposition of property

ch12

A taxpayer builds his own personal residence.  What cannot be added to basis?

A.  The value of his labor

B.  The cost of the materials

C.  Architect fees

D.  Payments to contractors

ch12

Which of the following is an increase to basis?

A.  Residential energy credits that have been claimed for a principal residence

B.  A casualty loss

C.  Depreciation

D.  Capital improvements

Two years ago Felicia received as a gift from her aunta bracelet worth $5,000.  Her aunt bought it many years ago for $800.  If Felicia sells the bracelet for $4,000, her basis for figuring gain or loss is:

A.  $0

B.  $800

C.  $4,000

D.  $5,000

Felicia inherited a bracelet worth $5,000 from her aunt.  Her aunt bought it many years ago for $800.  Felicia sells it six months later for $4,000.  Her basis for determining gain or loss is:

A.  $0

B.  $800

C.  $4,000

D.  $5,000

ch13

Which of the following is a capital asset?

A.  Inventory

B.  U. S. government publications

C.  Mutual fund shares

D.  Real property used in business

ch13

Daniel has stock that has declined in value.  He can report the loss if he sells it to:

A.  His wife

B.  His mother-in-law

C.  His daughter

D.  His  mother

ch13

On February 1, 2011, a taxpayer buys 10 shares of X Corp.  What is the earliest date that the stock can sold to qualify for long-term treatment?

A.  Any time after 2011

B.  February 1, 2012

C.  February 2, 2012

D.  February 5, 2012

ch13

A taxpayer selss stock in 2011.  Where is the sale first reported

A.  Schedule D

B.  Form 1040

C.  Form 4797

D.  Form 8949

ch13

A taxpayer sells 100 shares of X Corp. at a loss on December 15, 2011.  Which of the following acquisition dates for acquiring substantially identical stock will not trigger the wash sale rule?

A.  November 15, 2011

B.  January 1, 2012

C.  January 14, 2012

D.  January 15, 2012

ch13

In 2011, a taxpayer's home is completely destroyed by a tornado.  She receives insurance proceeds that exceed the adjusted basis of the home.   She decides not to rebuild or buy a new home, relocates to another state, and rents an apartment.  Where is the transaction reported?

A.  Directly on Form 1040

B.  Schedule A of form 1040

C.  Schedule D of form 1040

D.  Form 4797

ch14

Basis of a home is increased by all of the following except:

A.  Points that are fully deductible in the  year of payment.

B.  Legal fees to buy the home

C.  Surveys of the home

D.  Title insurance for the home.

ch14

Basis of a home is decreased by all of the following except:

A.  Deductible casualty loss not covered by insurance.

B.  Assessments for local improvements.

C.  First-time homebuyers credit

D.  Subsidy for conservation measures that was excluded from income.

ch14

A taxpayer, who is single, sells his condo in February 2011.  He buys a new condo, weds in June 2011, and his new bride moves in at that time.  Gain on the sale of his condo is $275,000.  Assuming he owned and used the condo as his main home for two out of the last five years, he can:

A.  Exclude gain of $250,000 and report not further gain.

B.  Exclude gain of $275,000

C.  Exclude gain of $550,000

D.  Exclude gain of $250,000 and report $25,000 as long-term capital gain.

ch14

Which of the following unforesen circumstances would not entitle a homeowner to a partial home sale exclusion.

A.  The unexpected birth of triples.

B.  Winning the lottery

B.  Being a victim of a crime in the neighborhood

D.  Losing a job and being unable to pay the house-hold bills.

ch14

In 2009, a taxpayer claimed the first-time homebuyer credit.  Which situation would require recapture of the credit?

A.  The sale of the home at a loss.

B.  The transfer fo the home to a spouse incident to divorce

C.  The sale of the home because one owner dies.

D.  The sale of a home because of a job move.

ch15

Earned Income for purposes of an IRA contribution includes all of the following except:

A.  Tips

B.  Alimony

C.  Unemployment compensation

D.  Self-employment income

ch15

A taxpayer obtain an extension of time to file her 2011 tax return,  but she actually files on April 14, 2012, before the filing deadline.  What is the deadline for making a 2011 IRA contribution?

A.  December 31, 2011

B.  April 14, 2012

C.  April 17, 2012

D.  October 15, 2012

ch15

Roth IRAs are similar to traditional IRAs in all of the following ways except:
a. There is not maximum age limit for contributions.
b. Distributions on account of disability are not penalized.
c. The contribution limit for 2011 is $5,000. ($6,000 for those 50 and older by year end.)
d. Taxpayer must have earned income in order to make a contribution.

ch16.
Which taxpayer does not qualify as an educator for purposes of deducting educator expenses up to $250?
a. A parent who home-school her child.

b. A principal of an elementary  school.

c. A classroom aide in a middle school.

d. A teacher in a high school.

ch16.
A taxpayer, who is single, graduated college and is now repaying her student loans.  She paid $2,800 in interest on her loans in 2011.  Her MAGI before considering any student loan interest deduction is $67,500.  How much of an above-the-line deduction can she claim?
a. Zero
b. $1,250

c. $2,000

d. $2,500

b. Is Correct!

Because her MAGI is halfway between the phase-out range for single taxpayers, she can deduct half of the maximum allowable student loan interest of $2,500 or $1,250.

ch17.

The deduction for a portion of self-employment tax is taken:

a. As a business deduction on Schedule C.

b. As a personal miscellaneous itemized deduction on Schedule A.

c. As an adjustment to gross income directly on form 1040

d. As an adjustment to self employment tax owed on Schedule SE.

c.  Is Correct!

The deductible  portion of self-employement tax is claimed as an adjustment to gross income directly on Form 1040.

ch17.

For purpose of deducting health insurance premiums from adjusted gross income, which business owner bases the deduction on compensation?
a. More-than-2% S corporation shareholder

b. Sole proprietor

c. General partner

d. Limited Liability Company member

a.  Is Correct!

A more-than-2% S corporation shareholder can claim the deduction to the extend of w-2 compensation.

ch17.

A sole proprietor has health insurance for herserf and no employees.  In figuring the deductible portion of the premiums, which of the following statements is correct?

a. All premiums are deductibvle as an adjustments to gross income without any limitations.

b. The premiums are limited to the net profits shown on Schedule C.

c. The premiums cannot exceed the net profits reduced by the employer-equivalent portion of the self-employment tax.

d. The premiums cannot exceed the net profits reduced by both the employer-equivalent portion of the self-employment tax and a deduction for contributions to a qualified retirement plan for the sole proprietor.

d.  Is Correct!

The deduction limitation requires that net profits be reduced by both the employer-equivalent portion of the self-employment tax and a deduction for contributions to a qualified retirement plan for the sole proprietor.

ch17.

A self-employed individual who relocated because of a new business must work in the new location for how long before the individual can deduct moving expenses?

a. 12 months

b. 24 months

c. 39 weeks

d. 78 weeks

d.  Is Correct!

To deduct moving expenses, a self-employed taxpayer must work at leat 78 weeks during a 24-month period after the move.

ch17.

Which of the following moving expenses is not deductible?

a. The cost of connecting or disconnecting utilities

b. The expenses of selling the old home

c. The cost of shipping a househod pet

d. The cost of driving to the new home.

b.  Is Correct!

No deduction can be taken for any expenses of selling the old home.

ch18.

Which of the following is not a condition for deducting alimony?

a. Payments made in cash

b. The spouse paying alimony must have modified adjusted gross income below a set level.

c. The obligation to make payments must end on the recipient spouse's death

d. Spouses who are divorced are not members of the same household.

b.  Is Correct!

There is no income limit for deducting alimony payments.

ch18.

Alimony recapture applies when payments in the third year decrease by more than $15,000 from the second year as a result of:

a. The payer spouses's ability to provide support

b. The death of the recipient spouse

c. The remarriage of the recipient spouse

d. The demise of the payer spouse's business upon which alimony payments were based.

a.  Is Correct!

Just because the payer spouse has payments reduced because he or she is less able to provide support does not avoid recapture.

ch18.

Which statement about child support is not correct?

a.  Is it not deductible by the payer spouse

b.  It need not be designated as such in the divorce decree if payments are contingent on an event related to the child, such as reaching the age of majority.

c.  It is not income to the recipient spouse.

d.  There are dollar limits on amounts paid as child support.

d.  Is Correct!

There are no dollar limits on amounts paid as child support.

ch18.

In 2011, Janet transfers 100 shares of stock to Ben as part of their divorce decree.  Janet paid $10,000 for the shares. The are worth $18,000 on the day they are transferred to Ben. He sells the shares six months later for $22,000.   What is the gain on the property?

a. Zero

b. $4,000

c. $12,000

d. $22,000

c.  Is Correct!

The recipient spouse's carryover basis is the other spouse's basis ($10,000), so gain is limited to $12,000 ($22,000 - $10,000). 

ch19.

In 2011, Sally, age 45, is single and has no dependents.  Her earned income is $45,000.  Sally's standard deduction is:

a. $950

b. $5,800

c. $8,500

d. $11,600

b. Is Correct!

Since Sally is single, not 65 or older, or blind, her standard deduction amount is $5,800.

ch19.

In 2011, ed, who is single and age 67 supports his 90 year old mother and claims a dependent exemption for her.  He can claim a standard deduction of:

a.  $5,800

b.  $8,500

c.  $9,950

d.  $11,400

c.  Is Correct!

Ed's standard deduction is $9,950,  $8,500 as head of household, plus the additional standard deduction of $1,450 because he is at least 65years old.

ch19.

In 2011, Jimmy, who is 21 years old and a full-time college student, earns $2,500 at a summer job.  He also has interst income of $250 and capital gain distributions form a mutual fund of $800.  His parents claim dependent exemption for him on their return.  Jimmy's standard deduction is:

a.  $950

b.  $2,800

c.  $5,800

d.  $6,100

b.  Is Correct!

Jimmy's standard deduction is earned income of $2,500 plus $300, which is greater than $950.  Investment income is not considered earned income for purposes of the standard deduction.

ch19.

Which of the following individuals can use the standard deduction?

a. A married person filing a separate return whose spouse itemizes deductions.

b.  A taxpayer who files a return for a short tax year because of a change in the annual accounting period.

c. A non resident or dual status alien

d. A dependent whois claimed on anothe taxpayer's return.

d.  Is Correct!

A dependent can claim the standard deduction, although the amount may be limited.

ch19.

Matt received a certified statement fromhis optometrist on December 1, 2011, confirming he cannot see better than 20/200.  Matt does not itemize deductions.  Matt is:

a. Not eligible for an additional standard deduction because he is only partially blind.

b. Eligible for an additional standard deduction because he was partially blind beginning in 2011.

c.  Eligible for an additional standard deduction beginning in 2012, the first full year after he is declared partially blind.

d.  Not eligible for an additional standard deduction because he was not blind during the entire year.

b.  Is Correct!

Matt is eligible to claim an additional standard deduction in 2011 because he is certified as partially blind as of the last day of the tax year.